Personal Finance

It’s a great time to get divorced

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While December is one of the most popular months to pop the question, it could also be a great time to call it quits if you live in New York, that is.

A new law, which was passed by the State Legislature and signed by Gov. Andrew Cuomo earlier this fall, will take effect next month, establishing a formula for maintenance, or alimony, payments in New York.

Starting Jan. 25, the income that can be considered for determining spousal support will be capped at $175,000, down from $524,000. The new law also limits the length of time post-divorce maintenance payments can be made and ends all maintenance payments upon death or remarriage.

In many high net worth divorces, the result could be a lowered payment burden on the payor, or breadwinner, in the dissolution of a marriage.

"I think it personally favors the monied party," said Barry Slotnick, a partner at Buchanan Ingersoll & Rooney specializing in high net worth matrimonial matters. "If you are the monied party you want to stall the filing, if you are the non-monied party, you want to go ahead and get it filed."

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Up until now, maintenance was awarded based on a consideration of a number of factors, including the length of the marriage, respective incomes and earning potential.

"In New York if you went from county to county, even case to case, maintenance awards were all over the board. There seemed to be no rhyme or reason to them," said Daniel Clement, a divorce lawyer in New York. "This movement arose to standardize it."

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But the simplified formula may encourage some spouses to rush to file before the law takes effect.

"For the people who are on the fence, contemplating divorce, this may push them to do something sooner rather than later," said John Slowiaczek, president-elect of the American Academy of Matrimonial Lawyers.

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"It's not unusual to see a spike in divorces after the holiday and particularly after the first of the year," he said. "This year, maybe the spike in New York will be little larger by virtue of this new legislation."

A simplified system also may encourage more spouses to ask for maintenance rather than walk away from what used to be a complicated legal calculation. "This changes the dynamic," Clement added. "When you had to fight for it, you may not have been so incentivized to go for it."

The people who are going to be crushed by the changes are those in long-term relationships who have been out of the workforce for 20 years or more and have the expectation that they will be taken care of by their spouse in the case of a divorce, Slowiaczek said. "This is going to really hurt that segment of society."

"The payee is going to have to make a gigantic change to their lifestyle, and if they're not working, they're out of luck," added Justin Reckers, a certified financial planner, divorce financial analyst and CEO of WellSpring Divorce Advisors based in San Diego.

The alimony recipients make up the bulk of Reckers' clients and are often the women in the divorce proceedings, he said. "We have to start immediately adjusting your lifestyle, managing expenses and figure out how to go back to work," he said.

Nationwide, there has been a growing trend toward either reducing or eliminating alimony, Slowiaczek said. "Part of it is driven by the culture of a two-income family and the number of women who have been successful in their careers," he said.