The general test when deciding whether alimony is appropriate in a New Hampshire case is whether there is a need for alimony and an ability to pay. In the past, there was no set formula to determine the amount of alimony or how long an alimony order would last, simply a list of factors that the Court had to consider.
In 2018, the Governor approved a new alimony law that applies to all cases filed after January 1, 2019. While the new law addressed multiple aspects of alimony statute, one big update was that it created a formula to calculate term alimony. Term alimony is defined as “periodic payments made to a spouse or former spouse after the effective date of the final decree” and its purpose is to “allow both parties to maintain a reasonable standard of living.” RSA 458:19(XV); RSA 458:19-a(I).
Alimony changes from 2019
If the Court finds that an alimony award is appropriate, a set formula is now applied and then adjustments can be made from the formula amount if the parties agree, or if the Court finds that justice requires an adjustment. The formula is as follows: 30% of the difference between the parties’ gross incomes. When calculating the income of the person paying, any alimony and child support, even for the parties’ joint children, is reduced, along with any costs related to health insurance or other expenses for the benefit of the person receiving alimony. Likewise, any child support received is added to the income of the party receiving alimony. Under the new law, the length of a term alimony order was also defined. Now, the maximum duration of term alimony is 50 percent the length of the marriage, unless the parties agree otherwise, or the Court finds that justice requires an adjustment. Another piece to consider is whether the need for alimony is lower than the 30% formula. If that is the case, the lower amount will be awarded.
As lawyers often see, the laws can change regularly and a modification in one law can impact another law. In this case, the new alimony law passed when, under the federal tax law, the person paying alimony could count those payments as tax-deductible and the person receiving alimony had to count the payments as taxable income. Beginning January 1, 2019, under the new federal tax law, alimony payments were no longer tax deductible for the person paying and were not considered income for the person receiving the alimony. This law applies to all divorce or separation agreements executed after December 31, 2018.
Updates should be coming
This update leaves New Hampshire with an alimony statute that does not account for the new federal tax law. Corrective legislation was pending, and passed the Senate, that would adjust the formula from 30% to 23% to account for the new federal tax law. While in the House, the legislation was vacated, most likely due to Covid-19 and a prioritization of emergency laws. It is expected that the bill will be re-introduced in January of 2021.
How should we handle this?
All of this begs the question: how do we address alimony if a change is expected? There are several different solutions if your case involves term alimony: you could agree to using the 23% formula, whether or not New Hampshire law changes; you could agree to using the 30% formula, and add a provision that alimony will be recalculated when the law changes to 23%; you could negotiate a different percentage that would remain fixed even if there is a change in the law; you could negotiate a different percentage that would automatically change with the new law and recalculate alimony at that time; or, recognize that the alimony formula will likely be changing and negotiate an alimony award that looks to the need and ability to pay only, without considering the formula.
Ultimately, each person’s situation is different. It is important to have a lawyer who is familiar with changes to the law, and expected changes, to reduce the risk of having to go back to Court for a modification once the law changes.
If you are in need of legal services in connection with a divorce case, or you have questions regarding alimony, we can help. Please feel free to call us in Nashua at (603) 943-5647 and we will be happy to set up a consultation to help you come up with an action plan. Don’t forget to “like” us on Facebook or Twitter to stay up to date with our latest blogs and posts.