In divorce, the Separation Agreement will dictate whether one party must pay another party maintenance, also known as alimony. These payments generally happen when one party earns more than the other, and it is found that the lesser-earner will face a significantly lower quality of life as a consequence of the divorce.
Most of the time, maintenance can be modified after the initial divorce agreement is signed if there have been significant and continuing changes to either party’s life situation. The moving party must be able to prove that the changes are significant (will cause at least a 10% change in monthly payment) and ongoing.
So, for instance, if your former husband pays you monthly maintenance, and he recently received a significant raise, you can go back to the Court and request that maintenance be recalculated.
However, there is one case in which maintenance cannot be modified. When both parties agree, the Court can create “contractual maintenance”, an agreement that cannot be modified except by the contractual terms of the Agreement.
When is Contractual Maintenance Appropriate?
I see contractual maintenance in fewer than 12% of the cases I handle. It’s tricky to put a document like this in place, because both parties must agree to it.
Let’s look at some examples in which it may make sense for a couple to sign off on contractual maintenance.
Let’s assume that in your divorce, you want the house, and your spouse agrees that you can have it. However, in order for you to take the other person’s name off the mortgage, you would have to refinance the property. Obviously, your former spouse doesn’t want to be on the mortgage for a house you own; he/she doesn’t want to have their credit rating affected if you aren’t able to make timely payments in the future. Similarly, he/she could be sued if you don’t make the payments. However, your financial situation may not be strong enough to make the bank feel comfortable refinancing in your name alone. That presents an issue.
If you both sign the contractual maintenance document, you can go to the bank and demonstrate that you will generate sufficient income from your divorce agreement for the foreseeable future. The bank will consider you a more solid risk, and you’re more likely to get approved and/or a better deal on your refinance.
This is a win-win, because you get your maintenance locked in, and your spouse is assured that his/her name will removed from the mortgage for a house they don’t live in.
It Comes Down to Your Risk Tolerance
Of course, every situation is different, and people have different reasons for wanting (or rejecting) contractual maintenance.
If you would be the recipient of maintenance, but you’re concerned about whether your spouse has the ability to hold down a good job (say, if they struggle with a gambling or drug/alcohol addiction, it may be in your best interest to request contractual maintenance. That way, even if your former spouse crashes and burns, that person will still be responsible for paying you a fixed monthly amount that cannot be changed. Of course, both parties must agree to this.
On the other hand, if you would be the payer of maintenance and you believe you’ll be earning much more in the future, you may also find contractual maintenance appealing. If you think that years down the line you’ll be earning much more money and don’t want to potentially have your former spouse go back and request that the maintenance be recalculated so you have to pay more, contractual maintenance may look pretty good.
If you’re simply worried that your ex-spouse will drag you back to Court every other week to try and modify maintenance and be a pest, contractual maintenance may again be appealing if you think it will help you avoid future Court battles.
Another reason for contractual maintenance is privacy. If maintenance is modifiable, your ex-spouse has the right to know about your current financial situation. However, if you have contractual maintenance, your future finances are irrelevant. Therefore, you can keep you financial situation private.
There are a variety of reasons why contractual maintenance may be a good solution. Remember, maintenance is different than child support, which can always be adjusted to reflect the children’s best interest.
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