If you have recently begun considering a divorce and are under the impression that alimony may become an issue in your divorce there are several rules and guidelines that you need to be aware of.  These rules are ultimately around for your protection, especially if you are the spouse paying alimony and are designed to help ensure that you are not financially ruined in the process.  Never deviate from these rules without speaking to your lawyer and finding out what should be different and an exact reason of why.  Never follow the advice of your spouse’s lawyer in regards to following the rules, remember they represent your spouse not yourself and are therefore looking for your spouse’s best interest not yours. 

 

 

First rule: no matter what your spouse says, they are not required to give you a receipt and are not required to be honest in court if there becomes a question of making your alimony payments.  For this very reason, it is best to only send payments for alimony to your spouse by way of a check, and make sure you get a canceled check back from your bank each month.  If your bank does not return checks, ensure that you get a copy of the check clearing your account as proof.  If your spouse ever disputes your payments and claims you are not making your payments, then cash payments made directly to your spouse will not help you.  However, canceled checks that have cleared your spouse’s account will speak volumes in your favor.  Always assume that problems will occur in the future and make sure you adequately protect yourself.  It is better to be safe than sorry.  If you do not want to pay by check, then consider a money order, or even perhaps negotiate to use a prepaid Visa or Master Card so that you can once again prove payments are being made, and have receipts to prove that it is being paid.  

Second rule: also follow the guidelines for payments that is set forth in your divorce decree, separation agreement, temporary order, order pendent elite, divorce judgment or any other document ordering alimony.  Ensure that payments are made in full; by the date specified and that they are delivered to your spouse in accordance with the order.  

Third rule: never agree to an alimony settlement in which the recipient spouse is not required to claim the alimony for tax purposes.  Insist upon the alimony payments being deductible for the payor and being taxable to the recipient.  This means that your yearly taxable income is reduced by the amount you are paying in alimony, while your spouses’ yearly income is raised by the amount you are paying in alimony.  This equals a huge tax savings for the spouse paying alimony but can cost the recipient spouse a lot of money in additional taxes.

Fourth rule: you should live apart in order for alimony payments to be proper in accordance with the IRS rules regarding alimony.  You cannot claim a deduction for alimony if you and your spouse live under the same roof.  This will result in an audit very quickly for you and your spouse.

Fifth rule: insist that payments be terminated upon the death of the recipient spouse.  Otherwise, the beneficiary of your spouses’ estate could continue to collect alimony payments while your spouse is no longer living.  Also, insist upon alimony being terminated at the payors death.  Another guideline you may want to add is that alimony is terminated upon the remarriage of your spouse, or upon engagement of your spouse, or if your spouse moved in with another partner, regardless of gender.  

Sixth rule: ensure that you have a very clear line drawn between the money paid for child support and alimony.  For example, it is not a good idea to terminate child support and alimony at the exact same time.  While most child support is terminated upon the children being emancipated, this is not a good time for alimony to terminate or the IRS may consider the alimony paid as child support instead of alimony.  To avoid this, allow a couple of month’s minimum between the two occurrences so that they are clearly identified.  

Seventh rule: this final rule is from the IRS themselves.  Do not front load the payments.  This means that you cannot pay much higher alimony payments for a very short period of time and then phase them into lower payments.  There are circumstances where this is allowed, but only specific amounts.  Talk to an accountant as well as your lawyer before setting this up.  If this type of method is chosen then ensure that it is tied to some form of requirement.  Such as a higher alimony payment for 4 years or so while your spouse attends school to get a degree, then alimony is lowered upon graduation.