Minnesota Divorce and Family Law Blog

Spousal Maintenance Factors

The Minnesota alimony statute lists factors for the family court to consider in deciding a case of spousal maintenance.  However, the statute directs the court to consider "all relevant factors" which may include factors other than those listed.  The statute also directs the court to make the decision "without regard to marital misconduct."  That is a reference to the no-fault aspect of Minnesota divorce law, in which one spouse cannot be treated less kindly for misconduct such as adultery and domestic abuse. 

The factors listed in the statutes are:

 

(a) the financial resources of the party seeking maintenance, including marital property apportioned to the party, and the party's ability to meet needs independently, including the extent to which a provision for support of a child living with the party includes a sum for that party as custodian; 

(b) the time necessary to acquire sufficient education or training to enable the party seeking maintenance to find appropriate employment, and the probability, given the party's age and skills, of completing education or training and becoming fully or partially self-supporting; 

(c) the standard of living established during the marriage; 

(d) the duration of the marriage and, in the case of a homemaker, the length of absence from employment and the extent to which any education, skills, or experience have become outmoded and earning capacity has become permanently diminished; 

(e) the loss of earnings, seniority, retirement benefits, and other employment opportunities forgone by the spouse seeking spousal maintenance; 

(f) the age, and the physical and emotional condition of the spouse seeking maintenance; 

(g) the ability of the spouse from whom maintenance is sought to meet needs while meeting those of the spouse seeking maintenance; and 

(h) the contribution of each party in the acquisition, preservation, depreciation, or appreciation in the amount or value of the marital property, as well as the contribution of a spouse as a homemaker or in furtherance of the other party's employment or business.

When The Court Reserves Alimony or Spousal Maintenance

In family court, there are cases in which the court grants spousal maintenance (i.e., alimony), and there are cases in which the court denies spousal maintenance.  There are also cases in which the court RESERVES spousal maintenance.  When the court reserves spousal maintenance, there is no obligation to pay spousal maintenance, now or in the immediate future, but there COULD BE the obligation to pay maintenance in the future.  

As an example, in Case A, the court finds that one spouse in a divorce is not self-supporting, and the court awards spousal maintenance to the dependent spouse.  In Case B, the court finds that both spouses are self-supporting, and the court refuses to award maintenance to either spouse.  In Case C, the court finds that one of the spouses is not self-supporting, but the other spouse is currently unemployed, so the court reserves maintenance.  This reflects the fact that the spouse who would otherwise pay maintenance does not currently have income to pay maintenance, but that the court believes that, once re-employed, that spouse will have the ability to pay maintenance.  The family court has reserved jurisdiction over the issue, so that in the future, the court may consider whether the facts and circumstances warrant a maintenance obligation.  

In many cases like Case B, when the court refused to award maintenance, the court loses jurisdiction to address the alimony issue in the future.  That is, the court's authority to award maintenance in the future expires, unless the court expressly reserves the issue.  The family court continues to have jurisdiction over the alimony issue only when one of the spouses is not self-supporting, or there is some doubt about one (or both) spouse's ability to become self-supporting in the future.    

Taxable Alimony, Nontaxable Child Support

The tax consequences of child support and alimony (spousal maintenance) are different.  Child support has no tax consequences, which is to say that child support is not taxable to the recipient, and not deductible from the income of the payor.  Typically, however, spousal maintenance is taxable to the recipient, and deductible from the taxable income of the payor. 

If a court order provides for one party to pay child support of $1,500 per month, and maintenance of $750 per month, on paper that combines to be $2,250.  Assume that one's combined state and federal taxes are at a rate of 33% of total income.  Since the payor will save approximately $250 on taxes (due to deducting the $750 from taxable income) and the receiver will incur approximately $250 in taxes (due to including the $750 in taxable income), the net amount of the $2,250 in combined payments is closer to $2,000.

If the court order instead provides for the party to pay child support of $750 per month, and maintenance of $1,500 per month, on paper that combines to be the same $2,250.  But the net amount is closer to $1,750, due to the approximately $500 in tax on the $1,500 in maintenance.

Moreover, if the party paying the support and maintenance is in a higher tax bracket than the party receiving the payments, the parties can mutually enjoy a net benefit.  Assume that the payor is in a tax bracket that results in a 33% tax liability, and the receiver is in a tax bracket that results in a $20% tax liability.  In the first example above, if the payor saves $250 on tax, the net effect to the payor is a combined expense of $2,000.  At the same time, the receiver may incur tax of only $150, so that the net effect to the receiver is a combined receipt of $2,100.  Together, the parties save $100 per month in taxes.

The net benefit increases with the second example ($750 child support, $1,500 maintenance).  If the payor saves $500 on taxes, the net expense is $1,750.  But if the receiver incurs tax of only $300, the net receipt is $1,950.  Together, the parties save $200 per month in taxes.