Alimony Waivers and Premarital Agreement Options

April 27, 2011

Alimony Waivers and Premarital Agreement Options

The discussion below is neither a complete analysis nor complete review of alimony or Premarital Agreements, but rather a very general discussion, and it is not intended as legal advice for any particular person.

Premarital Agreements are gaining popularity among a wide range of couples. Couples planning to marry have the right to waive alimony in premarital agreements, and if the waiver is clear and unambiguous, the waiver will be enforceable at the time of dissolution of marriage. The only exception being if the waiver of alimony causes a spouse to become eligible for support under a program of public assistance at the time of separation or marital dissolution, a court may require the other spouse to provide support to the extent necessary to avoid that eligibility.

Absent a written valid waiver of alimony, a court has discretion to award alimony, but the kind and amount of alimony, if any is awarded, is highly unpredictable as the court has a great amount of discretion. A spouse seeking alimony in a dissolution of marriage action must first demonstrate he/she has the need for alimony and that the other spouse has the ability to pay the alimony. There are several different types of alimony that can be awarded: permanent; durational; bridge the gap; rehabilitative; and lump sum. Each type is for a different economic purpose and duration and is beyond the scope of this discussion.

If the court determines the need and ability to pay exists, the court must consider many factors to determine both the type and amount of alimony. Those factors include: the standard of living established during the marriage; the duration of the marriage; the age and the physical and emotional condition of each party; The financial resources of each party, including the nonmarital and the marital assets and liabilities distributed to each; the earning capacities, educational levels, vocational skills, and employability of the parties and, when applicable, the time necessary for either party to acquire sufficient education or training to enable such party to find appropriate employment; the contribution of each party to the marriage, including, but not limited to, services rendered in homemaking, child care, education, and career building of the other party; the responsibilities each party will have with regard to any minor children they have in common; the tax treatment and consequences to both parties of any alimony award, including the designation of all or a portion of the payment as a nontaxable, nondeductible payment; all sources of income available to either party, including income available to either party through investments of any asset held by that party; and any other factor necessary to do equity and justice between the parties.

Before the less affluent fiancee agrees to waive alimony in a premarital agreement, he/she needs to make an informed decision as to the pros and cons. No one can predict the future. There is no way to know the length of the marriage, the standard of living that will be enjoyed, the health of the parties, the ability of the parties to earn a living at the time of dissolution of marriage or any other factor mentioned above.

An attorney probably will not advise a client to enter into an agreement that waives your right to alimony. That decision is strictly up to the client after considering the pros and cons. Generally speaking, a waiver of alimony is perhaps more appropriate for older couples who are both already well established and each has assets and/or income sufficient to live on in the event of marriage dissolution. A waiver of alimony is much less appropriate when both parties are younger; when the less affluent fiancee is younger; or when there is a large disparity in assets and earning ability at any age. It is rarely appropriate for couples who plan on having children together.

However, it is understandable that couples may want to fix the alimony obligations in the event of a dissolution of marriage to avoid costly, unpredictable, and time-consuming litigation. There are many options available to couples, and the only limitation is the creativity of the couples. CAUTION: While these options are better for the less affluent fiancee than a complete waiver, they still run the risk that they could be inadequate at the time of dissolution of the marriage, yet still be enforceable.

Typically the options are, but are certainly not limited to:

A. Determining fixed amounts of alimony at certain intervals based on the length of the marriage. For example, no alimony for 1 to 5 years; $X amount if between 6 and 10 years; $XX amount if between 11 and 15 years, etc.

B. Using a formula based on the relative incomes at the time of dissolution: For example, receiving spouse gets 35% (or some other higher or lower percentage) of the total gross income between the parties. Hypothetically, H earns $7,500 per month and W earns $2,500 per month. Total gross is $10,000.00. 35% is $3,500. Therefore H pays W $1,000.00 per month to bring her total to $3,500.00. This could also work in intervals as well. For, example, 20% of total gross 1-5 years; 25% total gross 6-10 years; 30% total gross 11-15 years, etc.

C. Using a formula based on assets.

D. Payment of a lump sum at certain intervals. For example, $100,000 after 5 years; $200,000 after 10 years, etc.

E. Sun-setting the waiver: For example, after so many years the waiver goes away and alimony is left up to the law and the circumstances at the time.

F. Sun-setting the waiver and agreeing to readdress it at a certain time down the road.

G. Any combination of the above.

H. Any other creative method of handling alimony.

In addition to the above, the options of determining the duration of the alimony, whether to make the provisions modifiable or non-modifiable, and making the payments taxable or non-taxable to the receiver and deductible or non-deductible from income to the payor are also issues that must be considered.

None of the above is a perfect solution. Couples planning for the alimony provision contained in a Premarital Agreement need to thoroughly discuss this issue before deciding how to handle alimony in such agreement.

Both parties must understand, however, that they are agreeing to the definite outcome that will be binding on them down the road without any ability to predict their financial circumstances at the time. Waiving alimony or fixing alimony in a premarital Agreement is risk taking.

If you are interested in consulting with a Florida Bar Board Certified Family Law Specialist about a Premarital Agreement contact the Law offices of Curtis R. Cowan, P.A. at 954-768-0720 or visit his web site at www.curtcowanlaw.com.

Article provided by Curtis R. Cowan PA
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