Are you out of luck if your spouse doesn't work? Do you "get screwed" when it comes to alimony just because your spouse is unemployed?
No.
One of the most common fears people have during a New Jersey divorce is this: "What if my spouse just stops working?"
Maybe your husband quit his job. Maybe your wife suddenly decided to become "self-employed." Maybe your spouse has been underemployed for years and now claims to have little or no income.
Does that mean you're out of luck?
Not necessarily.
In New Jersey, a judge is not always limited to looking at what your spouse actually earns. Depending on the circumstances, the court can also consider what your spouse is reasonably capable of earning.
That's where imputing income comes in.
Imputing income means that a court can assign income to a spouse even if that spouse is unemployed or earning less than he or she reasonably could be earning.
In other words, your spouse may not be able to avoid an alimony obligation simply by choosing not to work.
The court can look beyond the paycheck.
If your spouse was earning $150,000 a year and suddenly decides to quit working during your divorce, a judge does not necessarily have to pretend that your spouse now earns $0.
The real question may be:
"What should this person reasonably be earning?"
And that can make a tremendous difference when alimony is being decided.
There is no single formula for imputing income in a New Jersey divorce. The court has to look at the actual circumstances.
Depending on the case, a judge may consider factors such as:
The fact that your spouse is unemployed does not automatically mean that income will be imputed. There may be a perfectly legitimate reason why someone is not working.
But if your spouse is voluntarily unemployed or underemployed, the court can look much more closely at why.
Quitting your job does not automatically eliminate your potential alimony obligation.
If your spouse voluntarily leaves a good job, deliberately reduces his or her income, or takes a much lower-paying position during a divorce, the court can examine the circumstances surrounding that decision.
Why did your spouse leave their job?
Was the job loss voluntary?
Was there a legitimate reason for taking a lower-paying position?
Is your spouse making a reasonable effort to find comparable employment?
Or does it look like your spouse is deliberately earning less because a divorce and potential support obligation are approaching?
Those facts matter.
A spouse generally should not be able to manipulate his or her income simply to produce a more favorable support calculation.
This is where these cases can become more complicated. Your spouse may claim that there simply aren't any jobs available at his or her previous salary.
Maybe that's true. Maybe it isn't.
The court may look at the spouse's job-search efforts, qualifications, employment history, available positions, prevailing salaries, and the state of the job market.
Simply saying "I can't find a job" does not necessarily end the inquiry.
The evidence matters.
Self-employment can make determining income significantly more complicated.
A paycheck from an employer is relatively easy to identify. A business owner's true income may not be.
The court may need to examine tax returns, business records, expenses, distributions, benefits paid through the business, and other financial information to determine what the spouse actually earns.
And sometimes the income reported on a tax return does not tell the entire story.
If you're divorcing a business owner or self-employed spouse, determining income can become one of the most important financial issues in your case.
This situation comes up frequently, especially in longer marriages.
Maybe one spouse left the workforce to raise children. Maybe the arrangement made sense for your family at the time. Now you're getting divorced, and the question becomes whether that spouse can or should return to work.
There is no automatic answer.
A court may consider the person's age, education, prior career, length of time outside the workforce, current skills, health, earning capacity, and realistic employment opportunities.
Someone who has been out of the workforce for 20 years may be treated very differently from someone who voluntarily quit a six-figure job six months before filing for divorce.
Context matters.
A legitimate medical condition can absolutely affect someone's ability to work.
But if the person's health and earning capacity are disputed, medical evidence can become extremely important. A statement that "I can't work anymore" is not necessarily the end of the discussion.
The court may need evidence concerning the medical condition, the person's limitations, and whether those limitations actually prevent him or her from working.
Sometimes.
In contested cases, a vocational expert may be used to evaluate a spouse's employability and earning capacity.
A vocational expert may consider the person's education, work experience, skills, employment history, local job market, available positions, and expected compensation.
That expert's opinion can then become evidence of what the spouse may realistically be capable of earning.
This can be particularly important when there is a large difference between what your spouse currently earns and what you believe your spouse could be earning.
Imputed income isn't only an alimony issue.
A spouse's earning capacity can also affect child support and other financial issues in a New Jersey divorce.
That is why determining someone's actual income and earning capacity can become such a significant part of a divorce case.
If one spouse claims to earn $40,000 but realistically has the ability to earn $150,000, that difference can have a substantial impact on the financial outcome of the case.
So, can your spouse avoid paying alimony simply by not working?
Not necessarily.
New Jersey courts can look beyond what someone happens to be earning today and consider whether that person is voluntarily unemployed or underemployed and what he or she may reasonably be capable of earning.
But imputing income is rarely as simple as it sounds.
What if your spouse claims there are no jobs available? What if they left a high-paying career years ago? What if they are self-employed? What if they are approaching retirement age? What if they insist that health problems prevent them from working?
These cases can quickly become battles over facts, financial records, credibility, expert opinions, and strategy.
The law matters. But so does knowing how to prove your case.
If you are concerned that your spouse is unemployed, underemployed, or deliberately earning less during your divorce, don't assume that the number on the paycheck is the number the court has to use.
Until next time,