Maintenance and Family Support
Maintenance (formerly known as alimony) is financial support from one spouse to the other when a marriage ends by divorce or legal separation. In Wisconsin, maintenance is governed by Wis. Stats. Sec. 767.56, which provides that the court “may” grant maintenance to either party.
A maintenance determination must be based upon the factors listed at Wis. Stats. Sec. 767.56(1c). The first, and arguably most significant, factor is the length of the marriage; courts rarely award maintenance in a short-term marriage. Other commonly considered factors include the age and health of the parties; their education levels; their income or earning capacity; and whether one of the parties contributed to the other party’s increased earning capacity. These same factors help the court determine whether maintenance should be indefinite or for a limited period of time. Despite this lengthy list of specific factors, in practice there is little uniformity or predictability in maintenance awards.
Most maintenance awards can be modified, as provided by Wis. Stats. Sec. 767.59. The party seeking to increase, decrease, or terminate maintenance must show there has been a substantial change of circumstances since the maintenance order was entered. By statute, maintenance terminates upon the recipient’s remarriage, unless the parties agree otherwise.
Maintenance awards have income tax ramifications for both parties. Maintenance payments are considered income for the recipient, and reduce the payer’s income for tax purposes. See 26 U.S.C. Sec. 72 and Sec. 215. While child support payments generally are not deductible for tax purposes, Wisconsin statutes and federal tax law allow a hybrid of maintenance and child support, known as Family Support or Section 71 Payments. See Wis. Stats. Sec. 767.531; 26 U.S.C. Sec. 71. These provisions permit the spouse paying maintenance and child support to deduct the full payment from income before calculating taxes, and require the recipient to include the full payment as income. This Family Support option allows parents more flexibility in their financial arrangements.
Sometimes the parties or the court decide to avoid a maintenance award by providing for a maintenance buy-out – an unequal distribution of property to accommodate a spouse’s maintenance needs. When we evaluate a maintenance buyout, we first estimate the amount and duration of a likely maintenance award, then calculate a present-day equivalent to that stream of income. We use sophisticated calculators that consider, among other things, actuarial tables and the potential investment income from the lump sum.