How Might Financial Windfall Affect Alimony?

Reviewed by Mark P. McAuliffe

You may expect to experience a difference in your financial situation in the aftermath of the divorce. Specifically, you may expect such a change to be negative, as you may struggle to become a financially independent individual for the first time in a long time. What’s more, you may need some time to recover from the financial toll your divorce proceedings had on you (i.e., attorney fees, court fees, lost assets, etc). However, on the off chance, this change may be a positive financial windfall. Read on to discover how your unexpected financial windfall might affect your alimony order and how a seasoned Bergen County alimony attorney at McNerney & McAuliffe can work to protect your assets.

Understanding What Qualifies as a Financial Windfall

First of all, the general definition of a financial windfall is when you receive a large and likely unexpected amount of money. This may be thousands or even millions of dollars that instantaneously upgrade your status as a high-net-worth individual. Without further ado, you may experience a financial windfall after your divorce in the following ways:

• You may have had a big success in one of your investments.
• You may have gotten a significant raise or promotion at work.
• You may have sold a large asset or your business for a large amount of money.
• You may be the jackpot winner of the lottery or the winner of a high-stakes bet in gambling.
• You may be the beneficiary of an inheritance or life insurance payout from a loved one who has unfortunately passed away.
• You may have received a significant amount of compensatory damages or a high settlement offer in a personal injury claim.
• You may have received executive compensation packages, like performance bonuses or restricted stock units (RSUs)
• Massive appreciation or liquidated returns from cryptocurrency holdings and digital asset investments.

How Might Unexpected Financial Windfall Affect Your Alimony Payments?

Upon hearing about your financial windfall, your former spouse may argue that this was a marital asset that they are equally entitled to. Otherwise, they may argue that you have a greater means to provide them with additional financial support. Either way, they may petition for a post-judgment modification with the New Jersey family court. Rest assured, there are arguments that you may fight back with.

If your spouse is attempting to modify alimony payments as a result of the financial windfall you have experienced, you’ll need to show the court that your increase in income does not impact the overall fairness of the original support order. In New Jersey, legal precedent has limited how much financial gain earned after a divorce is finalized can be leveraged by an ex-spouse

Key Defensive Arguments

• You may argue that the tax implications of your financial windfall do not allow for an increase in alimony payments.
• You may argue that the increase in the cost of living since your marriage does not allow for an increase in alimony payments.
• You may argue that the standing alimony order already maintains the lifestyle your former spouse carried during your marriage.
• You may argue that your former spouse remarried or is otherwise financially dependent on another partner and does not need an increase in alimony payments.
• Proving that the windfall is the result of assets held separately, obtained after the marriage ended, or is otherwise entirely separate from marital joint efforts or investments
• Demonstrating that the windfall is a non-recurring, one-time lump sum (like an inheritance) rather than a reliable, recurring stream of income.

What Factors Are Used to Calculate and Modify Alimony Orders?

When determining alimony payments in New Jersey, the court may utilize statutory guidelines to determine how much you, as the higher-earning spouse, must provide to your former spouse.

The purpose of this calculation is to ensure that the amount of alimony is fair and just for both parties. However, it is important to understand that both you and your former spouse may undergo considerable life changes after your divorce that impact the feasibility of this agreement. If this occurs, you can petition the court to modify the alimony order.

Statutory Criteria Evaluated by New Jersey Courts

When considering whether or not a substantial change in circumstances, like a financial windfall, warrants an alimony modification, the judge assigned to the case will examine these matters in accordance with the statutory factors outlined in New Jersey law. This includes:

• The income and earning capacity of each spouse
• The assets and debts of both parties
• How long the couple had been married
• The standard of living established during the marriage
• Child support orders, if they have already been established by the court
• If one spouse sacrificed their career to support the other
• The age, physical health, and mental health of both parties
• The recipient spouse’s education and working history
• The current state of the job market at the time of the divorce

How Do Cohabitation and Remarriage Affect Alimony Obligations?

If you have questions or concerns about alimony after a former spouse remarries, do not hesitate to reach out to our skilled Bergen County alimony attorney.  It’s important to understand that, aside from financial windfalls, changes in the relationship status of a spouse are often cited as grounds to modify the current alimony obligations following a divorce.

The Direct Legal Impacts of New Relationships on Support

In most instances, when a paying spouse gets remarried, it does not impact their financial obligation to their ex-spouse. As such, they must continue paying alimony orders unless another change has occurred that impacts their ability to do so. 

However, if a recipient spouse enters a new relationship, gets married, or begins cohabitating with a new romantic partner, this may be grounds to modify or terminate the alimony order.

Under New Jersey State law:

• When a recipient spouse gets remarried, the state will automatically end alimony obligations once their marriage is authorized
• If alimony is being paid through Probation and/or the supporting spouse’s wages are garnished, the independent spouse needs to file a motion in court.
• Cohabitation alone may not be enough to end alimony unless expressly stated in a divorce settlement or judgment.
• The paying spouse can ask the court to reduce, or possibly terminate, alimony if their ex-spouse’s new partner contributes to the household expenses.
• Courts actively evaluate shared operational finances, joint residential leases, bank records, and indicators of true economic interdependence.

What Are the Different Types of Alimony Recognized in New Jersey?

It’s necessary to understand that there are several types of alimony structures in New Jersey that may be awarded. Ultimately, the outcome will depend on the circumstances of your divorce, your finances, and any other factors deemed relevant by the courts.

The Four Primary Alimony Structures Under State Statutes

Alimony in New Jersey is not intended to serve as a permanent source of income for the recipient spouse, but rather a bridge to support the spouse until they can reach financial independence. As such, there are several different types of alimony that may be awarded based on the circumstances and duration of your marriage.

Open Durational Alimony

• This type of alimony is often awarded to spouses married for at least 20 years
• Open durational alimony is awarded indefinitely, but allows for termination in the event that the recipient spouse remarries or becomes financially independent

Limited Duration Alimony

• This type of alimony is often awarded to spouses married for less than 20 years
• Limited duration alimony has a predetermined termination date, which means the obligation will automatically end on the date ordered by the court

Reimbursement Alimony

• This type of alimony may be awarded if a spouse stopped working and sought additional education during the marriage, requiring the other spouse to financially provide for both.
• Reimbursement alimony serves to compensate the lower-earning spouse for the sacrifices they made when the other spouse was seeking additional education

Rehabilitative Alimony

• This type of alimony is awarded to a spouse who sacrifices their career to support the other, such as leaving employment to raise children while the other continues working
• Rehabilitative alimony serves to support reeducation or vocational training so the spouse may easily reenter the workforce

Pendente Lite Support

• Pendente lite alimony is a type of temporary financial assistance designed to aid the lower-earning spouse exclusively while the divorce process is actively pending.

Can an Ex-Spouse Discontinue Alimony Payments After Filing for Bankruptcy?

In the event that you file for divorce, you may be relieved to find that the court agrees with your alimony request, as this can help you remain financially stable until you are able to reach financial independence. However, if your spouse files for bankruptcy, they may seek to terminate their obligation. As such, you may be, understandably, worried about your financial future.

How Federal Bankruptcy Courts Define Domestic Support Obligations

It’s important to understand that, during bankruptcy cases, there are both dischargable and non-dischargable debts. Essentially, this means that the bankruptcy process, whether it is a Chapter 7 liquidation process or Chapter 13 repayment plan, will ultimately satisfy some of these debts, allowing them to be erased, or discharged, during the bankruptcy process. However, certain debts are unable to be wiped away during this process. As such:

• Dischargeable debts, such as credit card debt, may be discharged, or wiped away, when the bankruptcy process is complete.
• In accordance with federal bankruptcy law, domestic support obligations, including alimony and child support, are ineligible for discharge.
• Even if your spouse files for bankruptcy, they will likely have to continue making alimony payments in accordance with the court order.
• Bankruptcy filings do not prevent the New Jersey family courts from issuing enforcement actions for accrued alimony arrears.

What Actions Must You Avoid After a Post-Divorce Job Loss?

When you and your spouse filed for divorce, you may have had a stable, high-income position, ultimately impacting the amount of alimony you were ordered to pay. However, if unforeseen circumstances occur, you may no longer have that job or be otherwise unable to maintain a stable income. If this occurs, you may wonder what will happen to your alimony obligations

The Legal Risk of Unilateral Support Stoppages

It’s critical to understand that job loss does not automatically mean you are no longer responsible for paying alimony. If you lose your job or primary source of income, you must continue paying alimony regardless. The only way in which you can legally stop making alimony is by obtaining a modification by the court that terminates the court order requiring you to make payments.

• Failing to pay alimony, regardless of job loss, can result in the court holding you in contempt
• Contempt of court essentially means you have intentionally disobeyed or violated an official New Jersey court order
• The court may penalize you by imposing fines, requiring you to pay your ex-spouse’s legal fees, or even sentencing you to spend time in jail (this is most common for chronic violators)
• If you lose your job, you must continue to make alimony payments in accordance with the current court order until the court formally modifies or terminates the order

What Steps Do I Need to Take to Modify My Alimony Order?

You cannot simply take it upon yourself to change your established alimony payment schedule when you see fit. Rather, you must formally petition for a post-judgment alimony modification with the New Jersey family court. When fighting for a fair and just post-judgment modification, there is no other than a competent Bergen County family law attorney to have in your corner. So please get in touch with us at McNerney & McAuliffe today.

The Post-Judgment Motion Process and Burden of Proof

In the event you have experienced a change in circumstances and wish to modify your current alimony obligation, it’s important to understand the legal processes you must adhere to. In general, you’ll need to gather considerable evidence to help support your claims that a modification is warranted. As such, the process includes:

• Filing a formal motion for modification with the appropriate New Jersey Superior Court family division
• Meet the mandatory legal burden of proof by demonstrating a substantial, involuntary, and permanent change in financial circumstances.
• Filing a complete and accurate Case Information Statement as a way of showing your current financial circumstances as compared to your finances when the divorce was filed
• Provide supporting financial documents, including your three most recent pay stubs, W-2 forms, and complete federal tax returns.
• Supply specific proof of job loss context, such as an official notice of termination or corporate downsizing documentation.
• Provide verifiable medical records or a physician’s certification if a health condition impedes your active employment capacity.
• Show your active efforts to seek new employment opportunities comparable to prior employment (evidence may include emails from recruiters, submitted job applications, and interview appointments)

Why Should I Speak With a Bergen County Alimony Attorney About a Financial Windfall?

Whether you recently received a financial windfall or believe your former spouse’s financial situation has changed significantly, obtaining legal guidance early can help you protect your interests and avoid costly mistakes. Legal disputes regarding sudden wealth or employment loss can escalate quickly without skilled advocacy. Contact a skilled Bergen County family law attorney to gain the emotional and legal support you require during this pivotal time. Our team at McNerney & McAuliffe looks forward to helping you.