Various alimony guidelines have been developed around the country.  The American Academy of Matrimonial Lawyers (AAML) has developed a guideline that uses incomes and length of marriage to calculate the starting point for determining alimony.  The Kaufman guidelines, developed by a Michigan divorce attorney and initially published locally by the Montgomery County Commission for Women, use income, length of marriage, education, income potential and child custody to generate a  recommended amount and duration of alimony.  Last year, the Maryland Court of Appeals approved a trial judge’s reference to the AAML alimony guidelines for informational purposes in Boemio v Boemio, 414 Md. 118, 994 A.2d 911 (2010) .

In Virginia, the Fairfax County Circuit Court has by rule adopted guidelines for pendente lite alimony determinations.  It is commonly understood that those guidelines have some influence on final alimony settlements and determinations.

There may someday be statutory alimony guidelines in each state the way there are now statutory child support guidelines but it is not likely to be anytime soon.  The driving force behind the universal adoption of statutory child support guidelines was the federal interest in making child support more predictable and more collectible across state lines.   It does not appear there is any similar overriding federal concern with alimony.  So divorcing spouses and divorce lawyers will continue to settle alimony cases based on all the circumstances with non-statutory guidelines playing an increasingly important role in negotiations.  Those cases that do not settle will be tried before judges who may or may not consider the various guidelines in deciding the cases.

What if one divorcing spouse works for a private company and has a pension and will be eligible for social security and the other is a government employee? The Court will divide the marital portion of the private pension and the government pension but cannot divide the social security.  Should the Court take account of that difference in expected government benefits in dividing the pension?  Not in Maryland.  See Pleasant v Pleasant, 97 Md. App. 711, 632 A.2d 202 (1993).  In that case the Maryland Court of Special Appeals held federal law precluded treating social security benefits as marital property and affirmed the trial court’s holding that the marital portion of husband’s pension, funded by payroll deduction during the marriage, would be equally divided when received and the wife’s social security benefit, funded by payroll deduction during the marriage, would not be divided.  The court made no other adjustment to the equitable distribution of marital property.  Is that unfair? Of course.  The law of Virginia is the same on this point.  See e.g.    Esposito v. Esposito, 2002 Va. Cir. LEXIS 234 (Fairfax County)

            Here is a comparison applying the child support guideline of each local jurisdiction to a typical case:  two children, sole custody, $0 health insurance and $0 child care costs and combined monthly income of $10,000, non-custodial parent’s income is $7,500 and custodial parent’s income is $2,500:

District 

total support                $25,174/12 = $2,098              

custodial % of income                            .75

recommended support order               $1,573

Maryland

total support                                        $1,811

custodial % of income                            .75

recommended support order               $1,358

Virginia

total support –                                      $1,577

custodial % of income                            .75                  

recommended support order               $1,183

Again, applying the child support guidelines to a case with the same facts except combined monthly income of $15,000, non-custodial parent’s income is $11,250 and custodial parent’s income is $3,750

District of Columbia:             

total support                $35,152/12 = $2,929

custodial % of income                            .75

recommended support order               $2,197

Maryland:                                           

total support                                        $2,847

custodial % of income                            .75

recommended support order               $2,135

Virginia

total support –1,597+.051 x $5,000 = $1,832   1

custodial % of income                            .75

recommended support order               $1,374

            As you can see, at higher incomes, child support is much lower in Virginia than in Maryland or the District.

1/  Total support for two children increases $5.10 for each $100 dollars of combined income between $10,000 and $20,000.

Recently I wrote regarding using life insurance to assure payment of child support.  Another scenario is life insurance to protect the alimony payment – the spouse being the beneficiary of the policy.  This is a straight forward consideration flowing from payer/insured spouse to payee/beneficiary spouse.  The insured wants less coverage and less premium, the payee/beneficiary spouse wants more coverage.

            Premiums on a policy of life insurance on the alimony payer benefit the alimony payee.  Payments to a third party on behalf of or for the benefit of a spouse or former spouse can qualify as alimony.  Paying insurance premiums can qualify if the payer spouse is not obligated to pay under the insurance contract – because in that situation he or she is not simply paying his or her own expense.  Generally, the owner of the policy is the person who is obligated to pay the premiums.  So in order for premiums on the life of the insured/alimony payer’s life paid by the insured/alimony payer to be deductible as alimony, the alimony payee must be the owner of the life insurance policy.  The parties’ Agreement should require the insured/alimony payer to pay the premiums on the payee’s behalf and the parties’ Agreement should state that such payments are alimony.

            Another situation where life insurance can be appropriate is to replace a survivor annuity if it is unavailable or available only on undesirable terms.  A traditional defined benefit pension pays a lifetime annuity to the retiree.  Federal law generally requires married persons to elect what is known as a joint and survivor annuity payment option, unless the employee’s spouse agrees otherwise in writing. In divorce, the parties can agree to a joint and survivor annuity or the court can order it.  Under this option, if the non-employee spouse survives the employee spouse, the pension payer continues the annuity payments at a reduced rate to the non-employee spouse for his or her life. 

            The initial payment (during the joint lives) under a single life annuity payment option is higher than the initial payment under the joint and survivor annuity option.  Depending on the amount of that payment reduction, it may make financial sense to elect the single life annuity and buy life insurance on the employee’s life to protect the income stream for the non-employee in the event that he or she is the survivor. The advice of an experienced life insurance professional can be very useful in doing this analysis.

The decision to pay money to an insurance company now so that the insurance company will pay others after you are dead is usually undertaken with some ambivalence.
If you have minor children, you generally still need life insurance coverage post-divorce but it is a prospect that many people find even more distasteful at that time. Add to this, the fact that the divorce court generally cannot order a party to obtain or continue life insurance. (In Virginia, the court can order a party to continue existing life insurance coverage and designate children as beneficiaries if the party has a duty of support to such minor children. Va. Code Sec. 20-108. D) So the party who is proponent of the life insurance coverage, usually the economically dependent spouse, will often have to make a concession on some other issue to get the desired life insurance coverage. In many cases, since that concession would means less money now to the economically dependent spouse, the concession is not made and the life insurance is not agreed to. As a result, many divorced fathers and mother have far less life insurance coverage than a married parent with similar income, net worth and family responsibilities would have. One more risk for children of divorce.

When we represent the economically dependant spouse, or in case where there are two significant income earners, we look carefully at apparent life insurance needs and counsel clients to seek an agreement requiring adequate life insurance coverage. When we represent the higher earner, if there are minor children, we counsel our client to carefully examine the life insurance need and think it through before bargaining for lower coverage.

It is always necessary from the insured’s viewpoint for the Agreement to provide for reduced coverage as the future financial obligation decreases over time. This is especially important if the life insurance policy does not lock in level premiums per unit of coverage for the duration of the obligation. It is best to consult with an experienced life insurance agent with a highly rated insurance company while the marital settlement agreement is being negotiated to determine the availability and cost of coverage.