One of the most common questions posed by clients is – how is alimony determined? Unfortunately, there is no easy answer to that question, and it is often dependent upon the facts and circumstances of a given matter. The law does not provide for a formula, even in the final version of the amended alimony statute that passed in late 2014, and requires that trial judges consider each of the factors outlined in New Jersey’s alimony statute (N.J.S.A. 2A:34-23(b)) in rendering an award.
As seminal New Jersey case law provides, the standard of living established during the marriage serves as the “touchstone” for alimony, with, whenever possible, the alimony award to be set at an amount that will “enable each party to live a lifestyle ‘reasonably comparable’ to the marital standard of living.” The amended alimony statute confirms that both parties are entitled to such a lifestyle, which is often determined based on a review of the parties’ Case Information Statements, testimony and supporting financial documentation. Experts may even be utilized to prepare what is commonly referred to as a “lifestyle analysis” to help provide a more accurate indicator of what the marital lifestyle actually was, and how expenses were divided between the parties and children, if any.
When negotiating an alimony resolution, however, practitioners often employ a so-called “rule of thumb” whereby the ultimate alimony figure is based on a certain percentage of the difference between the parties real/imputed levels of income. Debate between practitioners in applying this approach remains alive and well, especially in high income cases where utilizing a formula may undermine the notion of ensuring that the marital lifestyle is taken into consideration. Additionally, the formulaic approach oftentimes utilized in negotiating an alimony resolution takes into consideration the alimony deduction to be received by the payor on his or her tax returns. With the new tax law eliminating the deduction for alimony agreements/awards reached after December 31, 2018, even this approach will likely undergo significant changes.
To that end, case law confirms that a trial judge cannot employ an income-based formula when determining an initial alimony award or modifying one previously established (even if the initial alimony award was reached in settlement based on a formula). This principle was recently affirmed in Waldbaum v. Waldbaum, wherein the Appellate Division reversed a trial judge’s use of a formula in determining alimony in a post-divorce proceeding. Specifically, despite generally describing the lifestyle as one of “high-class”, and analyzing the alimony factors, the trial court employed a formula utilized in the parties’ settlement agreement when alimony was first agreed upon. In reversing the trial court, the Appellate Division held that “by setting alimony using a formula the alimony became untethered from the marital lifestyle and defendant’s needs.” The resulting alimony amounts had “no reasonable correlation to the evidence adduced regarding the marital lifestyle or needs.”
Thus, while reaching an alimony resolution provides parties with great flexibility in determining the award, a trial judge must follow the above-detailed requirements to ensure that the lifestyle is not only taken into consideration, but that all statutory factors are considered in rendering a final decision.