Divorce negotiations are often contentious. It is possible that the chances for this may be increased in the case of high net worth divorce, where requested spousal support in particular can reach levels beyond the imagination of many people. Some California residents may be aware of changes in the laws relating to spousal support in New York, due to come into effect in the next few weeks. They could result in a last-minute rush on divorce cases commenced by the less affluent spouses of wealthy individuals.
Currently, the maximum salary amount that is considered when calculating spousal support if $543,000. Following the change in the law, this figure will be reduced to $175,000. Based on an income of $500,000, this could represent a drop in monthly maintenance payments from $13,575 to $4,375, almost 70 percent. While the revised figure may still sound more than adequate to many people, there are other elements that will also affect future income.
The current guidelines for duration of spousal support state that those whose marriages have lasted for 10 years may collect maintenance payments for a term equivalent to half of the union’s term, or five years. This will be reduced to three years. The cumulative difference in spousal support payments for those who initiate divorce before the changeover could be substantial, potentially in excess of $1 million at the higher end of the scale.
The home of Hollywood has many famous and wealthy residents, many of whom may be contemplating the best way forward. Divorce laws vary by state, and it is unclear whether New York will be followed by other jurisdictions in the future. California residents should ensure that they have the appropriate advice according to individual circumstances. Spousal support is as important to someone whose wealth is measured in thousands as it is to one whose assets are measured in millions.
Source: New York Post, “Better get divorced now – or it could cost you $110K a year“, Richard Morgan, Dec. 3, 2015