Contractual vs. Modifiable Spousal Maintenance: Which One is Best for You?

Going through a divorce can be a challenging experience, both emotionally and financially. Determining spousal maintenance or alimony payments can be even more complicated. One of the crucial factors to consider when it comes to spousal maintenance is whether you want to go with contractual or modifiable spousal maintenance. In this blog, we’ll discuss the differences between these two options in greater detail to help you decide the right choice for your unique situation.

Contractual Spousal Maintenance

Contractual spousal maintenance is an agreement between both parties as part of their divorce settlement. The amount and/or duration of payments are explicitly written into the settlement agreement and are non-modifiable. That means neither party can request an increase or decrease in the amount or length/duration of support payments, no matter the circumstance.

Advantages of Contractual Spousal Maintenance in Refinancing and Mortgages

Contractual spousal maintenance is often used when both parties want finality and certainty in their financial arrangements after the divorce. This type of maintenance allows both parties to plan for the future without any uncertainties or surprises regarding the financial support they’re receiving or paying.

Contractual spousal maintenance can play a significant role in helping individuals qualify for refinancing or mortgages post-divorce, primarily due to its predictable nature. Lenders prefer stability when assessing an applicant’s ability to repay a loan. With contractual spousal maintenance, the specified payment amount and schedule provide a consistent, reliable source of income. This income can be included in the loan application, increasing the borrower’s overall income and potentially helping them qualify for a larger loan or better interest rates.

Moreover, the non-modifiability of contractual spousal maintenance assures the lenders that the income will not decrease over time, thus reducing the risk factor from their perspective. This stability can be particularly advantageous when trying to keep a home after divorce, as it may enable divorcees to meet the lender’s income requirements for refinancing their existing mortgage or applying for a new one.

Opting for contractual spousal maintenance can be particularly advantageous for payors anticipating a significant income increase post-divorce. This is because the spousal support amount, once agreed upon and written into the divorce settlement, is non-modifiable and will not change regardless of the payor’s future income.

In essence, by choosing contractual over modifiable spousal maintenance, the payor makes a strategic financial decision: They are betting on themselves and their future income potential. If their income increases significantly, they will continue to make the same spousal maintenance payments agreed upon at the time of divorce rather than facing a potential increase in payments that might occur with modifiable spousal maintenance.

This arrangement offers a measure of financial predictability and control for the payor, allowing them to benefit from any future income growth fully. It also incentivizes career development and progression without worrying about increased spousal maintenance payments. On a psychological level, this could provide a sense of financial independence and self-determination, as their increased earnings remain solely their own.

Disadvantages of Contractual Spousal Maintenance

While contractual spousal maintenance offers certain advantages, a few potential drawbacks should be considered. A key disadvantage is its inflexibility. Life is unpredictable, and circumstances can change drastically after a divorce. If the payor’s income significantly decreases, or they lose their job or face a financial emergency, they are still legally bound to make the agreed-upon maintenance payments. The non-modifiable nature of contractual spousal maintenance means no room for modification, even in unforeseen financial hardships.

Likewise, if the recipient’s financial needs increase due to unforeseen circumstances such as a health crisis or job loss, they cannot ask for an increase in the agreed-upon spousal maintenance amount. This potential inability to meet increased financial needs can be a significant disadvantage, especially during economic uncertainty or personal hardship.

Moreover, the risk of non-payment is another potential downside. If the payor refuses or cannot make the payments, the recipient may need to go through expensive and time-consuming legal proceedings to enforce the agreement.

Finally, opting for contractual spousal maintenance locks the recipient into a set amount that may not keep pace with inflation or rising living costs, potentially eroding their purchasing power over time.

In short, while contractual spousal maintenance offers predictability and certainty, its rigid nature can also be a disadvantage when flexibility and adaptability to changing circumstances are required.

Modifiable Spousal Maintenance

Modifiable spousal maintenance is another option, allowing payments to be modified over time. This type of support is the opposite of contractual spousal maintenance. It means that either party can ask the court to change the payments if specific circumstances occur. For example, the receiving spouse may become financially self-sufficient, or the paying spouse’s income may decrease, making it difficult for them to continue making payments.

Modifiable spousal maintenance allows either spouse to request changes to the payment schedule based on their current circumstances. This option helps both parties avoid unnecessary stress that may come with rigid contractual agreements. It’s critical, however, to understand that the change will only occur after utilizing the legal system, which may take time and increase expenses for both parties.

Advantages of Modifiable Spousal Maintenance

Modifiable spousal maintenance offers its own set of advantages in the realm of post-divorce finances. On the forefront, it provides flexibility, its most prominent benefit. This type of spousal maintenance adapts to changing financial circumstances, ensuring the agreement remains fair and equitable for both parties over time.

When the payor’s income decreases significantly due to job loss or other unforeseen circumstances, they can petition the court to reduce their payment obligation. This could offer financial relief and prevent further hardship under challenging times.

On the flip side, if the receiving spouse’s financial needs increase due to factors like job loss, health issues, or other economic hardships, they too, can approach the court for an increase in the spousal maintenance payments. This flexibility provides an additional financial safety net during times of unexpected adversity.

Modifiable spousal maintenance also considers inflation and cost of living adjustments. Unlike contractual spousal maintenance where the amount is fixed and could potentially lose value over time due to inflation, modifiable spousal maintenance can be adjusted to keep pace with increasing costs, thereby preserving the recipient’s purchasing power.

However, it’s worth noting that while modifiable spousal maintenance offers flexibility and adaptability, it also introduces an element of unpredictability. It requires an ongoing willingness to negotiate and possibly involve the court, making it essential for both parties to weigh the advantages against the potential increase in legal costs and stress. The decision between contractual and modifiable spousal maintenance will ultimately depend on both parties’ unique circumstances and financial outlook.

Disadvantages of Modifiable Spousal Maintenance

While modifiable spousal maintenance offers financial adaptability, it has potential drawbacks. A primary concern is the element of economic uncertainty it introduces. Unlike contractual spousal maintenance, payments are not set in stone and can fluctuate over time, making it challenging for both parties to plan long-term finances.

Another disadvantage is the potential need for ongoing legal involvement. A receiving spouse is understandably reluctant to voluntarily agree to less support than initially agreed to no matter the legitimacy of the reason. To modify payments, individuals may need to make a case to the court, presenting evidence of a significant change in circumstances. This process can be both time-consuming and costly, requiring additional resources.

Additionally, the payor may perceive the possibility of an increase in payments as a disincentive for career progression. If their income increases significantly, they may face a concurrent rise in spousal maintenance payments, which could discourage them from seeking promotions or better-paying job opportunities.

For the recipient, the potential for decreased payments poses a risk. If the payor’s income reduces for any reason, the court may lower the maintenance payments, potentially leaving the recipient financially vulnerable.

Finally, modifiable spousal maintenance can strain the relationship between the ex-spouses due to the ongoing need for negotiation and potential court involvement. This can result in increased emotional stress and potentially impact any children involved.

In conclusion, while modifiable spousal maintenance provides a level of financial flexibility, it also introduces a degree of unpredictability and potential stress. Therefore, it’s essential for individuals to thoroughly consider these factors and consult with a knowledgeable family law attorney when deciding between contractual and modifiable spousal maintenance.

Which Option Is Right for You?

Determining whether contractual or modifiable spousal maintenance is proper for you is a personal decision that should be considered carefully. The right option will depend on your unique circumstances.

For instance, if you and your spouse can agree on the terms of the agreement, then contractual spousal maintenance may be the right option for you. It provides certainty and peace of mind for both parties. However, if there is uncertainty regarding future financial circumstances, such as job security or health issues, modifiable spousal maintenance may be a more appropriate choice.

It’s essential to consult with a family law attorney to determine which spousal maintenance option is best for your situation. An attorney with experience in Colorado divorce settlement cases can help you understand the pros and cons of each option and guide you through the decision-making process.

Conclusion

Spousal maintenance is a critical issue in any divorce settlement. Whether you choose contractual or modifiable spousal maintenance depends on several factors such as financial circumstances, job security, future uncertainties, and many others. Working with an experienced Colorado spousal support attorney who can help you understand your options and choose the best one for your situation is crucial.

If you have questions about contractual or modifiable spousal maintenance or other areas of law during a divorce in Colorado, you can find our family law attorneys at www.kalamaya.law or 970-315-2365.