Massachusetts divorce lawyer Josey Lyne Payne discusses the pros and cons of unallocated support as an alternative to child support and alimony in Massachusetts.
Support, verb – “Furnishing funds or means for maintenance; to maintain; to provide for; to enable to continue; to carry on.” See Black’s Law Dictionary 2nd Ed. In a Massachusetts divorce proceeding, the parties are required to address the issue of support for either of the parties to the divorce. There are different types of support that must be addressed in order for an agreement to be approved. Consistent with the subject of this blog post, the first type of support is often referred to as “spousal support”; “spousal maintenance”; or “alimony”. The second type of support is support for the children, if any, simply referred to as “child support”. However, there is a lesser known and lesser seen type of support referred to as “unallocated support”. Each of the three types of support have their own unique characteristics, as well as their own unique potential advantages and disadvantages, therefore understanding the distinctions between these types of support is essential to reaching an agreement that will work for your family and will be approved by the judge.
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Child support is support specifically allocated for any children of the marriage. It refers to the sum of money that the noncustodial parent must pay to the custodial parent, the parent with physical custody. This sum serves as a parental contribution for the child’s basic living expenses, such as food, clothing, shelter, health care, and education. When a court orders a parent to pay child support, the parent must pay that support directly to the child’s custodian rather than directly to the child.
Trial courts determine the amount of the periodic installments for the non-custodial parent to pay, and statute determines the duration. The amount varies between cases, taking into account the unique circumstances of each case. Circumstances include: the child’s age, the particular health and educational needs of the child, and the standard of living that the child would have enjoyed if the family had continued living together. States differ on the exact methodology for calculating the amount of child support owed. Generally, however, courts will make specific findings regarding both the custodial and noncustodial parent’s net monthly income. Massachusetts Judges use the Child Support Guidelines Worksheet to determine how much child support to order. The Uniform Marriage and Divorce Act requires parents to pay an amount reasonable or necessary to the for the child’s support without regard to marital misconduct. Factors in determining reasonableness or necessity include the child’s financial resources, the custodial parent’s financial resources, the standard of living the child would have had if the marriage remained intact, the physical and emotional condition of the child and the child’s particular educational needs, and the noncustodial parent’s financial resources. It is important to remember that regardless of whether child support is arranged by agreement or ordered by a court, it is taxable to the payor spouse. Under Massachusetts law, duration is determined by statute, and the obligation to pay child support may be imposed until the child reaches the age of 23.
Spousal support, otherwise known as alimony, is support specifically allocated to support a spouse after a marriage ends. “Alimony” means payments for the support and maintenance of a spouse, either by lump sum or on a continuing basis. Alimony is paid by the “supporting spouse” to the “dependent spouse”. The general rule is that a spouse is dependent when he or she makes less money than the other spouse. Technically, a dependent spouse is a spouse, whether husband or wife, who is actually substantially dependent upon the other spouse for his or her maintenance and support or is substantially in need of maintenance and support from the other spouse.
It is important to remember that regardless of whether alimony is arranged by agreement or ordered by a court, it is taxable to the recipient spouse. An award of alimony may include, in addition to money in lump sum and/or periodic payments; transfer of title or possession of personal property and an interest in property; and/or a security interest in or possession of real property.
In Massachusetts, unallocated support is support not specifically allocated to support either a spouse or children of the marriage, but nevertheless intended to do just that. It can essentially be thought of as “family support” in a general sense. Unallocated support typically encompasses all of the support one spouse is paying to the other without differentiating where specific funds should be applied. Unallocated support in Massachusetts can work when the recipient of the support does not work and/or has a very low income tax bracket and the obligor has a higher income tax bracket. It is the difference between the tax brackets of the parents where the savings is potentially found and those savings, ideally, should be divided by and between the spouses equitably.
Although the tax code prohibits an amount being fixed as child support from being treated as alimony, it does not prohibit the contrary: an amount being fixed as alimony but treated as child support. An unallocated sum intended to cover for both spousal support and child support, as “family support” if you will, could be classified and fixed as taxable/deductible “alimony”, which is tax deductible to the person who pays, and taxable, as income, to the person who receives it. Alimony is treated as a transfer of taxable income from one spouse to the other. Child support, on the other hand, is neither tax deductible to the person who pays, nor is it taxable to the person who receives it. Child support payments are not a transfer of taxable income from one spouse to the other since child support is not paid for the direct benefit of the recipient spouse.
A portion fixed as child support may be stated directly in a divorce decree or separation agreement, or it may be inferred from the agreement’s terms. There are several issues to be aware of when structuring alimony and support payments, specifically when a provision of the agreement provides for a reduction in the amount upon the happening of a specified event (such as a child attaining a specified age, pursuant to statute or otherwise). Depending on the wording of the agreement, the entire amount of the payment could then be reclassified as child support and therefore nondeductible by the obligor as alimony, negating the very purpose for unallocated support in the first instance. Moreover, additional consideration must be given to whom claims any dependency exemption, tuition credits, and property transfers, just to name a few.
Determining which type of support would be the most beneficial for your family involves an analysis of many factors. The attorneys at Lynch & Owens, P.C. understand the dynamics that impact support orders and work with our clients to create a support plan that will work today and in the future. We counsel our clients on the advantages and risks of each type of support and work with you to create agreements which allow for the greatest financial benefit to you, our client, and your family.
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About the Author: Josey Lyne Payne is a Massachusetts divorce lawyer and Massachusetts family law attorney for Lynch & Owens, located in Hingham, Massachusetts.
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