Maintenance is Colorado’s word for alimony. It is an important way to help someone get back on his or her feet. On the other hand, sometimes a person has stars in their eyes about a big maintenance number, not realizing the downsides. I have seen many a client who paid another firm top dollar to go to court and obtain a maintenance award, only to walk away with very little in his or her pocket. Continue reading “12 Reasons Maintenance is Not What You Think”
With a new maintenance statute going into effect in January 2014, the topic has received attention in the Colorado press.
Maintenance refers to a form of spousal support commonly known as alimony. In a nutshell, it is paid by the higher breadwinner to the lower. A common rule of thumb, roughly accurate based on statute, is that you take 40% of the higher monthly salary minus 50% of the lower salary and that is the payment for about 1/3 to 1/2 the duration of the marriage. Structured properly, maintenance can give two parties, and any children they may share, a similar financial quality of life to that operating during their marriage.
Just as the promise of “til death do us part” does not always work out in marriage, the promise of maintenance is not a sure thing. Unfortunately, if the parties hit any of the common snags, the result for the recipient is a phrase I coined, “every penny you get is worth two cents of grief.” Often the cost of enforcing a maintenance agreement exceeds the value of the missed payments. This makes maintenance a dangerous promise for those who planned their budgets around the promise of payment. Circumstances for the paying party can be similarly harsh — more than one party has found himself or herself facing a contempt proceeding, and even jail, due to unpaid maintenance. With interest accruing at 8% for each missed payment, the potential penalties are staggering.
The following are some common maintenance myths:
1. MYTH: Once awarded, maintenance is the same as money in the bank. TRUTH: Sadly, maintenance awarded is not the same as maintenance paid. Many times a party falls into hard times or simply chooses not to pay. This is not the court’s problem — to go out on its own and enforce unpaid maintenance. The recipient must enforce his or her right to payment. This may require hiring an attorney.
2. MYTH: A court can order or modify “non-modifiable” or “contractual” maintenance. TRUTH: Contractual maintenance is only reached by stipulation of the parties. You cannot go to court ask for contractual maintenance that can never be modified. Absent extreme and limited circumstances or AN AGREEMENT OF THE PARTIES, the court always retains the right to modify maintenance. However, once a party permanently waives maintenance or both parties PROPERLY agree to contractual maintenance by an agreement removing jurisdiction to modify, the court loses its jurisdiction to modify. In almost all cases, this means that amount is written in stone forever. (Now, the ability to enforce the agreement is another story. See Myth 1 above.)
3. MYTH: Maintenance is the preferred and best way to settle unequal earning between the parties. TRUTH: A little known provision of Colorado law instructs that a court should try to settle unequal financial matters by a division of property FIRST and then go to maintenance. In other words, it is preferred that the better earner a larger share of marital property to the lower earner instead of paying monthly. Many parties agree this is better. As months go on and on, paying maintenance is less and less appealing to the paying party. A division of property is a one-time act and allows for investment and growth of the funds. It enables the parties to lead separate lives. On the other hand, there are bankruptcy and other risks that must be considered.
4. MYTH: The new statute makes maintenance mandatory. TRUTH: The new statute is not even a presumption that maintenance must be awarded. The statute simply sets forth the general formula and factors a court must consider on the record in deciding whether to award maintenance and how much to award. Family courts retain discretion to order as much or as little maintenance as they choose as long as their decision is reasonably supported by the record and not an abuse of discretion.
5. MYTH: Real men don’t get maintenance. TRUTH: Many men seek and are awarded maintenance. Maintenance is based on respective earnings and earning power. If the woman is the higher earner, she is the party who may end up paying. Under the new formula, the court must make a ruling on maintenance regardless of whether the higher breadwinner is a man or a woman.
6. MYTH: Once maintenance is paid to you, you never have to pay it back. TRUTH: Once a party files a motion to modify maintenance, the court has the right to look at all payments made after the motion is filed and even to make the recipient pay back amounts paid. This can even be the case when a party has gone to court and enforced unpaid maintenance or garnished wages while the motion to modify is pending.
7. MYTH: I lost my job and am broke so I don’t have to pay maintenance. TRUTH: In order to be absolved of your obligation to pay maintenance, you must file a motion to modify the order requiring you to pay maintenance. If you did not file a motion to modify, you are in default and may even be held in contempt.
8. MYTH: The best way to get back maintenance is to go to the courthouse file your own criminal contempt motion. TRUTH: A contempt motion is a very technical and complicated motion. Moreover, there are options for both remedial and criminal contempt motions with subtle and important differences. Both have the possible consequence of jail but for different reasons. In both cases, the inability to pay may be a perfect defense. Filing the wrong contempt motion, or filing a contempt motion rather than using other types of enforcement, can drastically increase your burden of proof and decrease your likelihood of winning. A brief consult with an attorney should steer you in the right direction and guarantee you enforce the unpaid maintenance in the best and most successful way.
9. MYTH: Parties can easily handle the maintenance issue on their own by checking a box on the court’s JDF “separation agreement” form. TRUTH: Maintenance has tax and other consequences the parties may not even realize. The paying party gets a tax deduction and the receiving party pays tax. That being said, if not handled properly, the IRS may ignore a maintenance agreement despite an agreement of the parties. Even the Colorado legislature was confused — putting maintenance options in their statute that are contrary to federal tax laws that recapture maintenance paid over too short a period. In other cases, the parties may have opened the door to maintenance by writing words on a separation agreement without knowing what those words mean in a legal sense. More than one client has been shocked to learn they waived maintenance or left the door open to maintenance by writing the wrong word or checking the wrong box. I strongly urge parties to at least consult an attorney and tax accountant before agreeing to maintenance on their own.
10. MYTH: You cannot hire an attorney to help with maintenance issues without paying a huge retainer. TRUTH: With unbundled legal services, you can hire our firm to advise you on many aspects of maintenance in as little as an hour or even a half hour without paying a retainer or requiring us to enter a general appearance in your case. I strongly urge you to at least call for a phone consult on maintenance issues before signing a separation agreement or seeking to enforce unpaid maintenance. My work number is 303-674-4414, my email is firstname.lastname@example.org and my cell phone 303-808-4794 is answered by me 24/7.