While some jurisdictions are moving toward a formulaic approach to the payment of spousal maintenance, leaving little room for a full review of the parties’ circumstances, many jurisdictions still provide only the most broad of guidelines for decisions around the amount of spousal maintenance paid. For these latter jurisdictions, using a rational approach to ascertain the amount of spousal maintenance paid may be more time consuming and difficult, but it most often results in more equitable settlement that more closely reflects the parties’ actual circumstances. The approach I like to take in my practice first looks at the facts on the ground in order to arrive at an agreed upon spousal maintenance payment.
It starts with a thorough analysis and review of the reasonable living expenses of each party. While this review opens the possibility of argument about this expense or that, parties are advised and cautioned in several ways. They are asked to review their historical spending from such sources as credit card statements, checks and receipts, so the expenses stated are accurate. And, they are cautioned that because their stated expenses are at a certain level of spending does not mean this level can be sustained in their new circumstances or the total income pool available is sufficient for such spending. And, they are advised, if the spending level they wish to enjoy is important enough to them to maintain rather than decrease, then additional income sources (i.e. further employment) may be needed to meet their wishes. The parties are advised that the expense budget is primarily a reality tool to ground them in their new two-household circumstances and the impact this may have on their lifestyle choices.
The tool that most cogently focuses them in their new reality is an expansive schedule of varying spousal maintenance payments and how each payment level affects each party. This schedule includes an after tax scenario for each party for each spousal maintenance payment level, for example, of $4000, $4500, or $5000 per month, whatever broad range of payments may be applicable to the parties’ income level – from the low to the high. The schedule has lines at each payment level for each party’s:
1) Gross monthly income from all sources.
2) Monthly spousal maintenance payment.
3) Total monthly income, which includes the receipt of spousal maintenance for the payee and subtraction of the spousal maintenance payment for the payor.
4) Total monthly expenses.
5) Total taxes paid or deducted for each respective party.
6) Discretionary (after tax) income remaining for payment of expenses.
7) Net income after payment of taxes and expenses.
This schedule provides an eye-opening, reality based view of each party’s income situation. Equitability is built into the schedule review, since it allows each party to see what both have left before and after their respective desired living expenses are paid. Vast differences in discretionary income are a compelling reason to narrow the gap, and living expenses that result in little or negative cash flow speak to a more realistic spending level. As important, the facts speak for themselves in such a schedule and serve as a strong incentive for the parties to work together for an equitable solution to the amount of spousal maintenance paid.