The Eight Requirements for Qualified Alimony: Part Five

Part Five: The instrument does not state that the obligation to make the payments continues after the payee-spouse’s death.

Alimony or separate maintenance payments are included in the gross income of the payee spouse and allowed as deduction from the gross income of the payor spouse.

A payment under a divorce or separation agreement executed or modified after 1984 qualifies as alimony if:

  • For alimony payments to be deductible, the payor-spouse must not be required to continue payments after the death of the payee-spouse; or make a payment (in cash or property) as a substitution for payment after the death of the payee-spouse.
  • Agreements: The absence of an express statement in the final divorce decree terminating alimony at the recipient’s death, though not required by statute or regulations, may open the door property settlement treatment of the payments. However, Minnesota State law covers this issue by stating that “unless otherwise agreed in writing or expressly provided in the decree, the obligation to pay future maintenance is terminated upon the death of either party or the marriage of the party receiving maintenance.
  • Death of Payor-Spouse: When an agreement or decree requires the estate of the payor-spouse to continue to make payments to the surviving payee-spouse, the estate cannot take a deduction for the payments under the alimony rules. The deduction is allowed only to the obligor spouse and not the estate or any other person who pays the alimony obligation. However, the estate can deduct the payments under the income tax rules for estates and trusts. The payments by the estate, whether paid out of its income or capital, are included in the surviving spouse’s gross income.