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FAQ’s on MAINTENANCE (ALIMONY) IN COLORADO

1. What is maintenance?

Maintenance is financial support paid by one spouse (called the “payor”) to another (called the “recipient”) in a dissolution of marriage case. In some states it is called “alimony”. The IRS calls it “alimony”. The section of the Internal Revenue Code that deals with alimony is Section 71. Maintenance can be paid pursuant to an agreement of the parties or it may be paid pursuant to an order of a court if the parties cannot agree.

Maintenance is not child support. Child support is paid for the support of children under the age of 19. Child support is based on a different formula and is calculated in a different manner than maintenance.

2. How is maintenance treated by the IRS?

Up until December 31, 2018 maintenance paid by one spouse to another was deductible from the income of the payor spouse and reportable as income for the spouse receiving the payment. Effective January 1, 2019 the law changed. For all maintenance orders entered after that date maintenance is no longer a taxable event. It is not deductible for the payor spouse and is not treated as income for the recipient spouse.

However, if a former spouse is paying maintenance pursuant to an order that entered before January 1, 2019 that maintenance will continue to be treated as deductible by the payor and taxable as income for the recipient.

3. How is the amount of maintenance determined?

Colorado law has what are called “advisory guidelines” that calculate the amount of maintenance that may be paid to a spouse. These guidelines are not mandatory but are commonly used by lawyers and judges to determine what a reasonable amount of maintenance might be.

The law also lists a number of other criteria for how to determine a fair amount of maintenance. These include the length of the marriage, the age of the parties, the health of the parties, the incomes of the parties, the financial resources of the parties, the lifestyle of the parties during the marriage, the reasonable needs of the parties and whether there are young children to be cared for by one spouse.

The parties are free to negotiate an amount of maintenance if they wish. If there is no agreement a judge will determine the maintenance amount after a hearing. At a hearing each party can make arguments and offer evidence concerning what the party thinks is a fair amount of maintenance. The guideline amount is often used as a starting point for the discussion about maintenance.

The advisory guidelines use the gross (before taxes are deducted) income of each party and the amount of maintenance is based on a formula using those gross income figures. The guidelines also provide a formula for how long the maintenance should be paid based on the number of months the parties have been married.

The formula for maintenance varies depending on how much total income the parties make monthly. Effective January 1, 2019 the following formulas are in place:

• For parties with incomes that total less than $10,000 per month (or $120,000 a year) the maintenance is equal to 80% of a figure equal to 40% of the combined total income minus the adjusted gross income of the lower wage earner.
• For parties with incomes that total more than $10,000 per month ($120,000 a year) but less than $20,000 ($240,000 a year) the maintenance is 75% of a figure equal to 40% of the combined total of income minus the adjusted gross income of the lower wage earner.
• For parties with incomes that total more than $20,000 per month ($240,000 a year), the guidelines do not apply and the Court will decide the issue of maintenance based on the statutory criteria outlined above.

4. How long is maintenance paid?

The guidelines state that for a marriage of less than three (3) years no maintenance will be paid unless the Court finds based on the other criteria that it is fair and equitable to do so. For marriages over twenty (20) years the Court determines a fair and equitable term of years. For marriages between three (3) years and twenty (20) years the guidelines provide a table that sets a term based on an increasing percentage of the number of months married. Short term marriages will have a term of 31.67% to 37% of the number of months married. Mid-length marriages will have a term from 37% to 45% of the number of months married. Longer term marriages will have a term from 45% to 50% of the number of months married up to the cap of 240 months. Some examples:

• 5 year marriage = 21 months of maintenance
• 7 years marriage = 33 months of maintenance
• 10 year marriage = 53 months of maintenance
• 12 year marriage = 71 months of maintenance
• Marriages longer than 150 months = 50% of the months married

5. If I am not married to my partner but we have been together for a long time will maintenance be a possibility? Does Colorado award “palimony”?

No. Colorado does not recognize palimony. Maintenance is only possible if the parties have been married and are divorcing.

6. Can we agree that there will be no maintenance or that maintenance will be different than what the guidelines suggest?

Yes, you can agree to waive maintenance but any such waiver must be voluntary and the party who is giving up maintenance must know what the guideline amount would be based on the facts of the case and understand that they are giving up that amount.

It is not unusual for parties to agree to a division of the marital property in such a way that a spouse might receive income producing property such as rental properties or investments that produce income in return for a waiver of maintenance. Parties might agree to give the lower income earner a greater share of the marital property in return for a waiver. Parties can also agree to an amount of maintenance or term of maintenance that is different than the guidelines suggest if such an agreement is still fair and equitable when looking at the overall settlement.

Parties can also agree to some limitations on the term of years maintenance is paid. Some agreements may be structured so that maintenance is paid over a longer or shorter time than the guidelines suggest.

7. What if my spouse and I make about the same amount of money?

If the incomes are equal or close to equal there will be no alimony unless the parties agree to it for some reason. Under the guideline formula if the calculation of maintenance results in “zero or a negative number” then there is no maintenance.

For example:

Since this is a negative number there would be no maintenance.

8. What if I lose my job or cannot pay maintenance later on? What if my ex-spouse starts making more income?

Unless the parties agree to make the maintenance non-modifiable, the maintenance can be modified if there is a “substantial and continuing change in circumstances”. Whether a judge would decrease, increase or terminate maintenance depends on the facts of each case but it can be modified. The amount and term of maintenance can be modified if the facts of the case support a modification. As a general principle, however, modification of maintenance is not a common occurrence. The party seeking the modification must prove that there is a substantial and continuing change in circumstances that make the prior order unfair. The most common reason for a modification is an unforeseen medical problem that affects the ability to work or causes a significant increase in expenses. A temporary loss of employment may result in a temporary abatement or modification but may not result in a long term permanent modification.

9. What if I remarry or my ex-spouse remarries? Or dies?

If the recipient spouse re-marries then maintenance will terminate. If the payor spouse remarries there would be no change.

If the recipient spouse dies the maintenance will terminate upon death. If the payor spouse dies maintenance may or may not terminate. However, there will usually be an agreement or order at the time of the divorce to provide life insurance to secure the maintenance if the payor dies before the term of maintenance ends. If there is no life insurance the recipient spouse may make a claim against the estate of the payor unless the agreement specifically states maintenance will end upon the death of the payor.

10. My ex-spouse is going to receive a percentage of my pension or military retirement. Will that affect the maintenance? What if my ex-spouse receives a percentage of my IRA or 401K? What happens when one or the other party retires?

Since maintenance is calculated based on the income of both parties, it is possible that maintenance will change when a pension payment or a payment of military retirement begins. Income from a pension or from military retirement is “income” for purposes of calculating maintenance.

Maintenance may also be modified when the payor spouse retires at his or her “normal retirement age” and has less overall income than when maintenance was figured on full time employment. If the recipient spouse retires and has less income that may also be a basis for modification depending on the relative incomes of the parties at the time and the facts of the case.

Likewise, when a former spouse has received a portion of an IRA or 401K and begins to receive income from those retirement accounts it is possible that maintenance may be modified.