Because my wife and I are both working remotely with a lighter than usual workload, it seems like a good time to finish discussing our divorce and write an agreement. We are stuck on an issue.
We have a fairly large investment portfolio. So far it has lost some but remained relatively stable due to heavy bond investments. Anyway, we are trying to figure out budgets and what alimony should be paid. There will not be child support because our kids are grown. I do make significantly more than she does but she doesn’t spend much and plans to buy a small condo in cash when I buy her out of the house, which will mean she can really make do on her salary because she won’t even have a mortgage.
She is telling me that I can’t count the income generated from the bonds she will get toward her overall income when we figure out the alimony I will pay. That doesn’t seem fair to me — it will still be income.
I do want to be reasonable and get this done. Who is right here?
Let’s take a closer look at what you just told me. You make significantly more than your wife; your kids are grown, meaning this is probably a long-term marriage; she is planning to reduce her lifestyle post-divorce to better make ends meet; and you want to include investment income in her annual income but you neglect to say you will do the same for your income, thus increasing your ability to pay.
Alimony is based on the need of one party and the ability of the other party to pay and will not usually exceed 30%-35% of the difference in your incomes. Now that alimony is no longer a taxable event, most people are agreeing to a tax-free percentage of 22%-28%. So the question is, using a mid-way point of 25% of the difference in your earned incomes alone, what does that look like?
Your wife has no obligation to reduce her lifestyle post-divorce. The case law says if the marital lifestyle can be maintained it should be and if not, you should share the burden of sacrifice. Just because she plans to lower her housing costs, that does not mean you get to pay less alimony. Also realize where you earn more, you will be saving more toward retirement than she is able to, meaning she has to budget for higher retirement savings going forward.
The case law also specifically says the income received from income generating assets divided in connection with divorce does not need to be counted in determining an alimony award. This is especially true if such income was historically reinvested.
So, if you really want to get this done, figure out an alimony amount you can live with paying that is fair to your wife without counting investment income.