Spousal Support in High-Income Divorce
Spousal support ensures that a divorce does not leave a spouse unable to afford living expenses and helps balance a couple’s disparity in earning power. However, spousal support in high-income divorces may involve unique considerations. Having experienced legal counsel can help guide you through the complex issues that may arise regarding spousal maintenance in your high-income divorce.
What Makes Spousal Support Different in High-Income Divorces
Couples may have different considerations regarding spousal support in a high-income divorce. For example, a high-income couple may have one spouse serving as the sole or primary breadwinner. The other spouse may not have the education, training, and work experience to obtain employment soon after the divorce to pay their essential living expenses or to maintain a rough equivalent of the standard of living the couple enjoyed during the marriage.
High-income couples may also have prenuptial or postnuptial agreements that address spousal maintenance differently than Texas law. For example, state law typically caps spousal maintenance at the lesser of $5,000 or 20 percent of the payor spouse’s average monthly gross income. For high-income couples, $5,000 may fall far below 20 percent of a spouse’s monthly income. But prenuptial and postnuptial agreements may provide for higher maintenance amounts. A Texas court may also have to assess the fairness of the statutory caps on spousal maintenance, given a high-income couple’s financial circumstances, and fashion alternative arrangements to achieve an equitable solution.
Key Factors Courts Consider in High-Net Worth Spousal Support
Some of the factors that Texas courts consider when deciding spousal maintenance in divorce include:
- The length of the marriage
- The couple’s standard of living during the marriage
- The financial resources and earning capacity of each spouse (including whether childcare responsibilities affect a spouse’s earning capacity)
- Each spouse’s contribution to the marriage, including contributions through homemaking, childcare, and business support
- The effect of spousal support for a payor spouse who has other child or spousal support obligations
- The contribution of one spouse to the other’s education, training, or increased earning capacity
- Any marital misconduct by a spouse, such as adultery or cruel treatment
- Any history of family violence
Tax Implications of Spousal Support in Dallas
For divorce judgments or settlements made before 2019, a payor spouse can deduct spousal support payments, and the recipient must report them as income. However, changes to the tax law made spousal maintenance neither deductible nor reportable as income for divorce judgments entered after 2018.
Types and Duration of Spousal Support for Wealthy Couples
A high-income divorce can involve different types of spousal support, including:
- Temporary Support – A court may order a temporary spousal support arrangement that lasts for the duration of the divorce proceedings or until the receiving spouse obtains another source of income.
- Statutory Spousal Maintenance – A spouse can petition for statutory maintenance during divorce proceedings, though the court must consider whether to award support based on statutory factors and must adhere to caps on the amount and duration of maintenance.
- Contractual Alimony – Couples may agree to a higher amount or longer duration of alimony than permitted by Texas law in a prenuptial or postnuptial agreement.
Under Texas law, courts typically may not order spousal maintenance for longer than five years for a couple married less than 20 years, seven years for a couple married for at least 20 years but not more than 30 years, or 10 years for a couple married for 30 years or more.
However, a court may continue spousal maintenance if a spouse cannot earn sufficient income to meet their reasonable minimum needs. For example, the receiving spouse may face physical or mental incapacity or have primary physical custody of a child of the marriage who requires substantial care and personal supervision due to physical or mental disability. Circumstances like these can prevent the spouse from earning sufficient income to meet their reasonable minimum needs.
Income Disclosure and Hidden Asset Challenges
Couples must make complete and accurate disclosures of their finances to one another and to the court when negotiating a prenuptial or postnuptial agreement or filing for divorce. Deficient disclosures or attempts to hide income or assets by a spouse can have adverse consequences for them, including invalidating a prenuptial or postnuptial agreement based on incomplete financial disclosures or resulting in adverse court rulings for efforts to conceal assets or income.
Unfortunately, spouses can find it challenging to track down hidden assets or income and may need support from forensic accountants to locate assets and prove they belong to a spouse.
How Prenuptial and Postnuptial Agreements Affect Support
High-income couples often enter into prenuptial and postnuptial agreements, which may affect parties’ support rights or obligations. For example, an agreement may limit or waive spousal support, even though a couple has a substantial disparity in earning capacity. Alternatively, prenuptial or postnuptial agreements may provide more generous support than contemplated by Texas law. As a result, the existence of prenuptial or postnuptial agreements can complicate litigation in a high-income divorce if one spouse seeks to challenge the validity or enforceability of an agreement that limits their right to seek spousal support.
Asset Protection Strategies and Legal Considerations
Spouses can best protect their wealth from the effects of spousal maintenance by negotiating a prenuptial or postnuptial agreement that addresses support, either by having the parties waive their right to support or establish a specific support amount, which allows a payor spouse to incorporate support obligations into their financial planning. However, agreements will require parties to make complete financial disclosures to one another to ensure enforcement.
Strategic Negotiation Approaches for High-Income Spousal Support
High-income couples may pursue various legal strategies to resolve concerns or conflicts over spousal maintenance, including:
- Attending divorce mediation to negotiate a settlement of spousal support and other financial issues, which may allow couples to protect sensitive financial information
- Structuring spousal support as a lump-sum payment versus monthly payments, as lump-sum payments can simplify financial planning and avoid the risk of future modifications, whereas monthly payments can provide a recipient with a dependable income stream
- Pursuing a holistic solution that incorporates spousal maintenance and marital asset division
Contact Balekian Hayes, PLLC, Today
Determining spousal maintenance when you and your spouse earn high incomes or own substantial assets can involve a unique set of considerations compared to other divorcing couples. Contact Balekian Hayes, PLLC, today for a confidential consultation with a high-income divorce attorney to learn more about typical spousal support in Texas divorces for high-net-worth couples.
