Rolling Meadows alimony attorney tax issuesGetting divorced may be the right move for the health and happiness of both spouses, but financially, this decision can be devastating. The divorce process itself is expensive for many couples, and rearranging finances after years of sharing responsibility is no easy task. Making this transition is extremely difficult for all spouses, but those facing financial disadvantages are at risk of suffering irreparable fiscal damage by leaving the marriage. Spouses in this situation may have the option of asking for spousal maintenance (formerly known as alimony) from the other spouse if his or her financial means are more lucrative and stable.

Spouses who are returning to work after years or decades of absence will likely struggle to maintain an acceptable standard of living post-divorce, and decisions about spousal maintenance are frequently settled via negotiation or mediation. However, resolving this matter is about to get much more complicated and volatile, as a new tax law goes into effect on January 1, 2019, that will completely upend the treatment of spousal support. This change will greatly disincentivize a paying spouse from agreeing to this support, and it will greatly increase the likelihood of litigation to determine whether alimony will be required. 

Tax Changes

Paying spousal maintenance is a significant financial burden for most people. Under the current tax laws, a person may deduct alimony payments from their federal income taxes, thereby reducing the payor’s overall tax liability. The former spouse receiving spousal support is currently required to report this money as income.

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Inverness spousal support attorneyAnyone who is currently paying alimony (legally referred to as spousal maintenance in Illinois) or considering this issue in the midst of divorce is likely aware that as of 2019, the tax rules for this obligation will change dramatically. Currently, the payor receives a deduction for this expense, and the recipient is required to report the payments they receive as taxable income. This arrangement relieves some of the financial burden this support can cause, which can serve to facilitate divorce settlement negotiations. However, under the recent federal tax reform laws, both the ability to deduct alimony and the need to report it as income will be eliminated for any divorce finalized on or after January 1, 2019.

Legal and financial analysts worry that this change will drastically increase the amount of conflict between spouses and greatly deter the payor spouse from agreeing to any type of ongoing spousal support. Recognizing the significant issues this change will introduce into the divorce process, Illinois lawmakers passed a new law this year that allows for adjustments to modification awards in hopes of making the transition under the new tax law easier. A discussion of the changes in Illinois alimony law will follow below.

New Baseline Spousal Maintenance Formula

Alimony is always a contentious issue in divorce, as the spouse asked to pay rarely has any desire to support an ex-partner once the relationship is severed. Further, unlike child support, which is the legal right a child holds until adulthood, alimony is essentially discretionary, and courts must determine if such support is appropriate before moving forward. To make this assessment, a long list of factors must be evaluated, and if the request is granted, the amount and duration of spousal support must be calculated.

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Posted on in Spousal Support

Hoffman Estates family law attorney, enforcing alimony, maintenance payments, Illinois spousal support, divorce and financesFormer spouses who receive alimony, or maintenance, are often cast by society as greedy and lazy, using this support to avoid becoming employed and self-sufficient. What many people fail to understand is that alimony is rarely a permanent form of financial assistance, and the vast majority of recipients need that money in the short-term to get their lives in order after a divorce. Recipients count on this money as a major part of meeting financial obligations, and suffer huge detriments when it is not paid.

Payors sometimes feel resentful over this obligation, and some choose to sidestep the responsibility by failing to pay the required amount. Alimony awards are legally enforceable, and the party denied rightful payment has the ability to petition a Court to force compliance. Usually, any penalties associated with violations are limited to additional financial outlay; however, in more extreme cases, criminal charges are possible.

The former head of the Chicago Board of Trade, Patrick Arbor, fled the country five months ago to avoid paying the alimony and property settlement award ordered in a divorce from his wife of 17 years, and was recently arrested by Boston Police when he re-entered the country, though quickly released when Illinois authorities declined to extradite him. While the circumstances of this case are somewhat outside the norm, it does illustrate seriousness of flouting Court-ordered obligations.

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Inverness family law attorney, unemployed parents, underemployed parents, child support payments, parental responsibilitiesRaising a child requires a parent to dedicate a large portion of his or her resources to adequately provide for the child's welfare, not least of which is a large financial obligation. Both parents are supposed to share this responsibility. However, this mutual obligation can become a point of contention between divorced and separated parents.

Child support is a Court-ordered duty to pay a set amount for a child's needs that is most commonly issued when parents get divorced or file a paternity a claim against a former partner. Typically, the legal process used to settle child support and custody claims are handled exactly the same, regardless of the marital status of the parties. Until earlier this year, however, Cook County had separate courtrooms for married and single parents. These facilities, which some claimed were dilapidated and imposed an unfair bias on unmarried parties, were shut down in February.

Apart from procedural issues, parents generally tend to disagree about how much money is being paid as well as how the funds are being used. Still, legitimate concerns can arise about a parent's ability to pay anything at all when he or she is under- or unemployed for significant periods of time.

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Barrington family law attorney, spousal maintenance awardsTransitioning from a two-income household down to one, following divorce, is a large adjustment for most individuals. In most instances, though, each party is able to financially support himself or herself, excluding child support, without contribution from the former spouse. However, maintenance, or spousal support, is sometimes necessary to sustain a former spouse while he or she, for example, gains new skills or training to make him or her more employable.

Illinois amended the laws on spousal maintenance in 2015 to make these awards more predictable by removing any subjectivity on the amount and duration of the maintenance obligation — although, a Court's obligation to first determine if maintenance is appropriate remains the same. A set formula now determines how much and for how long maintenance awards will be, and only marriages of 20 years or more are eligible for permanent maintenance, which is left to the Court's discretion to decide.

However, even though maintenance awards are easier to predict under the new provisions, changes may occur once the Court order is in place that justify a modification or cancellation. Someone subject to pay maintenance should not be locked into this obligation if circumstances make this arrangement untenable or unfair.

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