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What is Alimony and How Does It Work?

If you’re getting a divorce, chances are good that you may be receiving or paying alimony. Alimony is also called in some states “spousal support” or “maintenance.” If you are indeed in this situation (whether you’re the payor or the recipient of the alimony), it may make sense to know what alimony is and how alimony works.

It may also make sense to work with a qualified financial advisor to help you with your money during this difficult time. This free advisor matching tool recommends up to three financial advisors based on your unique circumstances.

What is alimony?

Alimony, also known as spousal support or maintenance, is a situation where one former spouse pays financial support to the other spouse after a divorce or separation.

Alimony can be in the form of cash, or some other type of payments. Spousal support is usually awarded in situation where one spouse was the breadwinner in the marriage. And the other spouse could no longer support himself and herself as a result of the divorce.

Depending on how long you were married, spousal support payments can be significant. Alimony, however, should not be confused with child support. They are two different things.

Child support, as the name suggests, is “support: for the child. Whereas alimony is “support” for the receiving spouse.

How does alimony work?

Generally, after a divorce is finalized, and if one spouse makes more money than the other, and the other spouse is unable to support him or herself financially, a court may award alimony.

How long and how much you have to receive or pay maintenance depends on your state. Consult with a divorce attorney in your state or a financial advisor for that matter. But generally, the longer you were married, the more likely spousal support will be awarded.

Alimony must be paid for a period of time to the receiving spouse. The payments must meet these requirements:

Cash.

 The payments must be made in cash rather than stocks, bonds or other form of property.

For example, if you’re getting a divorce and the divorce decree requires you to transfer some stocks of XYZ company to your ex-spouse, that does not qualify as spousal support or maintenance. Rather, it looks more of a property settlement. So, it must be cash, checks, etc.

Spousal Support Payments under decree.

The alimony payments must be received under a divorce decree or separation agreement. A divorce degree is a court’s final order that terminates a marriage. It will list all of the obligations of each party. Who gets what and how much.

No payment if the receiving spouse or the payor dies.

Alimony payments stop upon the death of the receiving spouse. Alimony is “support” for the receiving spouse. If he or she dies, he or she no longer needs support.

Even if the parties intended an amount of money to be paid to the estate of the receiving spouse in the event of his or her death, that payment would not qualify as alimony. Thus, alimony ends at the death of the receiving spouse.

The same is true if the payor dies.

The alimony payments is deductible.

The divorce decree should state who will pay tax on the alimony income. Usually, the receiving spouse will pay tax on the maintenance payments, as he or she will be in the lower tax bracket. And the payor will claim a deduction on the payments.

Therefore, it’s important to keep records of the payments (whether you’re the payor or the alimony recipient). 

Alimony is not child support. 

If you’re ordered by the court to pay a certain amount of money for child support after a marriage, this amount is not spousal support. So, for a payment to qualify as alimony, it must not be payment for the support of a child.

So, you can be in a situation where you’re paying child support and spousal support at the same time.

Who qualifies to receive spousal support?

Before a court awards you alimony, they will look at several factors. One is how long you were married for. You are more likely to get spousal support after a long marriage rather than a short marriage.

Another factor a court might look at is your capacity to earn. If you currently have a part time job, a judge might require you to seek a full time job to estimate how much you can earn.

A judge might also look at your standard of living during the marriage. Again, whether you will receive alimony depends on your state. Click here for the laws on your state.

The bottom line…

So what is alimony? Alimony is financial support to a spouse for a certain period of time. It is ordered by a court after a divorce is finalized. To qualify as alimony, the payments must be made in cash. The parties must not live together. The payments stop if the receiving spouse dies. And the payments are not used for child support.

What’s Next:

Speak with the Right Financial Advisor

If you have questions beyond alimony or spousal support, you can talk to a financial advisor who can review your finances and help you reach your goals (whether it is making more money, paying off debt, investing, buying a house, planning for retirement, saving, etc).

Find one who meets your needs with SmartAsset’s free financial advisor matching service. You answer a few questions and they match you with up to three financial advisors in your area. So, if you want help developing a plan to reach your financial goals, get started now.

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