How To Address Alimony In A Prenup

Exes and alimony – does it have to be that way? Alimony, also known as spousal support, is money one ex-spouse may pay the other after divorce. It’s meant to help the lower-earning spouse keep their standard of living, but it’s not guaranteed. State laws, your income, and even a prenuptial agreement can all play a role in whether or not alimony is awarded. Want to take control of alimony in YOUR potential divorce? Keep reading!

What is alimony? Think of it as financial help from your ex after a split.

Alimony, also called spousal support or maintenance, depending on what state you’re in, is the financial support paid from one ex-spouse to the other financially disadvantaged spouse in the event of divorce. Here’s more of what you need to know about alimony:

• Not automatic: Sometimes one ex-spouse pays the other support, sometimes not. It depends on your state’s laws and your individual situation. However, paying alimony is not automatic in a divorce.
• The Purpose: Alimony is used to help the spouse who has less to maintain their lifestyle for a while (or forever).
• State differences: Each state has its own rules about who qualifies, how much is paid, and for how long. For example, h ow alimony is awarded in California may be different than in New York.
• How is it decided? Generally, courts look at things like how long you were married, your age, income differences, who has custody of the children, and other factors.
• Example: In California, according to California Family Code Section 4320, a court will first determine if spousal support is necessary by looking at a set of factors, such as the duration of the marriage, the age of the parties, the standard of living they had during the marriage, and more. If the court deems alimony necessary, the next step is how much and for how long. Depending on that, there are different formulas for reaching a conclusion.

The bottom line: Alimony is the financial support from one ex to another if the marriage ends. It’s not an automatic given in a divorce, but instead, will depend on your unique situation and state laws.

Can you get out of paying alimony with a prenup? Potentially, yes.

One of the ways you can address alimony in a prenup is to waive it altogether. This means alimony is completely off the table in the event of a divorce, and neither party can request it from a court during the divorce proceedings.

• Full waiver of alimony defined: You and your partner agree that neither of you will pay alimony in case of divorce.
• Caveat: Courts can strike your alimony clause if upholding the alimony waiver would mean your spouse would go on public assistance or become financially destitute. How and if a court strikes down an alimony waiver is state-law dependent, though.
• Is an alimony right for me? Here’s what to consider:
  • Current income: Do you both make your own money? Are you both financially independent? Or does one of you financially depend on the other for income?
  • Future plans: Do you have plans for one of you to become a stay-at-home parent? What about plans to quit your job at any point in the future for whatever reason (i.e., your lifelong goal is to become a monk or yoga teacher and quit your corporate career)?
  • Unexpected events: Could a possible disability affect future earning power? Obviously, it’s impossible to predict the future, but if you already have an illness or something you believe could cause any future issues, waiving alimony may be damaging.

  Leaving it up to the court to decide

  One way of addressing alimony could be to not address it at all! Yes, that’s right, you can simply add a clause in your prenup that states you and your partner do not want to decide on alimony. You leave the decision in the court’s hands in the event of a divorce.

  Why would anyone do this? Well, they might feel like, without a crystal ball, it’s so hard to determine whether alimony would be appropriate in the future, so let a court decide then.

  Maybe they’re not sure if someone will stay home with the kids yet. Maybe one person is starting a business, and the other isn’t. What if something tragic happens, like an accident, and someone becomes disabled? The possibilities of the future are truly endless.

  A court’s job is to make fair decisions, so it’s reasonable that a couple would leave it up to the divorce judge.

  Waiving alimony but still keeping things fair with wealth equalization clause

  Let’s say you are set on waiving alimony. There is a way to offset this waiver by writing into your prenup an equalization payment in the form of a lump sum clause that will equalize the loss of alimony. Here’s some more info on how to:

  • What it is: A one-time lump sum you agree to pay your ex-spouse if you divorce in exchange for them giving up the right to alimony.
  • Example: John’s the breadwinner, Mary stays home with the kids. They waive alimony, but John also agrees to pay Mary a $100,000 lump sum if they split up. This “equalizes” the wealth.
  • Why do this?
    • Certainty: No worrying about what a court might decide about alimony years from now. Alimony can be permanent or ongoing.
    • Cuts Ties: No one wants to be financially tied to their ex forever. Being awarded alimony could keep ties between exes for an unknown amount of time after the divorce is final.
    • Peace of mind for both spouses: Helps offset any financial disadvantage from waiving alimony, especially for a spouse who took time out of the workforce.
    • Tailored to you: The amount is up to you and your partner, not a judge.

    Takeaway: Putting in a wealth equalization clause instead of alimony is a great compromise for some couples.

    Putting limits on alimony

    Another way to address alimony in your prenup is to explicitly write in a cap on the amount and/or duration of alimony.

    For capping the amount of alimony, this could be the actual end-game amount of alimony or simply a cap on the percentage of income.

    For example, maybe you want to say that alimony is capped at no more than $100,000 in total alimony paid. Or maybe you want to say alimony is capped at no more than 10% of the yearly income.

    You can definitely get a bit creative with this and determine a cap that makes sense for you and your partner.

    Limiting what sources of income can be used in determining alimony

    Each state has its own method of determining how much alimony and for how long. States may look at the different sources of income from the paying spouse to calculate a percentage and dictate alimony.

    Example:

    • Divorce court says alimony is appropriate: John is required to pay alimony, as ordered by the court. His sources of income are rental property, dividends, and a salary. The court adds up his total income for the year and calculates alimony based on his sources of income (unless it says otherwise in his prenup).
    • What the prenup says: HOWEVER, in the prenup, John had included a line that says something like, “I don’t want my rental property income to be included in that alimony calculation because that’s for my kids’ inheritance.”
    • Outcome: In this case, if this is an enforceable clause, the court will only add up the dividends and salary in determining alimony.

    Bottom line: This is a great option for couples who want to keep alimony as an option while still protecting the alimony payer’s finances. Win-win for both parties.

    Can a prenup completely block alimony in every case? No, not always.

    We can’t mention alimony in prenups without mentioning the potential downside. Courts can be weary of too much limitation or waiving of alimony and can strike it if it finds it necessary. Here’s why:

    • Unconscionability: If a prenup leaves one spouse with nothing while the other is counting their Lambos, a court might ignore the alimony waiver. Another example would be if the alimony waiver would require one person to use public assistance.
    • Why courts care: Courts aim for basic fairness and don’t want someone ending up on public assistance due to divorce or left destitute while the other person is well off. Yes, even if they signed a prenup.
    • Circumstances matter: A prenup that seemed okay when you were both earning well might be unfair if one of you gets sick or loses your job much later.
    • Real Example: In Indiana, a real court heard a case where a man signed a prenup that said he would pay his wife $500k in alimony. His net worth at the time of the prenup signing was $31 million. At the time of divorce, his net worth dropped to $300k. He couldn’t possibly pay his wife $500k in alimony, which would be outrageously unfair. So, the court struck the alimony clause.

    Takeaway: Even if you get a prenup with an alimony waiver or something listing out alimony requirements, it could be struck by a court one day if it’s outrageously unfair, leaves one person destitute, and/or requires one party to go on public assistance.

    The bottom line on addressing alimony in your prenup

    How you address alimony in your prenup is ultimately up to you. What you decide will depend on your financial situation, life goals, and each person’s wishes. There are many options, but some to consider may be waiving alimony altogether, leaving it in for the court to decide, equalization payments in exchange for alimony waiver, and limiting income sources for alimony payments. Don’t forget about the potential pitfall of unconscionability in a prenuptial agreement, alimony waivers, or limitations.

    Frequently Asked Questions (FAQs) about addressing alimony

    This is definitely a tough topic for many people to understand, so here are some more of your questions answered:

    Q: Do prenups protect you from alimony?
    A: They can! It depends on what your state law says (some states do not allow you to include alimony provisions and/or have strict regulations around it). If you are in a state that allows for alimony provisions in prenups and if you and your future spouse agree upon it, then YES, a prenup can protect you from alimony.

    Q: Do judges throw out prenups?
    A: In certain limited cases, yes, it is possible for a judge to throw out a prenup. However, this is no easy feat, as it requires legal fees and a solid argument to challenge a prenup in court.

    Q: Can a prenup leave a spouse with nothing?
    A: It depends. In some states and situations, it may be permissible, but generally, egregiously unfair prenups (i.e., unconscionable) are not upheld in most situations.

    Q: Can prenups address child support?
    A: NO! Generally, prenups may not include clauses about child support. Keep in mind child support is NOT the same as alimony; it is a separate and distinct payment that a court may award in a divorce. Alimony = financial support for the spouse. Child support = financial support for the child.

    You are writing your life story. Get on the same page with a prenup. For love that lasts a lifetime, preparation is key. Safeguard your shared tomorrows, starting today.

    Raymond Hekmat’s practice of law has been devoted exclusively to areas of California family law focusing on prenuptial agreements, divorce consulting and mediation, since earning his Juris Doctorate degree from Loyola Law School in 2009. During his tenure at Loyola, Raymond was President of the Evening Bar Association, and was awarded the Alumni Association Governors’ Alumni Award. While earning his degree, Raymond worked as a law clerk, and later an associate, for a Beverly Hills family law firm. Prior to founding HLM, Raymond’s practice involved complex family law litigation involving high-asset property division, complex custody litigation, jurisdictional issues, division of community estates and prenuptial agreements.

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