Alimony in Gross
Spousal support, also known as "alimony," can be ordered by a family court judge. This post examines when the concept of "alimiony in gross" is approprate and acceptable.
What is Alimony in Gross?
Typically, spousal support, like child support, is paid in the form of a monthly support obligation in accord with a court order. Alimony in gross, as the phrase suggests, is where the support payor pays a lump sum -or transfers an asset- in complete satisfaction of his or her spousal support obligation.
Often, when a support payor agrees to pay "alimony in gross", the payor receives a negotiated discount in the form of a reduced present value amount from the stream of payments they would have promised to pay in the future. For example, if the payor is obligated to pay $1000 per month for 120 months, the payor's total support liability is $120,000. Rather than having to pay that amount over time, the payor offers to pay a lump sum of $102,000; reducing his overall obligation by $18,000, or 15%.
There are advantages to both scenarios. In the alimony in gross scenario, the payor pays their total obligation "up front"; sometimes, events will occur in the future that may have reduced or eliminated the obligation altogether. For example, the death of the payee; an agreement by the payee to accept less or no alimony; and the possibility that the family court would reduce or eliminate the support obligation altogether.
Can a Family Court Judge Award "Alimony in Gross"?
Yes; although alimony in gross is less typical than periodic spousal support. Arguably, a family court judge lacks the power to order non-modifiable spousal support. Most often, alimony in gross is negotiated outside court and between the parties, without a ruling from a court.
When ordered in gross, family court judges often place a payment term on the payor. A spousal support award must be equitable and cannot impoverish the payor.
A Michigan divorce statute gives family court judges the power to award spousal support for the suitable maintenance of the adverse party. The alimony statute enables the judge to award support "in gross" or otherwise as the court deems just and reasonable after considering the ability of the parties to pay support and considering all the other circumstances of the case.
The case law addressing spousal support has led to the development of the following factors considered by the family court judge when deciding the rate and term of an alimony award:
the ages of the parties;
the length of the marriage;
the amount of property in the marital estate;
the education and training of the parties;
the ability of the parties to work and earn an income;
the ability of the parties to pay spousal support relative to other court-imposed obligations;
the need of one party for alimony;
the health of the parties;
the prior standard of living of the parties;
the past conduct of the parties, including any fault of a party in causing the divorce;
how cohabitation with a new partner affects a former spouse’s financial status.
Here is a link to the Spousal Support page of our law firm's web site. Give our firm a call if you would like to learn more about this legal issue that arises in many divorces.
Recent Case Addresses Alimony in Gross
In Marick v Marick, the Michigan Court of Appeals addressed the legal concept of alimony in gross. The case featured the divorce of an elderly couple; a second marriage for each spouse.
The family court judge awarded Husband a separate interest in his inherited trust, which he arguably comingled. Husband was also awarded three quarters of a million dollars in separate property as his premarital portion of his retirment assets. Wife did not have comparable separate assets.
Husband was obligated to pay Wife alimony in gross in the amount of $30,000, to be paid out at the rate of $500 per month. On appeal, Wife asserted this award was woefully inadequate in light of Husband's substantial separate assets. The Court of Appeals agreed, and reversed the trial court.
The appellate court found error in the trial court's calculation of Husband's income; it ruled that the trial court should have counted the interest Husband earned on his separate premarital retirement savings as additional income.
In remanding the case, the Court of Appeals instructed the lower court to better structure an alimony in gross award that properly takes into account the parties' incomes and needs. This, of course, is the challenge in every spousal support case.
We Can Help
Our law firm has vast experience in dealing with divorces that involve spousal support. We have represented clients that are both payors and payees of alimony. We have negotiated divorces that include alimony in gross.
If you, a loved one, or a friend, is involved in a divorce that involves alimony among the legal issues raised in the case, contact our firm to schedule a free consultation to discuss your options.