Our Alimony Lawyers Know Financial Issues are of Great Importance in a Divorce
Financial disputes, especially those involving spousal support or maintenance, often lead to prolonged and contentious divorce proceedings. The issue is particularly vital, as divorcing spouses have to support two households on income that previously supported one. Alimony is not required, but may be appropriate under various circumstances, and spouses contemplating divorce need to determine whether it makes sense to pursue an alimony award and how it will affect their and their children’s financial future.
To complicate the situation, both federal laws regarding how spousal support is to be handled tax-wise and Illinois laws regarding spousal support keep changing. Since the laws and their changes can be confusing, stakes are high and affect your lifestyle and finances for years, and making mistakes can be costly, it makes sense for divorcing spouses to seek guidance from an experienced Illinois divorce attorney.
The seasoned and compassionate Illinois family law attorneys at Wolfe & Stec, Ltd., have extensive experience representing spouses in determining spousal support. Our attorneys are thorough and hard-hitting in protecting our clients’ financial interests, but still attempt to preserve relationships for divorcing couples co-parenting children. Whether you are seeking or opposing alimony in your divorce, we will work diligently to get the best outcome possible. For a free initial consultation with a knowledgeable DuPage County spousal support lawyer, call our offices today.
Alimony is based on need and is gender neutral, so both women and men may be eligible to receive it. It is desirable for both spouses to continue living at a standard that is similar to what they enjoyed while they were married. However, many spouses are not able to do so, often because they stayed home or worked part-time to take care of family, or they took lesser jobs to help their spouse’s career advancement.
The purpose of spousal maintenance is to help the lower-earning spouse to manage financially and live in similar circumstances as when married. However, in general, the supported spouse is expected to eventually become self-supporting and no longer need maintenance.
Going through a divorce is an upsetting and life-changing experience, so it’s natural for divorcing spouses to have questions and concerns. The following are answers to questions our alimony lawyers are often asked:
In the past, there were no clear guidelines that dictated the calculation of spousal support, and judges had discretion in determining amounts and duration. This changed on July 1, 2015, and then again with the new revisions to the Illinois Marriage and Dissolution of Marriage Act (the “Act”) which took effect on January 1, 2019. Under the revised law, there are four primary types of alimony that may be available in a divorce:
1. Temporary Alimony
Temporary alimony (also called “temporary maintenance”) is financial support awarded to one spouse during the time the divorce is pending. It ends once the divorce becomes final. The purpose is to cover the recipient’s living expenses during the divorce process, usually when the spouses have decided to live separately during this time. If you should be entitled to temporary alimony, our attorneys will request it in your initial divorce filing, although it is possible to submit a request later in the divorce proceedings if necessary.
2. Fixed-Term Alimony
Fixed-term alimony is alimony awarded for a set period of time, usually to allow the recipient to become financially self-supporting. Fixed-term alimony will most-often be appropriate in situations where:
3. Reviewable Alimony
Reviewable alimony is not awarded for a specific duration. Instead, payments are periodically reviewed by the court review, and their renewal is generally contingent upon the recipient’s making good-faith efforts to become self-supporting. Reviewable alimony may be appropriate in circumstances where:
4. Permanent Alimony (Indefinite Alimony)
Permanent or indefinite alimony is financial support that is awarded for the remainder of the recipient’s lifetime. It is available only in divorces involving marriages that were 20 years in duration or longer. In this situation, the court, at its discretion, orders either permanent maintenance or maintenance for a period equal to the length of the marriage. However, there are still circumstances under which permanent alimony may be terminated.
In determining amount of alimony, Illinois courts (and divorcing spouses negotiating the terms of their divorce out of court) must examine factors including the spouses’ individual and combined net annual income, child support payment obligations, and alimony payment obligations from prior marriages (if any).
The formula for maintenance for divorces after 2019 is as follows: (33% of the payor’s net income) – (25% of the recipient’s net income) = the yearly maintenance paid. This amount is divided into 12 monthly payments.
The amount awarded cannot cause the receiving spouse to earn more than 40% of the couple’s combined net income. However, if the amount of maintenance is more than 40% of the couple’s combined gross income, the judge will again determine maintenance.
One of the provisions of the new Tax Cuts and Jobs Act removes the 75-year-old tax deduction for people making alimony payments. The new rules do not affect people who divorced or signed a separation agreement before 2019, but if a couple’s circumstances change, the alimony situation can be readdressed and the new laws may come into play.
In divorces settled prior to Jan. 1, 2019, the payors were able to deduct payments from their taxable income and recipients were required to report the support as income. For divorces settled on or after Jan. 1, 2019, payors can no longer deduct the payments on their income tax returns. Also, payments are no longer to be considered income for tax purposes. The spouse receiving the alimony receives it tax-free, the same as money paid for child support. This means the new law benefits people receiving spousal support in most cases.
If you are a payor and withdraw money from your IRA to make alimony payments, you may have a tax advantage. This is because the IRS doesn’t tax such funds upon withdrawal, according to the new tax code.
However, the law restricts how people receiving alimony can save for retirement, since you cannot invest alimony payments into an IRA. As a result, people who rely entirely on alimony payments for income might have challenges saving for retirement.
Divorce and support negotiations are traumatic enough under the best of circumstances, and changes in the law can make your situation even more stressful. The compassionate and experienced Illinois divorce attorneys at Wolfe & Stec, Ltd., understand the pressures of divorce and recognize the concerns you have for your future and that of your children. We know the laws, the tax codes, the courts and the system and can guide you through the process. We represent and advise clients in all types of divorce matters and have a long history of success.
If you have questions about spousal support or any other family-law issue, we offer a free initial consultation to examine your individual situation and help come up with solutions that are best for you and your family.