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Tag Archives: alimony

Wheaton alimony attorneysAt the start of 2019, the federal government eliminated the 70-year-old tax deduction associated with alimony payments. For receiving spouses, it may seem beneficial to no longer have to claim alimony payments as income, but the change actually leaves less money for the entire family. That is because paying spouses, who remain at the same tax bracket, may need to decrease their support amount to balance out their financial obligations. Thankfully, there are some alternative strategies that families can use to preserve their wealth after a divorce. 

Trading Alimony Payments for a Transference of Retirement Funds 

Depending on the ages of the divorcing parties, a transference of retirement funds may be preferable to alimony payments. In this option, the paying spouse makes a tax-free exchange of money by directing some of their retirement funds to the lower-earning spouse. The receiving spouse may also withdraw from the amount without tax penalty, so long as they are age 59.5 or older. If the receiving party has not yet surpassed the age threshold, divorcing parties may want to consider another alternative, as the 10 percent early withdrawal penalty may outweigh any potential benefits for the family unit. 

Using a Trust Account in Lieu of Alimony Payments 

Another potentially viable alternative to alimony payments is the use of a trust account. The most commonly used versions are the CRT (charitable remainder trust), QTIP (Qualified Terminable Interest Trust), ILIT (Life Insurance Trust), and Alimony Trusts. 

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DuPage County divorce lawyersChild support and alimony are often awarded to one of the spouses in a divorce, but not in every case. How do you determine if you may be eligible for these types of post-divorce support, and what can you do to ensure you receive the most amount possible? The following explains. 

Alimony Considerations in an Illinois Divorce 

Before a judge will award you alimony, you must be determined eligible, which generally requires that you be “disadvantaged” in some way. Examples of situations that may deem you “disadvantaged” in a divorce include:

  • A physical, mental, or emotional condition that prevents you from working;
  • A lack of education, skills, or recent work experience you need to obtain gainful employment;
  • Serving as a caregiver during your marriage (either to your children or your spouse); or
  • Supporting your spouse while they further their career or education (especially if it impacted you financially). 

If you are deemed eligible, a formula will be applied to your situation to determine your alimony entitlement and time-frame. The longer you were married, and the greater your spouse’s income, the greater your entitlement is likely to be in an Illinois divorce. 

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Wheaton divorce lawyersFamily structure has changed drastically over the last couple of decades, with many wives now serving as the sole or primary breadwinner. Unfortunately, studies have found that divorce is more likely to occur if the wife is the only one working, and now a new research project suggests that divorce risks are still greater when the husband works but earns less than the wife. So, what happens when a couple goes through a divorce and their familial structure is different from the typical but outdated societal norms? Learn more in the following sections. 

Division of Assets with Women as the Primary or Sole Breadwinner 

In many ways, the process of divorce does not change, simply because the wife is the sole or primary breadwinner. Debts and assets are calculated to determine the value of the marital estate, and the estate is then divided equitably between the divorcing parties. Yet, because of social issues - particularly those involving lower wages for women - the financial stability of a woman may be even more threatened than a man’s after the division of assets in a divorce. Additionally, you may be ordered to pay alimony to your spouse, which only increases your risk of financial issues after the divorce. For this reason, it is critical that wage-earning women have a seasoned divorce lawyer on their side, protecting their financial interests during the entire divorce process. 

Child-Related Matters with Women as the Primary or Sole Breadwinner

Matters pertaining to children, like parenting time and the allocation of parental responsibilities are not determined by money. Yet, because work may limit the amount of time that you have to spend with your child, you may receive a lower allocation of your child’s time in a divorce decree. Combat such issues by first finding ways to free up your time. Can you cut back on working hours or rearrange them so that you are free to spend time with your child more often? Is there a way that you can telecommute, at least for some your working hours? Also, remember that you may be required to pay child support if there is a large enough disparity in income. 

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DuPage County divorce attorneysStatistics indicate that the divorce rate has been on the decline for nearly every age group - but for those nearing retirement age, the rate has nearly doubled in the past decade. This phenomenon, dubbed the “grey divorce” wave, is not specific to the United States either; the United Kingdom, Australia, and other developed nations are seeing rising rates of late-life divorces as well. 

Examining the Gray Divorce Trend 

Researchers and analysts say the rate of late-in-life divorce has started to climb over the last decade because many couples in the Baby Boomer generation had either put off or not previously considered divorce. Divorce was more than just socially discouraged back then; it was thought to be inherently bad for children. Of course, we now know that the impact of divorce may vary, based on a variety of factors (i.e. the amount of parental conflict and the level of involvement that each parent has in the life of the child after the divorce, etc.), but parents from the Baby Boomer generation did not have this same information. 

Now, with their children raised, many are realizing that they still have a life to live - and they no longer want to spend it with their spouse. Sadly, the decision to divorce so late in life is creating some unique challenges for this American demographic group. 

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DuPage County spousal maintenance lawyer tax lawsNew tax laws that went into effect for this year have brought about quite a few changes. One major change, which could be bad news for those who are currently in the process of divorce, is that alimony (known as spousal maintenance under Illinois law) is no longer tax-deductible for those who pay it, and it will not be considered taxable income for those who receive it. This may be a major loss for people who are required to pay a large amount of alimony.

The 2018 Tax Cuts and Jobs Act (TCJA) is in effect now, and it applies to any divorce cases finalized after December 31, 2018. Therefore, going forward, any divorce that includes spousal maintenance will follow the new rules. Pre-2019 divorcees, however, may still qualify for the old rules.

Payors: Does Your Pre-2019 Agreement Meet Requirements for Tax-Deductible Alimony?

Many factors go into determining whether you can still deduct your spousal support payments from your taxes, including, but not limited to the following: 

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Abraham Lincoln A lawyer’s time and advice are his stock and trade. -Abraham Lincoln
Davi Law Group, LLC handles family law, estate planning and real estate matters for clients in Chicago and throughout the western suburbs including DuPage County, Will County, Kane County, Kendall County and Cook County and the cities of Aurora, Bloomingdale, Bolingbrook, Carol Stream, Darien, Downers Grove, Elmhurst, Geneva, Glen Ellyn, Hinsdale, Joliet, Kendall County, Lisle, Lombard, Naperville, Oak Park, Oak Brook, Oswego, Park Ridge, Roselle, St. Charles, Villa Park, Warrenville, Wheaton, Winfield, Woodridge and Yorkville, Illinois.
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