As a NJ divorce mediator I am always surprised when I meet a couple for the first time and learn just how much they don’t know about using mediation for divorce.  I would have thought by now with the Equitable Mediation Services website, this blog and the attention divorce mediation has gotten in recent years (including being the profession of choice for the gentlemen in the movie “The Wedding Crashers” although given that I am an Accredited Professional Mediator I am in no way the charlatans Vince Vaughn and Owen Wilson were in the movie!) more people would be familiar with the concept of using mediation for divorce in New Jersey.  Sadly that is still not the case.  With that in mind, I’m taking the next few posts to outline some of the real questions I’ve been asked by couples just like you when they come to see me for their free consultation.  Today’s question has to do with calculating alimony in NJ and how that’s handled in mediation.  The quick answer?  The same way it would be handled were you to hire an attorney and litigate.

Many couples are surprised that we even discuss alimony in mediation as for some reason they think they have to go to an attorney which is simply untrue.  Alimony is discussed along with the other three main areas of divorce including the parenting plan, equitable distribution and NJ child support and all agreements are then drafted into the Memorandum of Understanding. Given the vagueness of alimony in NJ, when you think about it, mediation is the perfect place to discuss it.  You see one of the challenges facing divorcing couples in New Jersey is that there is no set formula for alimony like there is in other states.   Alimony in NJ is based on a series of 13 statutory factors which when you really read through them provide little guidance in terms of how alimony is really calculated.  That’s why we use a budget based approach which allows us to discuss what the couples goals are post-divorce and come up with an amount that allows each party to maintain a relatively similar post-marital lifestyle vis a vis each other and to ease the transition from intact family to a separated one.  I’ve said it before and I’ll say it again: this is your divorce – not the courts, not the judge and certainly not your attorney’s so why not discuss with each other what alimony arrangement works in your particular situation instead of leaving it in the hands of complete strangers who don’t know you or your children?  Using mediation for divorce allows you to do just that.

If you have any questions about divorce mediation in NJ using mediation for divorce or how hiring a NJ divorce mediator can benefit you, please feel free to contact Equitable Mediation Services to schedule a free, no-obligation consultation in one of our nine North or Central New Jersey office locations.  Or feel free to visit the Equitable Mediation Services website where you’ll find lots of great information about parenting plans, equitable distribution, NJ child support and spousal support / alimony and contact us when you’re ready.

In our previous two posts we discussed how couples who use NJ divorce mediation can draft agreements regarding parenting plans and the equitable distribution of marital assets and liabilities in advance of their pending divorce and file when they are ready.  Given the economic times we are living in, it may be in a couple’s best financial interest to remain married for a variety of reasons (housing, health insurance, employment status being tenuous etc.) and file somewhere down the road.  Some couples I see as a NJ divorce mediator tell me they plan on waiting years to file.  Well years may be a bit much but for couples who wish to wait a few months or maybe even a year, using divorce mediation in NJ is the smartest route one can take no matter what your time line.  In today’s final post in the series, we’ll look at two of the most complex divorce mediation topics: child support and alimony.  Given the emotions surrounding them, it’s no surprise they are often the most difficult to get agreement on from couples in divorce mediation in New Jersey.  Factor into this child support is a formulaic calculation that uses a software program and a set of NJ Child Support Guidelines while spousal support (or alimony as it is commonly referred to) is not calculated at all and is loosely based on a series of spousal support / alimony statutory factors (which in the opinion of this NJ divorce mediator are vague at best) create quite a dilemma.

From our equitable distribution conversations, you have an idea of how your major assets and liabilities are to be divided.  That being said, one of the most important decisions when it come to calculating both child support and alimony is the the decision on housing.  Are you going to sell the marital home or will one of you live in it?  Will you reimburse the other party for their equitable distribution or will they wait to be reimbursed until you decide to sell it?  All of these decisions go to (a) where will you all live (b) how much money each of you will have for housing and (c) how much each of you will need to live your post-marital life.  In addition to the parenting plans we developed earlier, this is a major factor in how we calculate child support and alimony.  If we can have the conversations we need to have, then determining an appropriate amount child support and alimony becomes a lot easier.  You may even establish separate bank accounts and begin the paying of child support and alimony and then behave as if you were roommates and share the household expenses as you see fit.  Then you file whenever you’re comfortable because after all, it’s your divorce, isn’t it so should that be up to you?

###

Joseph Dillon is a Professional Accredited Divorce Mediator in NJ and the owner of Equitable Mediation Services a New Jersey divorce mediation practice serving Somerset, Mercer, Middlesex, Essex, Morris, Monmouth and Hunterdon counties including the towns of Edison, Parsippany, East Brunswick, West Orange, Bridgewater, South Brunswick, Hillsborough, Livingston, Randolph, Maplewood, West Windsor, Summit, Plainsboro, Millburn, Morristown, Montgomery, Madison, Readington, Branchburg, Warren, Princeton, Metuchen, Lawrenceville, Pennington, Short Hills, Bernards, Bedminster, Colts Neck, Holmdel, Roseland, Montclair and surrounding areas.

As we learned in our last post, child support for the most part is a non-taxable event but what about spousal support or as it was formerly known here in New Jersey: alimony? What are the tax implications for payments from one spouse to an ex-spouse for their own support and not of their children? The short answer is spousal support / alimony is a taxable event unless otherwise stated in your Memorandum of Understanding.  Forgive the shameless plug but this is an instance in which you really want your divorce mediator to have both a legal and financial background like I do as this topic can get pretty tricky and is definitely more complicated that can be explained here.

First some background.  Regardless of your belief in spousal support / alimony, the idea behind it is that marriage is an emotional as well as a financial partnership so spousal support / alimony is meant to compensate one spouse financially for the dissolution of this economic part of the partnership recognizing that each party made contributions ot the  marriage that allowed both parties to enjoy a certain measure of financial success.  Notice I keep saying spouse as spousal support / alimony is not simply a payment an ex-husband makes to an ex-wife (although it quite often is) but rather a payment from one spouse to another spouse and with more women achieving positions of prominence in the corporate world and being compensated financially for it, there are instances in which an ex-wife is paying spousal support / alimony to an ex-husband.

In the most simple of examples, spousal support / alimony is a taxable event.  The party who pays it gets to deduct it from their taxes and the party who receives it must claim it as income so this does present some unique tax challenges for both parties.  For example, let’s say the receiving party needs $500 in support to make ends meet and receives $500 a month in spousal support / alimony.  While that may be fine on a month to month basis, come tax time, that $500 will be effectively reduced to $375 assuming a 25% tax rate after taxes so in reality, they are short $125 a month or $1500 a year while the paying party received a tax benefit for the deduction they received by claiming it on their taxes.  Your New Jersey divorce mediator can help each of you with options such as “grossing up” the amount or making it a non-taxable event.

Another issue to watch out for when it comes to spousal support / alimony is calculating it especially when done in conjunction with child support.  Because spousal support / alimony is a taxable event and child support is not, parties sometimes manipulate the amount of each payment so that while on a month to month basis you are receiving the same amount of dollars, the amount being received in child support is higher and spousal support / alimony is lower.  Maybe it looks like a tax savings for each of you since child support is a non-taxable event but this can have disastrous consequences depending on how close the children are to emancipation since child support ends for the most part at age 18.  There you would be no longer receiving any money even though the dollars were intended as spousal support / alimony and in reality they came over as child support.  Don’t think this happens?   I’ve seen it with my own eyes and is one of the dirty tricks people try and pull during divorce mediation session and the subject of a previous article that you can read here.

I hope you’ve found this series of articles helpful and encourage you to contact us should you have any questions about divorce mediation or if you’d like to schedule a free, no obligation consultation to learn more about our divorce mediation services.  Please note that this article is not meant to be construed as legal or tax advice and that since everyone’s situation is unique, it’s always best to consult with your accountant, mediation service, or NJ mediator regarding your specific situation.

###

Equitable Mediation Services is a New Jersey divorce mediation practice serving Somerset, Mercer, Middlesex, Essex, Morris, Union and Hunterdon counties including the towns of Edison, Parsippany, East Brunswick, West Orange, Bridgewater, South Brunswick, Hillsborough, Livingston, Randolph, Maplewood, West Windsor, Summit, Plainsboro, Millburn, Morristown, Montgomery, Madison, Readington, Branchburg, Warren, Princeton, Metuchen, Lawrenceville, Pennington, Short Hills, Bernards, Bedminster and surrounding areas.