If you are paying monthly alimony to your ex-spouse and have recently received a financial windfall, you may be wondering what the consequences will be. Will you be required to pay more? Can your ex-spouse request an increase in payments because of this newfound money? Continue reading and contact a Sparta, NJ alimony attorney for more information.
What is a Financial Windfall?
A financial windfall is the unexpected receiving of a large amount of money. When you either come into money that you did not anticipate getting or find out that the money you knew was coming is significantly more than you expected, it is considered a financial windfall. This could result from a life insurance payout after an unexpected passing, receiving an inheritance and realizing it is for millions of dollars when you thought it would be for thousands, being given a random bonus at work, etc.
Will Alimony Change Because of a Windfall?
If you pay alimony to your ex and you’re wondering if your financial windfall will affect the amount you owe them, you will be glad to know that typically an increase in wealth will not impact spousal support payments. Alimony is only intended to benefit the receiving spouse so they can maintain their standard of living and make up for any lower earning capacity due to circumstances that occurred during the marriage. Alimony is not typically decided based on a percentage of income, so a financial windfall will usually not result in spousal support changes.
What is an Escalator Clause?
One of the only ways a financial windfall will increase alimony payments is if there is an escalator clause in your divorce agreement. This means that it was agreed that the amount of alimony is subject to change depending on certain factors including the paying spouse’s wealth and income. If so, an increase in financial wealth will result in an increase in alimony payments.
When Do Alimony Payments Get Adjusted?
While a financial windfall will usually not change alimony payments, certain situations will. The following are all valid reasons that spousal support payments may increase or decrease.
- Cost of Living Adjustment (COLA) clause
- If the cost of living increases and there is a COLA clause in your divorce papers, alimony payments may increase to make up for the inflation.
- Disability of either party
- If the receiving spouse becomes disabled they may request an increase in alimony to help them during their difficult time. In the same vein, if the paying spouse becomes disabled they may request that the payments decrease to give them a financial cushion while they deal with their disability.
- New cohabitation
- If the receiving spouse moves in with a new partner, the paying spouse may request a decrease or elimination of alimony payments.
- New financial responsibilities
- If the paying spouse gets married and/or has a child, they can request to decrease alimony as they have a new responsibility to take care of their child and family.
