How much will Rupert Murdoch, the billionaire chairman of News Corp., and Wendi Deng have to pay for their divorce? A significant sum, no doubt, but chances are pretty good that they’ll be able to weather the financial storm.
Many divorcing spouses have a tougher time of it. Those amicable enough to use mediators, collaborative lawyers or even do-it-yourself forms can dissolve their marriages for no more than a few thousand dollars. But when terms are contested, bills in the United States typically run $15,000 to $35,000.
The high costs of figuring out a financial settlement were emphasized in a new analysis by a New York state commission on divorce policy. Not surprisingly, the commission found that squabbling over spousal support, in particular, increases the cost of divorce. Because judges handle awards inconsistently and unpredictably, divorcing couples are easily frustrated and discouraged from settling, further driving up legal expenses.
So what can be done?
One idea is to establish a consistent formula for spousal support — at least for couples in fairly ordinary financial circumstances. A bill before the New York Legislature would make the state the first to apply a formula to post-divorce alimony.
The formula proposed in New York ensures that a spouse pays alimony only if he or she is a much higher earner. It takes into account the difference between the two spouses’ incomes and ensures that the payee doesn’t end up earning more (or even as much as) the payer.
A formula can enable low-income spouses to win awards they could not have afforded to litigate. It doesn’t work so well, however, for affluent couples with complicated sources of income. In such cases, the equation can lead to a payment level that seems unfair to one of the spouses, who ends up pursuing even more litigation to seek an exemption from it. For this reason, it’s worth putting in place caps under which the formula is applied — something that has been done with child-support.
The New York bill is a smart step that we hope will inspire other states to adopt standard, predictable alimony calculations.
Bloomberg News (June 19)