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Question: How Can I Split Spousal Support Savings Between the Parties?
Answer: The first thing to do is to answer the question, "spousal support savings compared to what?"
For this example, we will examine how to split the spousal support savings compared to an "all child support" scenario.
1. Using the Spousal Support What-If screen, you can see the After-Tax Cash of both parties in the "base case," where all the payment is child support and none is spousal support.
2. Now create another column and enter the same amount, but all spousal support with none as child support.
3. You will see, in most cases, that the payer is better off and the recipient is worse off.
4. Now, increase the spousal support amount by the recipient's gap, to "make the recipient whole." You will have to increase the spousal support by a bit more than the initial gap, because the recipient will lose some of the increase because the spousal support the recipient receives is taxable.
5. You are now at a position where the reicpient is as well of as s/he was under the "all child support" case. But the payer is better off.
6. Now, you can increase spousal support still further. With one additional dollar of spousal support, the recipient will be better off than with all child support, and the payer will still be better off. You can keep increasing spousal support for awhile.
7. As you increase spousal support, you will eventually reach a point where both spouses are better of by the same amount, compared with the base case of all child support. Your goal has been reached.
8. We have been considering a one-year time frame. But you can consider a multi-year time frame by totaling the after-tax cash for each party for all years under consideration. Build the total first for the "all child support" base case. Then build the total for each trial spousal support case. Using those totals as you go through this procedure. It takes a bit more time to use totals over several years, but it may be more worthwhile to the parties. Note that you may export the screen to Excel, and use Excel to total up the columns for you.