Big Divorce Mistake #5: Misunderstanding How Alimony is Calculated

How do you calculate alimony in Tennessee?

How do you calculate alimony in Tennessee?

Calculating alimony (spousal support) is a state by state determination but many states have the same considerations and factors. Need, ability to pay, and lifestyle of the parties are fantastic issues for forensic accountants to analyze and form opinions thereon. Through review of tax returns, financial statements, divorce discovery, subpoenas, and other methods of investigation, forensic accountants can help determine accurate income, uncover hidden income, and discover undisclosed income generating assets.

See Mason’s complete list of the 10 Big Divorce Financial Mistakes.

Tracy Coenen:             Can you tell us about some of the factors involved in calculating alimony?

Miles Mason:              Some states have some very specific formulas that they look at, and in those states, I think it’s under eight, that have very specific formulas, but most states have child support guidelines that list a number of factors for alimony, and they’re going to be called statutory factors. Length of the marriage, needs of one party, earnings of the party, ability to earn money. So even if you’re not fully employed, can you work and make more money? The ability to pay. I had a client one time making $25,000 a month after taxes with no expenses. I mean he had a pickup truck and an apartment and $25,000 a month after taxes left. Obviously a tremendous amount of ability to pay.

Lifestyle during the marriage can be a big factor. Do the parties have country club memberships? Kids in private schools? International travel? What’s the property division? A supported spouse that has $5 million in assets may need less support than a spouse with $500 for obvious reasons. Was there a history of one of the parents being a stay-at-home parent? And then what’s the education? There’s a big dividing line, I think, all across the country between supported spouses with a college education versus supported spouses without an education. But obviously both issues begin with calculating income.

Thank you to Tracy Coenen, CPA, CFF for inviting me to join her in this video series. Tracy is a nationally recognized forensic accountant practicing in Milwaukee and Chicago.

The Forensic Accounting Deskbook by Miles Mason, Sr. JD, CPA, published by the ABA Family Law Section

Miles Mason, Sr. JD, CPA is the author of The Forensic Accounting Deskbook: A Practical Guide to Financial Investigation and Analysis for Family Lawyers, Second Edition, published by the ABA Family Law Section.  This updated edition of one the ABA’s most popular resources explains the practice of forensic accounting and business valuation and how to apply it in family law cases. It provides a practice-focused introduction to the core financial concepts in divorce, such as asset identification, classification, and valuation, income determination, expenses, and more.