Maybe you should decide alimony the “wrong” way.
What?
That’s right. In some cases, resolving alimony without asking a judge to determine the amount may actually benefit you. Here’s why.
New Jersey does not have an official alimony calculator or a mandatory formula for determining alimony. Unlike child support, which is generally calculated using established guidelines, alimony depends on the specific facts of each marriage.
There are two main ways alimony is decided in a New Jersey divorce: you and your spouse reach an agreement, or a Family Court judge decides for you. The process of reaching “the number” can be very different depending on which path you take.
Once you understand that difference, you’ll be better prepared to decide how alimony should be handled in your case. Let me explain.
If a judge determines alimony, the judge must consider the factors established under New Jersey law. These include the actual financial need of one spouse and the other spouse’s ability to pay, the length of the marriage, the age and health of both spouses, the standard of living established during the marriage, and each spouse’s income and earning capacity.
The court may also consider education and employment skills, time away from the workforce, parental responsibilities, contributions made during the marriage, the division of marital property, income available through investments, tax consequences, and other relevant circumstances.
There is no single factor that automatically determines the result. A judge must consider the evidence, apply the law, and determine an amount that appears reasonable under the circumstances.
That sounds like an awful lot of work, doesn’t it? Well, it is. It also leaves quite a bit of room for the judge to exercise discretion.
A judge will usually begin by examining each spouse’s Case Information Statement. The Case Information Statement contains detailed financial information, including income, monthly expenses, assets, debts, insurance and information about the lifestyle maintained during the marriage.
The judge may examine the expenses claimed by each spouse and determine whether they appear reasonable based on the evidence. For example, a spouse might report an electric bill of $500 per month. If the evidence doesn't support that amount, the court may use a different figure when evaluating that spouse's financial needs.
That process can continue throughout the financial picture as the court considers the parties' needs, available income and the lifestyle established during the marriage.
Sometimes both spouses consider the ultimate outcome reasonable. Sometimes one or both are very unhappy with it. That uncertainty is one reason many New Jersey alimony cases are resolved through settlement rather than trial.
But how do spouses agree on an amount when New Jersey has no official alimony calculator?
To avoid the cost, time and uncertainty of a trial, attorneys and mediators sometimes discuss informal formulas as a starting point for settlement negotiations.
One formula you may hear about compares the spouses’ incomes and applies a percentage to the difference. Historically, some divorce professionals have referred to a figure around 25%.
For example, suppose one spouse earns $200,000 per year and the other earns $60,000. The difference between their incomes is $140,000. Twenty-five percent of that difference would be $35,000 per year, or approximately $2,917 per month.
Simple, right? But there is something very important you need to understand: The 25% formula is not New Jersey law.
It is not an official NJ alimony calculator, and a judge is not required to use it. An informal formula also cannot fully account for the length of the marriage, the marital lifestyle, each spouse’s actual expenses, parenting responsibilities, earning potential, assets, debts or the many other facts that may affect alimony.
The number may provide a starting point for negotiations. It should not be treated as a reliable prediction of what a judge would order.
Maybe. The real question is not whether an informal formula is technically the “right” or “wrong” way to calculate alimony. The better question is: Would you be better off accepting a negotiated alimony amount, or taking the issue to trial and asking a judge to decide?
Before answering that question, you should understand how the proposed amount was calculated, whether it reasonably addresses the recipient’s financial needs, whether the paying spouse can realistically afford it, and how the amount compares with the marital lifestyle.
You should also consider how long alimony will continue, whether the amount or duration can later be modified, what evidence a judge would consider at trial, the possible range of outcomes, and the additional cost and time required to litigate the issue.
A negotiated agreement gives you more control and certainty. A trial gives a judge the authority to apply New Jersey’s alimony factors to the facts of your marriage, but the outcome can be difficult to predict.
Neither option is automatically right for everyone.
Sometimes an informal calculation helps spouses reach a practical settlement. In other cases, relying on a simplified formula could produce a result that is seriously unfair to the person paying or receiving alimony.
That is why you should never accept an alimony number simply because an online calculator, mediator, attorney or spouse says it is “standard.” There is no standard alimony amount in New Jersey.
The amount of alimony is only part of the issue. You must also consider how long the obligation may continue. New Jersey recognizes several types of alimony, including open durational alimony, limited duration alimony, rehabilitative alimony and reimbursement alimony. The appropriate type and duration depend on the circumstances of the marriage.
For marriages lasting less than 20 years, the length of the alimony obligation generally cannot exceed the length of the marriage unless exceptional circumstances exist.
That does not mean alimony automatically lasts as long as the marriage. It means the court must evaluate the statutory factors and the facts of the case when deciding an appropriate duration.
For most divorce or separation agreements executed after December 31, 2018, alimony is not deductible for federal income tax purposes by the person paying it. It is also generally not included as federal taxable income by the person receiving it.
Older agreements and certain modified agreements may receive different treatment. Tax consequences can significantly affect the real value of an alimony arrangement, so speak with a qualified attorney and tax professional before relying on any assumed tax treatment.
You may find websites offering an “NJ alimony calculator” or promising an estimated payment based on the spouses’ incomes.
These tools may give you a general number, but they cannot tell you what your case is worth. An online calculator doesn't know the lifestyle you maintained during your marriage, whether either spouse is voluntarily underemployed, whether income should be imputed, or whether someone has unusually high or low expenses.
It also doesn't know how your assets will be divided, whether one spouse sacrificed a career, whether additional education or training may be necessary, or whether health issues or unusual financial circumstances affect the case.
Two couples with the same incomes could have very different alimony outcomes. Use an online estimate as a conversation starter, not as legal advice or a guarantee.
There is no single answer. The right approach depends on your income, expenses, assets, length of marriage, marital lifestyle, earning capacity and goals.
In some cases, using an informal formula as one part of a larger negotiation may help the spouses avoid an expensive trial. In other cases, that same formula may produce a completely inappropriate result.
So maybe deciding alimony “the wrong way” is not always wrong. You simply need to understand the potential outcome before you agree to it.
Until next time,
Steve