Financial issues are likely to be a concern for anyone who is splitting up with their partner. In many high asset divorce cases, one spouse earns the majority of the family’s income, and the other spouse may be unable to make enough money to provide for their needs on their own. A spouse may ask for spousal support, which is also known as spousal maintenance or alimony, to be paid, giving them the means to pay for their ongoing expenses. However, spousal support is not awarded in every case, and spouses should be sure to understand how Texas’ divorce laws will apply in their situation.

When Is Spousal Maintenance Awarded?

The purpose of spousal support is to provide for the needs of a spouse who is unable to provide for their own minimum reasonable needs. Typically, a spouse will be eligible to receive spousal maintenance if the parties have been married for at least 10 years, and the spouse who is seeking spousal support does not currently have the means to support themselves. This will allow a spouse to receive ongoing support payments if they did not work during their marriage or relied primarily on their partner’s income to meet the family’s needs.

While spousal maintenance is rarer in marriages of less than 10 years, there are some situations where it may be awarded. These include cases where a spouse has a physical or mental disability that causes them to be unable to earn enough income to support themselves or where a spouse will be the custodial parent for a child who has a disability that requires a level of care that would prevent the parent from earning a sufficient income. A spouse may also be required to pay spousal support if they were convicted of family violence against the other spouse or their child during the marriage or divorce. Even if a spouse would not normally be eligible to receive spousal maintenance, a couple may agree that support will be paid as part of their divorce settlement, or the terms of a prenuptial agreement may require support to be paid.

Paying alimony or maintenance after a Texas high asset divorce can cost tens of thousands of dollars for high earners. Yet there may be options available to parties in a high net worth divorce to limit the amount of taxes paid on alimony. Once you know that your spouse is entitled to receive maintenance under Texas law, you will likely be wondering whether there are ways to limit the amount of taxes that you will pay on those alimony payments. Indeed, since the payor spouse is responsible for taxes on the maintenance payments, those taxes can be significant.

While a court order for maintenance does not provide options for minimizing maintenance taxes in a high net worth divorce in Texas, entering into a marital settlement agreement with your spouse in which you provide an alternate form of compensation in lieu of maintenance payments could allow you to minimize taxes substantially. There are certain methods for reducing or minimizing alimony taxes for the wealthy, discussed below.

Minimizing Taxes on Maintenance in Austin, TX

Texas law caps maintenance payments at $5,000 per month, Yet even taxes on payments of $5,000 are probably more than you would like to pay. As we said above, there may be options to reduce the total amount of taxes you will pay. Options that may be available include but are not limited to the following:

Late last year, Congress passed the Tax Cuts and Jobs Act, which made significant changes to the deductibility of alimony payments. The recent amendments could have a serious impact on Texas couples who finalize their divorces next year, so if you are considering filing for divorce, it is critical to contact an experienced high asset divorce attorney who can explain the legal ramifications that the new law could have on your own divorce.

Alimony Basics

Except in specific circumstances, the amount of alimony that a former spouse can receive in Texas is capped at:

Although spousal support is usually described merely as alimony, there are actually three types of spousal support recognized under Texas law. Each type comes with its own set of conditions and requirements, which determines who is eligible to receive support and for how long they can continue receiving it. If you are going through a divorce and have concerns about your financial future, you should consider consulting with an experienced high asset divorce lawyer who can help you determine whether you qualify for spousal support.

Temporary Spousal Support

Temporary spousal support is usually granted by the court when one party is unable to financially support him or herself while the divorce is still pending. Temporary alimony payments can be made every month or in a lump-sum payment. Which type of payment, how much the recipient is eligible to collect, and for how long he or she can continue receiving payments depends on a number of factors, including each party’s ability to support him or herself, each spouse’s employment skills, and both party’s earning ability.

In Texas, courts can order spousal maintenance if a party can establish that he or she lacks the ability to provide for his or her reasonable needs because of an incapacitating physical or mental disability. Demonstrating a disability for the purposes of receiving maintenance can be difficult, so if you are considering a divorce and have questions about your eligibility to receive alimony, it is critical to contact an experienced complex divorce attorney who can explain your rights and legal responsibilities.

Establishing Disability

Before a court will award spousal maintenance based on disability, the party seeking alimony must first provide evidence of a physical or mental disability. This does not necessarily require the submission of medical evidence. Instead, a party can demonstrate his or her condition through circumstantial evidence and the testimony of witnesses. For instance, when attempting to establish disability, courts will take into consideration a series of factors that can be deduced through testimony, including whether the party seeking maintenance has attempted to secure employment in the past or is currently receiving any form of income. Providing this type of evidence is often necessary to demonstrating a link between the party’s disability and his or her inability to sustain employment. Without this link, courts are often reluctant to order payment of spousal maintenance based on disability.