Contractual Alimony

Contractual alimony is based on an agreement or contract between the parties for one spouse to voluntarily pay another spouse or former spouse.

Why would anyone agree to contractual alimony?

Alimony can be used to pay the other spouse for their interest in property with tax advantages. Alimony is taxable to the receiving spouse and deductible to the paying spouse if agreed by the parties. However, there are very strict IRS rules that need to be followed or the alimony will not be deductible and taxable to the receiving spouse. Discuss alimony tax issues with your Certified Public Accountant, as well as,  your divorce lawyer.
   
Alimony is a means of shifting income to the spouse with the smaller income to take advantage of the Federal Income Tax laws.  Alimony can be used to assist a spouse to become financially independent, such as using the support to enable the former spouse to attend school.

Court Ordered Alimony or Maintenance

The Texas Family Code uses the word, "maintenance." It means an award in a divorce suit of periodic payments from the future income of one spouse for the support of the other spouse.

Texas was one of the last states in the United States to recognize alimony when welfare reform occurred in 1995. As a result of the reluctance of the State Legislature to pass an alimony statute, the limitations placed on alimony awards by the legislature, alimony can be awarded by the judge in limited circumstances.

The following criteria must be met to qualify for court ordered maintenance or alimony:

• Must be married at least 10 years;
• Must not be self-supporting;
• Normally limited to 3 years, unless receiving spouse is mentally or physically disabled; and the,
• Amount of alimony limited to $2,500 or 20% of payer’s monthly gross income, whichever is less.

Alimony terminates upon the following:

• Death of either party;
• Remarriage of receiving party; or
• After a hearing, if the receiving party cohabitates with another person in a permanent place of abode on a continuing conjugal basis.

Factors used by a judge to determine that a spouse should receive alimony:

• What are the financial resources of the parties?
• What are the liabilities of the parties?
• Can the obligor afford to pay the alimony?
• What are the educational skills of the parties?
• How long will it take for one spouse to acquire an education or training necessary to enable the spouse to find appropriate employment?
• How long was the marriage?
• What are the ages, health, earning ability and physical abilities of the parties?
• Can the paying spouse pay his own personal needs, his child support and additional alimony?
• Has there been acts of destruction of assets, fraud, concealment or abnormal expenses by one spouse?
• Is there any separate property?
• What contributions were made during the marriage (such as educational, financial, homemaking)?
• What, if any, marital misconduct occurred? and,
• What efforts has the unemployed spouse done to obtain employ