In Virginia, a family law judge may award support and maintenance for several reasons. Typically, courts consider nonfinancial matters such as each spouse’s contribution to the marriage, whether there are grounds for divorce, how long the marriage lasted, and the age and health of each spouse, among other relevant issues.
When it comes to aspects of the divorce that affect spouses’ financial futures, judges consider their income and obligations, including earning capacity and the skills and education they have or would need to acquire to find viable employment opportunities.
Judges also consider the following financial issues before awarding support and maintenance:
- Standard of living the spouses had during the marriage
- Retirement accounts and pensions
- Property interests
- Marital property division
- Tax consequences of the divorce, property division and maintenance
The Tax Cuts and Jobs Act has changed the way spouses pay taxes on alimony. Now, on federal income tax returns, the receiving spouse does not claim the payments as income, and the paying spouse does not receive a deduction on the amount paid.
For many couples, taking the tax advantages from the equation has sent them looking for alternatives that may be more beneficial to each spouse. Virginia law suggests that a lump sum payment may represent a portion of the spousal support agreement in addition to periodic payments or instead of them.
Forbes reports that some spouses have gotten even more creative in their quest for the most advantageous alimony alternatives. For example, a spouse may receive a retirement asset in lieu of alimony, and the breadwinning spouse may transfer pre-tax dollars into the account rather than make taxed support payments directly to the receiving spouse.
Charitable remainder trust
A high-asset couple may choose to set up a charitable remainder trust. The receiving spouse would be the trust beneficiary. At the end of the specified timeframe, the payments would stop and the trustee would distribute the assets to the charity that the trustor has designated.
Other options may also be available, depending on the couple’s assets and their willingness to cooperate on a creative solution.