New Mexico Support Attorneys
In a collaborative divorce, one of the team members is a financial specialist. In addition to helping strategize how to divide the assets and debts, a financial specialist can analyze the parties' incomes for child support and alimony purposes.
- Child support is figured on gross, not net, income.
- Child support is not tax-deductible by the payor.
- Alimony can be figured on gross income, if the New Mexico Alimony Guidelines are used. If a more traditional analysis is used, then the financial specialist can gather information regarding the income, net, and the expenses of both parties and suggest ways to have monthly bills paid.
Child support and spousal support (alimony) are part of most divorces, including collaborative divorces. If the parties have children together, then child support must be calculated. If the marriage is relatively long-term (over 10 years at least) and there are other factors, such as health issues, or disparate income earning potentials of the parties, then alimony or spousal support is also an issue in the divorce.
Child support is figured on gross income of both spouses and is not tax-deductible to the paying spouse, nor is it considered income to the recipient. It is commonly calculated according to the New Mexico Child Support Guidelines in litigated divorce cases, but parties in a collaborative divorce have more creativity afforded to them.
Alimony does exist in New Mexico despite a common misconception that it does not. Alimony (or spousal support) is tax deductible to the paying spouse, and is often a very valuable deduction as it is deducted from income, before adjusted gross income is calculated. Alimony is includible in the recipient's income, thus the recipient must pay taxes on spousal support. Often the paying spouse is in a much higher income tax bracket than that of the recipient spouse, after the divorce, due to disparate earnings. Thus, tax savings can be achieved through the paying of alimony from the higher earning spouse in the higher tax bracket to the lower earning spouse in the lower tax bracket.
New Mexico has alimony guidelines which calculate alimony based on the gross incomes of both parties according to a formula. The guidelines are a starting point, not an ending point, for discussion in collaborative divorce cases. The alimony guidelines are also used in negotiating settlement of litigated cases, but cannot be used at trial. In a traditionally litigated case, budgets must be prepared, taxed must be figured, and a host of other statutory factors must be argued, making alimony cases one of the most expensive issues to litigated or negotiate and settle in a traditional litigated divorce.
In a traditional litigated divorce, child and spousal support are purely financial decisions. The interplay of taxable/deductible alimony and non-taxable/non-deductible child support rarely get taken into account in a traditional litigated divorce.
In a collaborative divorce, the Financial Specialist is much more accurately able to forecast expenses for children and spouses and then take advantage of spousal support being tax-deductible to the paying spouse in order to save on taxes and still transfer more after-tax dollars into the hands of the recipient spouse.
