In typical divorce proceedings, the court considers five main factors: grounds for divorce; division of property; custody of children; child support; and awarding alimony. Today, most issues in divorce proceedings are resolved between the parties without court involvement. However, the need for alimony may not be readily apparent. Historically, alimony was essential to protect the wife from an estranged husband, as women were typically not permitted or expected to work. Today, gender stereotypes concerning employment have little influence on divorce proceedings; nevertheless, alimony is essential for ensuring fairness through the separation and divorce process.
Alimony in North Carolina
Many states recognize alimony as a resource for a spouse to get back on his or her feet after divorce. North Carolina uses a different method when determining if a spouse qualifies for alimony. Alimony may be awarded if (a) a spouse is “actually substantially dependent”; (b) a spouse is in “substantial need of support”; or (c) the supporting spouse was at fault in ending the marriage. The receiving spouse is known as the “dependent spouse” while the other is the “supporting spouse.”
“Actual substantial dependence” means the dependent spouse must actually rely on the supporting spouse to continue the standard of living he or she had been accustomed to prior to the separation. “Substantial need of support” similarly means that the dependent spouse would be unable to maintain that standard of living without relying on the supporting spouse. If a dependent spouse commits adultery during the marriage, he or she will not receive alimony; likewise, a supporting spouse must pay alimony if he or she committed adultery during the marriage.
When awarding alimony, the court must consider the frequency, duration, and amounts of the payments. The court will determine if the supporting spouse will be required to make one lump-sum payment, periodic payments, or sign over a piece of property in lieu of money. The courts will seek to find an amount and duration of alimony that is fair to both the supporting and dependent spouse. The North Carolina statute governing alimony lists 16 factors to aid the court in deciding the amount and duration:
- A spouse’s marital misconduct;
- Relative earnings of the spouses;
- Age and physical/mental/emotional health of the spouses;
- Duration of the marriage;
- Amount of income for each spouse, both earned and unearned;
- A spouse’s contribution to the other spouse’s education and training;
- Custody of a child, including expenses and effect on earning power;
- Standard of living created during the marriage;
- Each spouse’s education and employment opportunities;
- Assets and liability of each spouse;
- Property brought into the marriage by each spouse;
- Needs of each spouse;
- Contribution of a spouse as a homemaker;
- Tax liability created by alimony awards;
- Property previously divided as part of the divorce proceedings;
- Any other economic factors affecting a spouse that the court finds just and proper.
No factor alone is more important than the others; however, many cases focus on property, earnings, and standards of living.
Those earnings are based on a spouse’s entire income, including investment income such as dividends, gifts, and severance packages from work. When considering earnings, the court must also consider a spouse’s earning capacity. Earning capacity refers to the amount a person could make if they tried their hardest based on their education and skills. The court looks at this to prevent a spouse from underworking or quitting his or her job in order to avoid alimony.
Taxes
Typically, alimony payments are deductible from a supporting (or paying) spouse’s taxes. They are treated as income for the tax purposes of the dependent (or receiving) spouse. Some spouses may choose to create a private alimony agreement to avoid tax liability. However, as long as five factors are met, the spouses cannot avoid these federal and state taxes. These factors are:
- Payments in cash (rather than through property);
- The duty to pay is created by divorce or separation agreement;
- The payment is not for non-alimony purposes;
- The parties do not live together;
- The dependent spouse is living.
Method of Payment
The method of alimony payments is determined by the circumstances. The court will also determine a date for payments to end. Typically, payments are made in one of the following methods:
- Lump sum
- Periodic payments (i.e. weekly, monthly, annually)
- Transferring title to personal property
- Transferring title to real estate (and giving an interest in that property)
- Granting a secured interest in real estate.
Termination
The court will typically set a termination date for alimony payments. However, certain events may trigger termination of the duty to pay alimony. The events include the dependent spouse remarrying, the dependent spouse living with another person in a situation similar to marriage, or if either the supporting spouse or dependent spouse dies. Some alimony agreements may eliminate these triggering events.
Modification
An alimony agreement may be modified by the court if either spouse shows a “substantial change in circumstances.” This includes changes of income, earning capacity, and expenses of either spouse. However, the court will not modify an agreement if a spouse deliberately increases expenses or lowers income in order to modify alimony. Additionally, certain property settlement agreements that set alimony cannot be modified.
Enforcement
The court may order a party to secure alimony payments by bond, mortgage, or deed of trust. Additionally, the court may require a party to assign a right in his or her wages, salary, or other income. All typical civil remedies are available. This includes arrest and bail, attachment and garnishing wages, injunction, criminal or civil contempt charges, and income withholdings, among others. Past-due alimony payments may be converted into a judgment lien on property in an action before the court.