Alimony Is Broken — But Let's Not Fix It

After years of working as a financial adviser to divorced and divorcing clients, I've concluded that the institution of alimony is a mess. But some of the proposed fixes for it are even worse.

Alimony, or spousal maintenance, is the legal obligation of a person to provide financial support to his or her spouse before or after marital separation or divorce. Once upon a time, alimony was the right of the wronged spouse in a divorce; now, under no-fault divorce laws available in all 50 states, it as become conditional based on numerous statutory factors and case law.

Here's where the mess comes in. Most of the time, divorcing spouses aren't equal, economically speaking; they have different earnings and earnings potential. Family courts have to decide when and how to measure economic inequality following the termination of marriage — and how to rectify it.

But alimony awards are highly discretionary. Unlike the case with child support, there is no general standard or formula for setting the amount and duration of alimony. Cases with similar facts can have wildly different outcomes.

Plus, alimony is one of the most contentious issues that tend to prolong divorce litigation; nearly 80% of divorce cases involve a request for modification of alimony.

Here are two examples I've seen first-hand of disparate alimony award obligations.

Exhibit A:

• Mr. & Mrs. Smith, married for 32 years, divorce at ages 57 and 55, respectively. He's a lawyer making over $300,000 a year; she has always been a homemaker.
• Mrs. Smith is awarded lifetime alimony of $110,000 a year.
• Mr. Smith, taking early retirement at age 62, files to terminate alimony.

Exhibit B:

• Mr. and Mrs. Jones, married 25 years, divorce at ages 52 and 53, respectively. He's an investment banker making $1.2 million annually; she, a former sales consultant, has raised the children and stayed home for 20 years.
• Mrs. Jones is awarded $300,000 alimony for 10 years.
• Mr. Jones quits his job five years after the divorce to become a schoolteacher, lowering his salary to $50,000. He files to reduce his alimony.

From a distance, the facts were roughly similar. But the outcomes weren't.

The judge in the Smith case reduced alimony only slightly, and kept it in force for her lifetime. Meanwhile, Mrs. Jones's alimony was cut more than 90%, to $25,000 annually. She ended up having to sell her home, cut lifestyle expenses, and re-enter the workforce.

Many believe that alimony needs to be fixed because of the extraordinary degree of variance among rules of law applied in various decisions. The easy answer to this complicated problem: create uniform standards and formulas for calculating alimony awards. Formulas allow for objective quantification of an outcome, given a set of measurable circumstances — predominantly the length of a marriage.

More and more states are taking a hard look at alimony and are experimenting with adoption of alimony guidelines or a formula for temporary alimony that offers judges a framework for determining permanent awards. A few states have gone further to abolish the need for alimony all together.

But formulas can be too simplistic in their application, placing at risk numerous deviation factors that provide a greater chance of the result fitting the facts of the case. Marriages differ by type, socio-economic status, and too many different and divergent fact patterns. Judges may feel compelled to calculate alimony based on a simple formula using years and percentages, rather than the full merit of a nonworking spouse’s worth.

Proposed new laws are written in gender-neutral terminology and suggest potential for drastic changes, some even retroactively. The effects of new laws will affect substantially women, who represent 97% of the people seeking and requiring alimony.

If alimony duration is predetermined by length of marriage, women who are victims of domestic abuse will face an impossible choice. They will be pressured out of fear of homelessness to stay in an abusive relationship until they meet a target cutoff date for lengthening their support. At the same time, men who want to get out of a marriage cheaply can run to divorce court on the eve of the next cut-off period.

Rather than zealously reform alimony laws, I suggest that alimony has evolved already to mirror many socio-economic developments in institution of marriage and “partnering." In fact, there are now six variations on alimony, each applicable to a different family situation:

• Temporary — Ordered when parties separate prior to divorce.
• Rehabilitative — Given to the lesser-earning spouse for the time necessary to acquire paying work and become self-sufficient.
• Permanent — Paid to the lesser-earning spouse until the death of the payor or recipient, or upon remarriage of the recipient.
• Reimbursement — Given as reimbursement for expenses incurred by a spouse during the marriage, such as for education.
• Durational — Limited in time and not paid for more than the length of the marriage.
• Lump Sum — A specific, unmodifiable amount paid at once or in installments.

Given the variety of marital relationships, spouses in modern marriages are unlikely to find a single-formula solution to be equitable. Sweeping reforms may not represent progress at all, but a hindrance to fundamental public policy.

We should focus instead on how to encourage equal economic allocations and financial control during marriage. Some financial strategies are to mandate high schools to educate young adults about finances; to require institutions to secure informed consent from all owners for activity in joint financial accounts; to suggest to remarrying couples the use of more prenuptial and postnuptial agreements to allocate and quantify marital economic equality; and to prepare thorough estate plans that provide for trustees and third-party administrators of wealth.

Strengthening the economic partnership in marriage promotes a more predictable and measureable outcome in divorce.

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Vasileff received the Association of Divorce Financial Planners’ 2013 Pioneering Award for her public advocacy and leadership in the field of divorce financial planning. Vasileff is president emeritus of the ADFP and is a member of NAPFA, FPA, and IACP. She is president and founder of Divorce and Money Matters, serving clients nationwide from Greenwich, Conn. Her website is www.divorcematters.com.