UPDATE: The sweeping new tax plan Congress passed at the end of 2017 will impact almost everyone. This includes changes to divorce settlements, specifically those involving spousal support.
Beginning January 1, 2019, on new court orders that include spousal support provisions, the party paying spousal support will no longer be able to deduct this amount. At the same time, the recipient will no longer have to pay taxes on this amount. As it currently stands, the opposite is true. This may impact the way people negotiate divorce settlements. Some estimate spousal support payments could drop as much as 10% to 15%.
However, this large change in spousal support taxation policy will not apply to existing divorce orders (those entered prior to January 1, 2019). These orders, so long as not later modified, will be grandfathered in at the prior tax policy.
It is important to note that any Modification after December 31, 2018, to a pre-existing court order re spousal support will likely be subject to the new laws. So, if you have an order in place before 2019, the old regulations still apply. But if you modify the order after the new tax plan takes effect, you’re likely subject to the new rules.
ORIGINAL POST: Next to child support, questions about spousal maintenance are at the top of our Frequently Asked Questions list. The impact of cohabitation on spousal support is a topic we discuss with clients frequently. Specifically, we are asked, “my ex is moving in with her new boyfriend, am I still required to pay her spousal support?”
The impact of cohabitation on spousal support is a particularly tricky subject when it comes to divorce. Once your divorce is final and the final orders are signed it can be incredibly difficult to change spousal support. Unlike child support, a significant change in circumstances is not enough for the court to reduce your spousal support obligation.
The courts will consider a multitude of factors when deciding if spousal support should be awarded. The most common factors the court will consider include:
- How long the marriage lasted
- The established standard of living in the marriage
- Retirement benefits
- Disparity in income and earning abilities
- Education and skills
- The parties’ physical, emotional, and mental health
- Child-rearing responsibilities including financial support
If your divorce decree requires you to pay spousal support, the idea of continuing that support after she has moved in with a new partner may be a tough pill to swallow. In Oregon, the paying party is tasked with proving their ex’s new living arrangement has significantly improved his or her financial circumstances.
ORS 107.135(3)(a) provides:
“A substantial change in economic circumstances of a party, which may include, but is not limited to, a substantial change in the cost of reasonable and necessary expenses to either party, is sufficient for the court to reconsider its order of support, except that an order of compensatory spousal support may only be modified upon a showing of an involuntary, extraordinary and unanticipated change in circumstances that reduces the earning capacity of the paying spouse.”
This burden of proving a significant improvement in the financial situation provides a great deal of grey area for the courts and is part of the reason spousal support modifications are rare. Because spousal support can be awarded for a variety of reasons including education and other remedial purposes, it is possible that the support obligation will remain even if it is evident your ex’s financial circumstances have improved substantially.
If your ex has moved in with a new significant other, you must continue to pay support until your obligation has been met or the court orders a change. The impact of cohabitation on spousal support can be complex. It is often well worth the investment to speak to an experienced family law attorney to understand your unique situation.