The Current State of Alimony in North Carolina
Lee Rosen, Rosen Law Firm
By Lee Rosen
Founder - Rosen Law Firm
Guest Columnist Special Feature:
Where Did “Alimony” Come From?
In a divorce proceeding, the court usually considers five major issues: grounds for divorce, property division, custody/visitation, child support, and alimony. Long ago, there was no such thing as a “no-fault” divorce, property division was based on title (who owned the property on paper), custody of children almost always went to the mother, child support was based on the bread-winner/husband’s ability to pay, and alimony was to provide the innocent wife with lifelong support, since women did not work. Today’s world is very different: Parties can divorce without fault, property division is based on “equitable factors” and title doesn’t matter, custody doesn’t always go to the mother, child support is based on “guidelines,” and women work. Necessarily, the law of alimony has changed drastically over the last fifty years.
How Does North Carolina Deal with Alimony?
North Carolina enacted its current alimony statute in 1995 as part of a wave of alimony reform across the country. The North Carolina legislature recognized that old alimony rules did not fit new economic realities, but at the same time the state acknowledged that some spouses remain economically dependent after long-term marriages.
According to Nancy E. LeCroy’s writings in the North Carolina Law Review in 1996, in addition to making several alterations to the alimony statute, the new legislation repealed certain provisions of the statute and replaced them with three new sections. The first, North Carolina General Statute section 50-16.1A, is the new definitional section of the alimony statute, which retains most of the old definitions with some alterations and additions. The second new provision is section 50- 16.2A, which creates an entirely new category, “post-separation support.” Under section 50-16.1A(4), “post-separation support” is defined as “spousal support to be paid until the earlier of either the date specified in the order of post-separation support, or an order awarding or denying alimony.” This new type of support effectively replaced the old “alimony pendente lite” that was used prior to the new legislation to achieve essentially the same result.
The third and final new provision, section 50-16.3A of the North Carolina General Statutes, significantly rewrote and revised the rules for the entitlement, amount, and duration of alimony awards.
The North Carolina statute does not recognize the concept popular in other states of “rehabilitative alimony,” that is, alimony to a spouse to allow him or her to get back on his or her feet to previous, pre-marriage earning levels. Rather, alimony may be awarded only to the spouse who is actually substantially dependent upon the supportive spouse or is substantially in need of support, and/or the supporting spouse was at fault in break-up of the marriage.
What Does the North Carolina Alimony Statute Provide? Who can get alimony?
First, in order for the court to award alimony, the court must find one spouse is “dependent.” The statute provides: The court shall award alimony to the dependent spouse upon a finding that one spouse is a dependent spouse, that the other spouse is a supporting spouse, and that an award of alimony is equitable after considering all relevant factors, including those set out in subsection (b) of this section. To be “actually, substantially dependent,” and thus entitled to alimony, a spouse must have an actual dependence on the other in order to maintain the standard of living to which he or she became accustomed during the last several years prior to the spouses’ separation. To be “substantially in need of support” means that the dependent spouse would be unable to maintain his or her accustomed standard of living established prior to separation without the financial contribution from the other. Not willing to completely break with tradition, the statute also provides that a dependent spouse who committed an “illicit sexual act” during the marriage shall not receive alimony, and a supporting spouse who committed an “illicit sexual act” during marriage shall pay alimony. (If both committed such an act, then the discretion of the court determines whether a spouse shall receive alimony; if such an act was condoned, it is though the act did not take place.) Conventional notions of “guilt” survive. How long does alimony last? The duration of the award may be for a specified or for an indefinite term. What factors determine the duration and amount?
The statute lists sixteen factors for the court to consider:
The list of factors contained in the statute is not meant to be exhaustive, since the overriding principle in cases determining the correctness of alimony is fairness to all parties. And though the statute does not state that any one factor is more important than any other, the recent case law stresses property, earnings, earning capacity, and the accustomed standard of living of parties. One recent case also stressed that who was “caretaker” to the marital children is an important factor. At the least, the trial court must make findings sufficiently specific to indicate that the trial judge properly considered each of the factors for a determination of an alimony award.
- The marital misconduct of either of the spouses. Nothing herein shall prevent a court from considering incidents of post date-of-separation marital misconduct as corroborating evidence supporting other evidence that marital misconduct occurred during the marriage and prior to date of separation;
- The relative earnings and earning capacities of the spouses;
- The ages and the physical, mental, and emotional conditions of the spouses;
- The amount and sources of earned and unearned income of both spouses, including, but not limited to, earnings, dividends, and benefits such as medical, retirement, insurance, social security, or others;
- The duration of the marriage;
- The contribution by one spouse to the education, training, or increased earning power of the other spouse;
- The extent to which the earning power, expenses, or financial obligations of a spouse will be affected by reason of serving as the custodian of a minor child;
- The standard of living of the spouses established during the marriage;
- The relative education of the spouses and the time necessary to acquire sufficient education or training to enable the spouse seeking alimony to find employment to meet his or her reasonable economic needs;
- The relative assets and liabilities of the spouses and the relative debt service requirements of the spouses, including legal obligations of support;
- The property brought to the marriage by either spouse;
- The contribution of a spouse as homemaker;
- The relative needs of the spouses;
- The federal, State, and local tax ramifications of the alimony award;
- Any other factor relating to the economic circumstances of the parties that the court finds to be just and proper;
- The fact that income received by either party was previously considered by the court in determining the value of a marital or divisible asset in an equitable distribution of the parties’ marital or divisible property.
Parties to a divorce must remember that the determination of alimony is a matter left to the wide discretion of the judge based on his or her notions of “fairness.” One recent case said that in determining the amount of alimony, consideration must be given to the needs of the dependent spouse, but the estates and earnings of both spouses must be considered. “It is a question of fairness and justice to all parties.”
How are “earnings and earning capacities” figured?
The trial court must consider a party’s total income, undiminished by savings contributions. This includes investment income, severance pay, gifts, and any source of “funds” available for support.
The court must also consider a party’s “earning capacity.” This means the amount a person can earn using his or her best efforts to earn income commensurate with his or her skills and education. The purpose of this section is to prevent obligors from quitting his or her job and claiming an inability to pay, and to prevent obligees from likewise quitting his or her job and claiming dependence on that basis.
How do taxes figure into this?
Under federal and state income tax law, alimony is deductible by the payor spouse and reportable as income to the dependent spouse, provided that the following criteria are met: (1) the payments are in cash and not in kind; (2) the payments are made incident to divorce or to a separation agreement; (3) the parties have not designated the payments as non-alimony; (4) the parties are not living in the same household; and (5) the payor has no liability for payment after the death of the payee spouse. While the parties may privately agree that the tax deduction and the taxable income aspects of federal alimony law shall not apply, the parties may not by private stipulation create “alimony payments” that do not meet the five federal criteria and yet attempt to obtain the tax deduction for the payor.
How is alimony paid?
An award of alimony may include, in addition to a sum of money in lump sum and/or periodic payments, transfer of title or possession of personal property and an interest in property, a security interest in or possession of real property. Both periodic and lump sum payments may be for a limited, specified term. In fixing the amount of alimony, the court must consider all the factors enumerated in G.S. 50-16.5: “Alimony shall be in such amount as the circumstances render necessary, having due regard to the estates, earnings, earning capacity, condition, accustomed standard of living of the parties, and other facts of the particular case.”
When does alimony terminate?
The court can order alimony for a definite period, thereby providing a definite termination date. Certain events will also cause alimony to terminate. Chief among these are the remarriage of the dependent spouse or the continued cohabitation of the dependent spouse with a person to such a degree that the supported spouse’s expenses are lessened, and the death of either party.
An important exception exists to the rule that alimony terminates on the remarriage of the dependent spouse. Sometimes parties enter into a global settlement agreement, fixing their property rights and spousal support rights. When the provisions of the property division and the alimony are “integrated,” that is dependent on each other, then the alimony provision cannot be terminated on remarriage. For example, a wife might give up a valuable property right in exchange for the stream of income that alimony provides. That stream of income cannot then be terminated on remarriage, because it was a bargained for right.
Can alimony be modified?
Alimony that is not lump-sum, that is for a definite amount for a definite period, can be modified upon a showing of a “substantial change in circumstances.” This means a change in circumstances from those that existed at the time of the original order to the time of the petition for a modification. This would include a change in income or assets of either party, a change in earning capacity (e.g., a new graduate degree), or an unanticipated change in expenses. (A dependent spouse cannot, however, deliberately increase expenses and run up bills in an effort to increase alimony.)
Alimony that is part of an integrated property settlement agreement cannot be modified, because it is a bargained for right.
Can the parties agree on alimony instead of having the court decide it?
The law encourages parties to come to an agreement regarding their rights and obligations. Thus, the parties can agree to all the possible terms of alimony: the right to receive it, for how long, for how much, when it can be modified, when it terminates.
When parties decide to fix the alimony obligation by agreement, the agreement must be untainted by fraud, must be in all respects fair, reasonable, and just, and must have been entered into without coercion or the exercise of undue influence, and with full knowledge of all the circumstances, conditions, and rights of the contracting parties.
How are alimony orders enforced?
For a dependent spouse, having the court make an alimony award is only half the battle. The other half is collecting the award. North Carolina General Statutes sec. 50-16.7 provides that alimony can be enforced by an income withholding order or by a transfer of personal or real property.
The court may require the supporting spouse to secure the payment of alimony by a bond, mortgage, or deed of trust, or any other means ordinarily used to secure an obligation to pay money or transfer property, or by requiring the supporting spouse to execute an assignment of wages, salary, or other income.
More severe remedies such as arrest and bail, and contempt are available, too.
The revision of the North Carolina statute in 1995 was a step towards the idea of support only for those who cannot support themselves. The North Carolina statute, however, retains traditional notions of fault and providing for dependent spouses after long marriages. With these principles in mind, it’s probably far better for parties to negotiate property and alimony awards than to leave it to the wide discretion of the judge.
A list of trained collaborative divorce attorneys is available at www.rosen.com/collaborativeattorneys
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About our Expert:
Lee S. Rosen is a Board Certified Family Law Specialist and founder of the Rosen Law Firm with offices in Raleigh, Charlotte and Chapel Hill, North Carolina. Founded in 1990, the firm is dedicated to providing individual growth and support to couples seeking divorce by helping them move forward with their lives. Our staff of attorneys and other legal professionals expertly address the complex issues of ending a marriage. Our innovative approach acknowledges that divorce is so much more than just a legal matter. Practice areas include child custody, alimony, property distribution, separation agreements, and domestic violence relief. Visit his website at www.Rosen.com. For more background information and past articles for CarolinaNewswire.com, check out Lee's Archives as well as all our other guest expert columns.
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