Child support on the other hand is taxable to the payor and tax free to the recipient. When one spouse earns a significantly larger income than the other spouse, it can be beneficial to shift a portion of the tax burden to the lower income earner, which then lowers the tax the family owes to the Internal Revenue Service (IRS) thus allowing more money to stay in the family, benefiting both parties and the parties’ children.
In fact, even in the absence of this language, in a recent case decided by the Supreme Judicial Court, Duff-Kareores v. Kareores, the justices presumed that because there were unemancipated children but no language discussing child support in the parties’ separation agreement, the alimony order included child support. In other words, even though the parties called the support order alimony, the court decided that it was really some form of unallocated support.
One benefit to calling the support order alimony is that there is a statutory framework and case law that can be used to help parties (or a judge) figure out the details of the order. For example, by statute, alimony is based on the recipient’s need and the payor’s ability to pay. In figuring out the amount of support paid, a court would look at the need of the recipient or the order can be based on 30%-35% of the difference in the parties’ incomes. This can give parties a starting place for their negotiations. There are also statutory durational limits to alimony based on the length of the marriage. There are clear rules for what income should be included when calculating alimony. There is case law discussing the modification standard for alimony. In other words calling the support order alimony can provide clarity.
If parties choose this option, they must be very careful when drafting the language because there is no predicting how a court will interpret that order if they need to go before a judge for modification. Flexibility can create uncertainty unless the terms of unallocated support and potential modification in the future are very clearly defined.
Another reason to call the support order alimony rather than unallocated support occurs when the higher income earner is also the custodial parent. If the higher income earner is the custodial parent, an unallocated order would not include child support. In a recent Appeals Court case, Rosenwasser v. Rosenwasser, the parties’ separation agreement called the support order unallocated support because it included child support and alimony while the lower income earning spouse (the mother) was also the custodial parent.
The unallocated support order included a base order and a percentage of income over the base amount. However, when the support payor (the father) became the custodial parent and filed for a modification of the support order (along with a request to move to florida), the court used a similar formula (base and percentage) to calculate alimony despite the fact that the father was no longer paying child support. The Rosenwasser decision focuses primarily on the removal issue, but the court's use of an unallocated support agreement to inform a pure alimony calculation is informative and shows how future application of unallocated support language can be unpredictable. On the other hand, it's unclear that the court would have handled this any differently if the original order had been called alimony.