What is Alimony?
What is Alimony?
payments to a spouse after marital separation or divorce.
Alimony Details
Alimony is also referred to as "spousal maintenance" in some countries. The idea behind providing alimony is to support the spouse with a low income or no income at all. Alimony becomes even more crucial in cases when the separated couple has children to care for. Alimony covers the individual in such cases to financially recover their independent life.
The alimony amount is pre-determined by a marriage court. Failure to pay the amount within the mentioned time frame can result in civil or criminal charges against the payer. The alimony amount helps the individual continue with the lifestyle that they were accustomed to before separation.
Alimony payments stop upon death, remarriage, or court order. In most states, alimony payments only come into the picture when the marriage lasts for more than ten years. The current and potential future income of both spouses determines the alimony amount. Most states don't recognize the need for alimony if both individuals have similar incomes.
Real World Example of Alimony
Media tycoon Rupert Murdoch split with his first wife, Anna, in 1998 after 32 years of marriage. Together, they had three children. They finalized their divorce in June 1999, and Rupert had to pay $1.7 billion in alimony. Over $110 million of it was in cash. It is one of the most expensive alimony settlements of all time.
Cell phone and mobile technology mogul Craig McCaw was married to his wife Wendy from 1974 to 1997. His wife demanded over $200,000 in monthly payments to support her expensive lifestyle. The court eventually settled for a lump sum payout of $460 million.
American actor and director Mel Gibson married Robyn Denise Moore in the late 1970s. They separated after being married for over 31 years. Together, they had seven children and three grandchildren as of 2011. Robyn got out of the marriage with over $400 million in alimony payment which was over 50% of Mel Gibson's total net worth.
Alimony vs. Child Support
Alimony payments are meant to support a spouse or a former spouse. On the other hand, child support protects the children and their future from a separated marriage. One parent has to help support the growth of their children by paying money to the child's guardian.
The alimony amount paid for divorce agreements finalized before December 31, 2018, is tax-deductible. This means that one can deduct the alimony payment from the taxable income for the year. For divorces finalized after December 31, 2018, the Tax Cuts and Jobs Act makes alimony money a taxable income.
Child support payments are not taxable as they are intended to benefit the children. These payments are also not tax-deductible for the parent who provides them.
History of Alimony
Alimony started during a time in England when divorce was not permitted, only a legal separation. Because the husband still had to take care of the wife, these payments contributed to supporting the wife. Eventually, alimony found itself in American divorce laws. Up until the 1970s, alimony was strictly seen as something a husband gave a wife. In 1979, the Equal Protection Clause extended this support to husbands.