Tag Archives: maintenance

How Have Divorce Cases Changed Without the Alimony Tax Deduction?

Wheaton spousal maintenance lawyerOn January 1, 2019, a provision of the federal Tax Cuts and Jobs Act of 2017 went into effect that will impact divorce cases going forward. This law eliminated the tax deduction for spousal support in divorces finalized on or after that date. The effects of this change to the law are still being felt, and many long-term results have yet to be seen. In many cases, it has required people on both sides of a divorce involving spousal maintenance to be more savvy and resourceful when it comes to reaching a settlement.

How Has the New Law Affected Taxes on Spousal Maintenance?

For many years, maintenance (which is also referred to as spousal support or alimony) was taxed as follows:

  • The spouse paying maintenance would be able to deduct the amount of support payments from his or her taxable income.
  • The spouse receiving maintenance would pay income taxes on the support payments.

Under the new law, there is no tax deduction for the payor of spousal support and no tax on these payments for the recipient. However, this change only applies to divorces that were completed after December 31, 2018. For divorces finalized on or before that date, spousal maintenance will continue to be taxed as it had been previously. In other words, the new law taxes spousal support payments in divorces completed in 2019 or later the same as child support payments.

Strategies Being Employed Under the New Tax Law

While some may see this change in the law as a substantial hindrance to those who pay spousal maintenance and a benefit to those who receive spousal support, the truth is that it may result in lower alimony payments and financial issues for both parties. Without the ability to deduct maintenance payments, a payor may be in a higher tax bracket, leaving them with less overall income to put toward support. Because of this, both parties in many divorce cases may be less willing to negotiate and agree on spousal maintenance payments.

To address these concerns, some divorcing spouses are getting much more creative and resourceful about how they reach spousal support agreements. In many cases, spouses are figuring out ways to reach fair divorce settlements without having the payments made by one party to the other be considered spousal maintenance that is subject to tax guidelines. Some strategies that people may use to lessen the effects of the new law include:

  • Funding alimony through pre-tax retirement accounts
  • Setting up a trust
  • Allocating more marital property through investments

Contact a DuPage County Alimony Lawyer

Changes to the tax laws can have a significant effect on your divorce, and you should be sure to understand the best ways to address these issues and reach a settlement that will meet your ongoing needs. At the Andrew Cores Family Law Group, our Wheaton divorce attorneys can help you determine how to protect your financial interests and ensure that you will be prepared for success as you move on from the end of your marriage. Reach out to us at 630-871-1002 for a complimentary consultation.

Sources:

https://www.isba.org/ibj/2018/12/breakingupishardertodo

https://www.marketwatch.com/story/new-tax-law-eliminates-alimony-deductions-but-not-for-everybody-2018-01-23

https://www.forbes.com/sites/heatherlocus/2019/07/12/minimizing-taxes-in-divorce-without-the-alimony-deduction/#77d7cfa78344

https://www.cnbc.com/2018/12/18/this-checklist-can-help-you-manage-your-divorce-after-new-alimony-tax-rules-go-into-effect.html

What Factors Are Considered When Determining Alimony in Illinois?

DuPage County spousal support lawyerAlimony, also called spousal support or maintenance, is a payment from the higher-earning spouse to the lower-earning spouse during divorce or after the divorce has been finalized. There are various forms of spousal support, and these may be awarded based on the needs of the lower-earning spouse and the means of the higher-earning spouse to pay. A few examples of types of spousal support include reimbursement alimony, lump-sum alimony, rehabilitative alimony for vocational training or education, temporary alimony paid during the divorce, and permanent alimony.

In most cases, alimony is not permanent; instead, it is set for a specified length of time and, after that time period ends, the payments will cease. As a potential paying spouse or receiving spouse, you likely have questions about how the court makes a decision about alimony, or how both parties may reach a mutual decision about alimony outside of the courtroom. A skilled DuPage County spousal support attorney can provide all the details you need to know and assist you in reaching an outcome that provides for your financial needs.

How The Court Awards Alimony

According to Illinois statute 750 ILCS 5/504, the following factors are used to determine whether maintenance is appropriate:

  • The income and property of each party
  • The needs of each party
  • The future earning capacity of each party
  • Any potential impairment of the spouse seeking alimony
  • The time necessary for the alimony-seeking spouse to acquire training, education, employment, etc.
  • The standard of living established during the marriage
  • The length of the marriage
  • The age, health, occupation, vocational skills, etc. of each party
  • Other forms of income earned by each party, such as disability
  • The tax consequences of alimony payments for each party
  • Any contributions and services made by the spouse seeking alimony on behalf of the higher earning spouse, such as career advancement and homemaking
  • Any other relevant factors

If the court determines that an alimony award is appropriate, statutory guidelines will be used to determine the amount and duration of spousal maintenance payments. The amount of payments will be based on the income earned by both parties, and the length of time payments will be made will be based on the length of the marriage. However, if the spouses earn a combined gross annual income of $500,000 or more, the court may deviate from these guidelines and award maintenance that it believes is appropriate.

Does the Spouses’ Sex Have Anything to Do With Alimony?

Alimony should never be awarded based on the sex of divorcing spouses. However, middle-aged, married men with at least a high school diploma earn, on average, over $80,000 per year. Married women of the same age earn, on average, roughly $50,000 per year, which is a 40 percent difference. As such, men are more likely to pay spousal support than women. This is a generalization, not a rule; 38 percent of wives earn more than their husbands. In these cases, alimony may be awarded to the husband.

Our DuPage County Alimony Lawyers Can Help

Spousal support is a powerful tool that can provide a lower-earning spouse with a means to education and allow them to maintain the standard of living they have grown accustomed to. On the other hand, as a paying spouse, you likely want to limit the impact that alimony payments will have on your own financial well-being. In either case, the skilled Wheaton spousal support attorneys at Andrew Cores Family Law Group can advocate for your interests and help you reach a positive outcome to your divorce. Call us today at 630-871-1002 to schedule a free consultation.

Sources:

http://www.ilga.gov/legislation/ilcs/documents/075000050k504.htm

https://www.marketwatch.com/story/married-men-earn-more-than-single-or-married-women-and-single-men-2018-09-19

Am I Entitled to Long-Term Spousal Support after My Divorce?

support, Wheaton divorce lawyersUnder the law in Illinois, children have to right to expect financial support from both parents, regardless of the adults’ marital situation. The same is not true, however, for divorcing spouses. While there may be situations in which long-term spousal maintenance is appropriate, there is no inherent assumption that it will be granted. Instead, in the absence of an agreement either at the time of divorce or prior, such as a prenuptial agreement, the court will examine the applicable circumstances and decide if an order for spousal support is necessary.

Negotiated Maintenance and Prenuptial Agreements

Most aspects of divorce can be settled fairly amicably through the process of negotiation. You and your spouse may be able to reach an agreement regarding spousal support with an arrangement that works for your particular situation. Spousal maintenance provisions can also be included in a prenuptial agreement, created prior to your marriage. As long as such agreements are workable and relatively fair, they are likely to be accepted by the court.

Court-Ordered Maintenance

When you and your spouse cannot reach an agreement regarding support, the court will review the circumstances of your marriage and divorce. It will be up to the judge to decide whether or not to award spousal maintenance, and to determine the amount to be paid based upon provisions in the law. The court is expected to take into account:

  • The income and property of each spouse, including the portion of the marital estate each is receiving and the resulting tax consequences;
  • The needs of each spouse;
  • The current and anticipated earning capacity of each spouse;
  • The impact on each spouse’s earning capacity based on roles in the marriage and family;
  • The standard of living established in the marriage;
  • The length of the marriage;
  • The age and health of each spouse;
  • The contributions of the spouse seeking maintenance toward the other spouse’s earning capacity;
  • The time necessary for the spouse seeking maintenance to become self-sufficient, if even possible; and
  • Any other factors deemed to be just and equitable.

If the court determines that maintenance is appropriate, the law provides a formula for calculating the recommended amount and duration of the award for most cases. The court may deviate from the formula, however, based on findings of fact related to the individual couple’s situation.

There are a large number of factors that could impact your requirement to pay spousal support or your eligibility to receive it, and an experienced DuPage County family law attorney can help you navigate the process. Contact the Andrew Cores Family Law Group today to schedule your free initial consultation and get the answers you need to whatever questions you may have. Call 630-871-1002 for an appointment.

 

Source:

http://www.ilga.gov/legislation/ilcs/ilcs4.asp?DocName=075000050HPt%2E+V&ActID=2086&ChapterID=59&SeqStart=6100000&SeqEnd=8350000