The gig economy has grown by a whopping 33% since 2020. At least 16% of Americans have used Upwork, Fiverr, or a similar online platform in the last year. While there are several upsides to freelancing, remote work, and side hustles, but the gig economy also poses new complexities and challenges for divorcing couples.
You should consult with an established divorce attorney in Alabama if you are unsure about calculating an accurate spousal support or child support amount or need help with property division and other financial matters related to your divorce.
Calculating Alimony and Child Support for Gig Economy-Based Divorcing Couples in Alabama
One of the spouses is usually entitled to alimony or spousal support during a divorce, especially where one spouse makes far less money as compared to the other. Alimony is calculated on the basis of a spouse’s ability and need to pay.
It’s easy to calculate the ability to pay when a spouse has a longstanding career and receives W-2. The court can easily determine what an individual has earned and predict the earning potential when they have received relatively the same amount each year.
Based on this, things become difficult when one or both spouses are gig workers. Income can drastically fluctuate on a yearly or seasonal basis for gig workers.
This makes it difficult to determine the appropriate amount of alimony. In addition, alimony and child support are usually calculated during divorce proceedings, which remains the same for the duration awarded. This clearly presents challenges in the case of someone employed in the gig industry.
There are several factors that need to be considered when an individual is employed in the gig economy – availability of projects and estimated income from the projects. While alimony can be modified with changes in financial circumstances, it requires additional litigation expenses and attorney’s fees.
A proven divorce attorney will consider other major factors such as the lack of benefits in the gig economy. W-2 employees are typically awarded several benefits in the form of life insurance, health insurance, dental insurance, and retirement account contributions.
Gig workers are required to dip into their profits to pay for insurance and save for retirement. This can cause additional complications when calculating spousal support. Gig workers also find it easier to conceal income from their spouses.
Difficulties in Enforcing Child Support for Gig Workers
The issue gets more complicated when kids are involved. The same challenges of calculating spousal support are present while calculating child support. In addition, enforcement of child support can get difficult once the amount is calculated.
For instance, a person with a regular job can have their paycheck garnished if they fail to pay child support. This is not possible in the gig economy since the parent doesn’t really receive a paycheck.
Even where the independent contractor gets steady work and consistent paychecks, the hirer may not be made responsible for withholding payments for missed child support checks. Furthermore, it’s always easier for independent contractors and gig workers to conceal income. You should know that enforcement will also likely call for additional litigation expenses and attorney’s fees.
Importance of Prenuptial Agreements in a Gig Economy
There are several steps you can take to avoid these divorce pitfalls. Prenuptial agreements allow you and your fiancé to make decisions regarding divorce in advance.
It’s wise to sort out financial considerations before the breakdown of a relationship. The peace of mind you will get from having a signed prenup is priceless. And, it can be especially helpful in the case of individuals working in the gig sector without any permanent income stream.
You and your partner can easily use the prenuptial agreement to make decisions regarding the alimony in case the marriage hits a rough patch and breaks down. You can choose to completely eliminate or limit the alimony. This way you and your partner can keep clear expectations. Prenups are helpful when it comes to making calculations in the event of a divorce.
Prenups provide numerous options – you can set alimony caps or decide that there will be no spousal support until at least 20 years of marriage, among other things. You can also make room for sunset provisions that allow the renegotiation of alimony down the road.
In addition, you can make arrangements for property division for ensuring the potential split is fair and amicable. This can be useful in the case of an independent contractor or gig worker with a highly fluctuating income.
It’s critical to comprehend that while prenuptial agreements can be used for alimony and spousal support, you cannot include any child support provisions in them. Divorce attorneys frequently work with financial advisors, business valuators, and accountants to calculate income and shed light on an individual’s financial needs where the gig industry is concerned.
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