Divorce Maintenance (Alimony) in Wisconsin—Waiving vs Holding Open

February 24, 2016 Divorce, Property, Debt, & Finances

When is it Right to Waive Maintenance?

Short answer: Essentially it depends on your length of marriage, age, health, income disparity and the ability to support yourself long-term.

At the very end of every divorce case (see all steps in the divorce process), there comes the time, typically during the negotiation of the final settlement phase, where both spouses must agree upon whether or not spousal support, commonly referred to as “maintenance” in Wisconsin and known more universally as alimony, should be paid by on party to the other party.

Let’s start with how alimony is defined in the Wisconsin court system.

While there are three different types of alimony (rehabilitative, compensatory, and lifestyle maintenance), there are two distinct ways to classify how long alimony is issued at the conclusion of a case—limited term maintenance and indefinite maintenance.

How Long Do Terms of Maintenance (Alimony) Last?

Limited Term Maintenance 

Unlike the “hold open” option, where two spouses have been married for 10 years or longer, “limited term” might be more appropriate for shorter term marriages or marriages of less than 20 years. This option means one spouse is paying maintenance to another spouse, but the length of the marriage doesn’t warrant an indefinite support order. For example, if two people are married for 15 years and there is a disparity in annual earnings between each of the two parties or one requires continued spousal support to complete their education or retrain to secure a good job, opting toward a limited term is appropriate. In this same instance, the length or term of the support order would grant the receiving spouse 7.5 years of paid alimony (exactly one half of the lifespan of the marriage). While this “half of the length of marriage rule” isn’t the law, nor will you find it in a law book or statute, many family lawyers and courts adhere to it when negotiating limited term maintenance orders.

Indefinite Maintenance

Indefinite maintenance means exactly that—there is no cutoff point for the termination or cessation of alimony payments. In this case, maintenance payments would only terminate upon the recipient spouse’s remarriage, or death of either party, as required under the IRS tax rules to receive the tax deductibility of the payments upon the death of the payee-spouse. Maintenance payments continue until the court is made aware of the remarriage or death of either party at which point the court then decides whether the maintenance order should be modified or terminated.

Indefinite maintenance is commonly agreed upon by two parties who have been married for 20 years or more. Apart from unusual and exigent circumstances, such as one spousal party having a chronic medical diagnosis that prevents them from working, it is rare to see indefinite maintenance orders be issued to spousal parties who have been married for less than 20 years. Additionally, there’s been a recent trend of divorce cases passed through the Court of Appeals and Wisconsin Supreme court where trial courts are ordering limited term maintenance on long term relationships that they are being overturned or reversed on appeal. The higher courts are essentially concluding that in long term relationships, where there is a need for spousal support, those payments need to be indefinite in nature with no ending point, barring death of either party or recipient spouse’s remarriage, where it terminates by law.

Likewise, there are also two ways to classify if or when alimony will be issued to the receiving spouse in any given divorce case.

Waived vs Held Open Maintenance

What it means to “Hold Maintenance Open”

Hold open” allows a party to reserve the right to re-enter court at a later date after the divorce is finalized where they can be awarded alimony based on circumstantial change. This is standard for marriages that span 10 years or longer, where there doesn’t necessarily need to be a large discrepancy in annual earnings, but because of the tenor of the marriage life, both parties have the option of coming back to court for necessary financial aid or relief.

Waive or Terminate

In marriages of shorter duration, less than 10 years, and the parties’ annual income is similar, where both spouses have a viable way of supporting themselves, waiving maintenance is fairly customary.

Two Things to Remember Before You Make a Decision to Waive

#1: If you choose to waive maintenance, it’s waived forever.

A note of caution: once maintenance is waived, it’s waived forever—at the time the divorce is finalized along with any time in the future. This is evident in Wis. Stat. S 767.59 (1c) (b) – Revision of support and maintenance orders, where it states:

“A court may not revise or modify a judgment or order that waives maintenance payments for either party or a judgment or order with respect to final division of property.”

If your financial circumstances change post-waiver in a way that requires more support from your ex-spouse, you’re not at liberty to re-enter the court and ask to be compensated with that alimony. Once alimony is waived, it’s terminated and gone forever, so approach this part of your divorce process with great caution and deep consideration.

#2: Maintenance impacts your taxes.

In Wisconsin, the spouse paying alimony is obliged to pay all income taxes associated with that alimony amount. On the other hand, the spouse receiving the alimony does not pay taxes on it—the recipient-spouse’s alimony income is tax deductible, so they cannot claim it as income. However, in order for the paying spouse to achieve tax deductibility, payments must terminate upon the death of the recipient-spouse. Under Wisconsin law, marriage also terminates the maintenance obligations.

Bottomline—Carefully Consider Your Maintenance Options

Treat the option to terminate your right to receive maintenance delicately. This process takes careful consideration, so when reviewing your options with a divorce attorney, ask questions about what other financial alternatives to alimony exist should you choose to waive. For example, there are many instances where your lawyer encourages you to accept your right to waive but on the flipside of that, honor your right to receive financial benefits in lieu of maintenance such as increased property division buyout or guaranteed section 71 payments over a specified period of time.

Start by Knowing Your Rights

If you’re still having trouble figuring out whether you should waive maintenance in your divorce case or have it held open, the first step to making a decision is seeking advice from your counsel and understanding your rights before it’s too late to do so. Contact an experienced family lawyer from Karp & Iancu to get started.