Alimony is based on what the payor spouse makes, what the payee spouse needs, and the living standard of the marriage during the time the parties were living together. However, both state and federal law prohibit forcing someone to pay an amount that is so high that it is impossible to pay. Someone cannot be forced to pay, for example, 50%, 60%, or 70% of their monthly income in alimony.
What is Income?
That begs the question: What is income? That may seem like an obvious question, but people get paid many different ways. Some people get regular, periodic paychecks. That makes it easy to determine how they get paid. But others get paid sporadically—say, with commissions, or end of year or periodic bonuses.
When people get paid periodically, does the court, in calculating alimony, include those bonuses or commissions in calculating income, or does income only mean whatever you get in a regular, periodic paycheck?
Court Includes All Payments
That exact question was recently determined by a New Jersey court. In the case, the husband made over $1 mil a year—but a large part of that was bonuses. His monthly income was “only” $20,000 a month. Problem for him was that the alimony award required him to pay $17,000 a month to his ex-wife.
The husband tried to appeal this decision, saying the alimony amount required him to pay 80% of his regular income. His position was that his bonuses, which raised him to the $1 million yearly, should not be included or counted as income, for the purpose of calculating alimony.
Federal law does count bonuses as “earnings.” As such, the court ordered that the alimony amount was reasonable, when taking into account the yearly bonus.
Guaranteed or Non-Guaranteed?
Of course, this case had to do with a yearly bonus, but it is unclear how certain the bonus is—in other words, whether it is guaranteed on a yearly basis. While bonuses and guaranteed income are counted for alimony, there is still an argument that non-guaranteed bonuses or commissions should not be calculated for the purposes of income and alimony.
For example, performance-based bonuses, which can vary or not be given at all, could be excluded from alimony calculations, if there is a showing that the bonuses vary from year to year. Commissions can also vary, depending on markets, the overall economy, etc.
In those cases, courts will take a long term approach: How much income or bonus has the payor spouse made on a yearly basis in the last one, five, or 10 years? Is there any income that would skew the average, for example, a one time large bonus or commission that is not expected to be regular, but which skews the average?
A party who may have to pay alimony should show the court that the one-time higher earning should not be considered the norm for the purposes of calculating alimony.
Are you facing having to pay alimony, or are you in need of alimony in your divorce? Contact our New Jersey Divorce attorneys at The Law Office of Agnes Rybar LLC for help.