Alimony unaffected - intentional pay cut.

 

            Posted on Dec 21,2014      

            Alimony unaffected by intentional pay cut.

Q.   I got divorced five years ago.  My business is owned by me and two equal partners. We each get one-third of the annual net income.

My ex-wife kept our house. She's got primary custody of our children.  I kept my interest in the business. My alimony then equaled 33 percent of my income.

Over the last two years all partners ended up with less disposable income because we are investing capital in order to try to grow the business. So now my alimony is about 45 percent of what I actually take home.

What are my chances of getting the alimony reduced?

R.M.Sudbury

A.  I'm going to assume your wife uses the alimony to pay a mortgage on her house, to feed and clothe the children, to pay her other expenses; and that she didn't agree to your diverting your income so you might grow your business.

When you got divorced, instead of agreeing to pay a fixed amount of alimony, you could have agreed (with your wife's OK) to pay her 33 percent of your income. Then you'd both have increases or decreases in cash flow based on how much you earned each year.

Back then, you might not have wanted a percentage deal so she couldn't automatically share in increase in your income. Now, hoping for a bigger payoff in the future, you and your partners chose to divert part of your respective incomes into a capital investment in your business. But you still have to pay taxes on that diverted money, a tax that might be reduced because of increased depreciation.

No matter why you intentionally reduced your income, whether by early retirement, taking a lower paying job, or going to live as a hermit in a cave on the top of some mountain, the court will find you still have the earning capacity to pay the court-ordered alimony and child support. Then you'd be ordered to cash in your retirement accounts or sell other assets to pay up.

So your best bet is to talk with your ex to ask her if she'd agree to a fixed percentage. If she says no, don't waste your time or money paying a lawyer to file your request for a reduction. The judge will probably find you actually have no material reduction in your income. And, you'd probably also have to pay your ex-wife's legal fees.

If she agrees, get it in writing with notarized signatures. And before she changes her mind, immediately file a modification to have that document incorporated into a judgment of modification.  But if she goes this route with you, don't later be asking how you can cut down her alimony because even at Christmas time, you can't eat your cake and have it too.