Alimony vs. Property Distribution; What You Should Know

 Posted on October 28, 2021 in Family Law

The lives of married people are often totally intertwined, which is part of what makes divorce so difficult. How do you determine who is entitled to what? The challenge is especially acute in the financial realm. After all, it is often the case that one spouse was mostly or entirely dependent on the income of the other.

In these situations, the dependent spouse will often be granted some form of compensation for his or her continued sustenance post-divorce. Generally, this compensation falls into one of two categories: property distribution or spousal maintenance.

Spousal maintenance or “alimony” is court ordered spousal support in the form of monthly payments made by the supporting spouse to the dependent spouse. Property refers to assets already in the couple’s possession, such as a house, stock dividends, etc.

Divorcing spouses are often presented with a choice between greater alimony payment and less property, or more property in exchange for less in alimony. This decision should be made with great care. Both choices carry serious ramifications, and each has both pros and cons.

Here are some factors to consider:

Taxes:

When it comes to alimony or property, there may be serious tax implications. Thanks to recent changes to U.S. tax law, alimony payments are neither tax deductible for the payor nor taxable for the recipient. This means that the payor must usually pay taxes on the portion of his or her income that is then paid out as maintenance. 

Property distributions, on the other hand, are usually not taxed--at least not the distributions themselves. However, property distribution can still have tax consequences. For example, if your divorce judgment gives you possession of the family home, you will probably be fully responsible for property taxes. 

Modifications:

It is a misconception that alimony payments are set in stone. They, in fact, can be modified by both the paying and the receiving spouse.

Generally speaking, it is the paying spouse that is seeking modification. They can seek a reduction in payments if their economic situation changes or they experience a life altering event that somehow inhibits their ability to make payments. The loss of a job or a permanent disability are examples. The change in circumstances cannot be merely cosmetic.

The receiving spouse can also request a modification, although it is usually harder to get judicial approval for an increase in payments.

Property distributions offer much more stability in this regard, as they are usually not subject to modification.

Term:

Alimony also has an expiration date in most cases. If the award is meant to be permanent, the payments will end when the paying spouse dies. Again, in this regard property offers much more stability. A house, for example, will usually continue to gain value in perpetuity.

Contact a Waukesha County Family Lawyer

Family law is complicated, and divorcees are presented with numerous difficult decisions throughout the divorce process. For this reason, having the right family lawyer by your side is critical.

The attorneys at Bucher, Wolff & Sonderhouse, LLP have years of experience helping Wisconsin residents navigate the divorce process. We appreciate the circumstances facing our clients and believe a good lawyer does more than write briefs and interpret the law; they provide candid advice and an empathetic voice. If you need a Waukesha County family lawyer, contact Bucher, Wolff & Sonderhouse, LLP today at 262-232-6699 for a free initial consultation.

Source:

https://docs.legis.wisconsin.gov/statutes/statutes/767/vi/56