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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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Illinois alimony attorneysAlimony, otherwise known as spousal maintenance, is not routinely awarded in Illinois. However, it is an element in some divorce cases. Learn how determinations regarding alimony are made, including how long you can expect to receive payments, and discover how a seasoned divorce lawyer can help you pursue the most favorable outcome in your case. 

Illinois’ Statutory Guidelines on Alimony 

Most of the time, family courts use a set of statutory guidelines to determine the amount and duration of alimony payments. While the court may deviate from these rules, they must either provide a valid reason for doing so, or the combined annual income of the parties must amount to more than $500,000. In those instances, the court may weigh several factors to determine the amount and duration of alimony payments (i.e. the length of the marriage, contributions of each party to the marital estate, ability to work, education, etc.). Otherwise, an alimony award is usually determined using a two-step process. 

  • The amount of alimony to be paid each year is determined by subtracting 20 percent of the receiving spouse’s gross income from 30 percent of the paying party’s gross income. 
  • The duration that alimony should be paid is determined by multiplying the years of marriage by a specific percentage (based on the number of years the parties were married). The product of the equation is the number of years that alimony will be paid. 

In 2018, the courts changed the multiplying factors used to determine the duration of spousal support, which has resulted in some parties receiving alimony for a shorter amount of time. These new percentages are as follows: 

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Illinois family law attorneysIf you signed a prenuptial agreement before the start of your marriage, you are among the small percentage of couples that decided to “insure” your assets against the devastating effects of a nasty divorce. However, a new tax law may now require you to reexamine (and potentially make changes to) your current agreement. Learn more in the following sections, including how our seasoned divorce lawyers can assist you with the process. 

How the New Tax Law May Affect the Provisions of Your Prenuptial Agreement 

If your prenuptial agreement includes a provision for alimony, you may need to reexamine it, as the new tax law changes how alimony is handled after a divorce. Though alimony was once considered a deduction that payers could claim to lower their tax load at the end of the year, it will become nothing more than an added expense in divorces that occur after December 31, 2018, as the new law eliminates it as a deduction. Since the paying spouse is typically in a higher tax bracket than the receiving spouse, this change may leave less money for the family unit.

Reexamining your prenuptial agreement can help you determine if alimony is still a useful tool in the event of a divorce. However, you will want to do this with the assistance of a seasoned family law attorney, as they typically have an in-depth understanding of how the law applies to prenuptial agreements and divorce. Moreover, an attorney can help you strategize other possible provisions that can better protect your assets if alimony is determined to be an unfavorable one. 

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Wheaton alimony lawyersMoney is often one of the leading sources of contention during a divorce, and it is about to get worse, thanks to the new tax law regarding alimony payments. Set to take effect on January 1, 2019, this new law will eliminate the tax credit that paying parties used to receive at the end of the year. Learn what this could mean for your Illinois divorce, and discover how a seasoned divorce lawyer may be able to help you mitigate the potential risks and issues that could arise. 

A Closer Look at the New Alimony Tax Law

In previous divorces, and those completed before January 1, 2019, alimony payers receive a tax credit at the end of each tax year. The receiving party is also required to report their alimony payments as income to the Internal Revenue Service (IRS). Both of these aspects of divorce will be changing at the beginning of next year. That means there will no longer be an incentive for paying alimony, and fewer parties will be willing to pay it. That can hinder the financial well-being of receiving parties, as well as the paying parties, perhaps even more so than many realize. It can also make for more contentious divorces, and that can increase the stress levels of all involved parties - especially any minor children that the couple may share. 

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Wheaton divorce lawyersWhen one party is severely disadvantaged in a broken marriage, it can feel like an excuse to stay. Yet, unbeknownst to some, it is not necessary to do this. Instead, it may be possible for a party to obtain child support and/or alimony before a divorce has been completely finalized. Learn more in the following sections, including how to go about the process, and discover how a seasoned divorce attorney can assist and improve the outcome of your case. 

Are You Eligible for Alimony or Child Support?

Not all parties are eligible for alimony or child support in a divorce. In fact, alimony is becoming less common in divorce, and some recent changes to Illinois’ child support laws have created situations in which neither parent pays support (i.e. parents have near equal income and near equal parenting time). However, if you are disadvantaged in your marriage - perhaps because of a health condition or because you stayed home to raise your children - you may be eligible for alimony, child support, or perhaps even both.

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Illinois alimony lawyersAlimony, though awarded less frequently today than it once was, is still a component in some divorces. Thanks to the changing tax laws under the Tax Code and Jobs Act, the rules that once applied will be changing as well. More specifically, parties who pay alimony will not be eligible for a tax deduction if their divorce is finalized after December 31, 2018. Learn more about how this new law may impact your post-divorce finances and discover some strategies for minimizing the damage in the following sections. 

Alimony Under the New Tax Law

The new tax law removes the deduction that alimony paying spouse once received. Sadly, this can keep them in a higher tax bracket, which may ultimately impact the amount of alimony that they are willing to pay. The receiving spouse, though no longer required to pay taxes on their alimony money, may receive a lower award, thanks to their spouse’s tax bracket stance. The new tax law may also hinder negotiations, making for a longer, more drawn-out divorce, which also drives up the cost of divorce. In short, the new law could have a significant impact on the finances of all involved parties, both during and long after the divorce. 

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Illinois divorce lawyersTaxes, though not often discussed, are a critical element in almost every divorce, and they are especially important when alimony may be owed. Thanks to the new Tax Code and Jobs Act, everything about alimony and taxes will change, come the start of 2019. Find out how and discover what it could mean for your Illinois divorce in the following sections. 

The New Tax Law and Divorce - An Overview

While the new tax law may not affect all divorces, it is likely to have a significant impact on cases involving alimony. Parties who pay support and complete their divorce after December 31, 2018, will no longer receive a tax deduction at the end of the year, and receiving spouses will no longer be required to pay taxes on the alimony they receive. At first glance, this might seem like a benefit for the family, but appearances can be deceiving. 

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Illinois alimony lawyersAlimony is meant to provide a disadvantaged party with the financial resources they need to recover after a divorce but it can be a burden for the paying party. In fact, many rely on the tax break they receive at the end of the year to even out the expense. Sadly, that tax could be eliminated if the GOP bill tax bill is passed by the Senate, as is. Learn more about how its passage could impact you in divorce and what an experienced attorney can do to help.

The GOP Bill and Divorce

As of right now, paying parties can claim their alimony as a tax deduction. This not only reduces the individual’s tax load at the end of the year, but it also helps to keep more money in the family unit. If eliminated, it could increase the risk of divorce-induced poverty among already at-risk families, such as those classified as low to middle income by the government.

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Illinois divorce lawyersAlthough alimony is far less common than it once was, it is still a factor in divorces today. Under what circumstances is alimony awarded, and how can you tell if you may be entitled to it in your Illinois divorce case? The following information explains, and it provides you with some details on why and how the assistance of an experienced family law attorney can help.

Alimony in an Illinois Divorce

Despite the common misconception, alimony is not awarded in divorce, simply because one asks for it. Instead, there are certain factors that the courts use to determine if a party may be eligible, including:

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DuPage County alimony lawyersAlimony, though less common now than it once was, is still awarded in some divorce cases. More specifically, it may be awarded to a disadvantaged spouse – an individual that earns less money than their spouse, or one that has given up their career, education, or employment to take care of the home or children. Stay-at-home fathers are included in this definition. Learn more about your right to pursue spousal support in an Illinois divorce, including how an experienced divorce lawyer can help improve your chances of a favorable outcome.

Gender No Longer a Determining Factor

Not long ago, alimony was awarded mostly to stay-at-home moms and women that did not work outside the home. With family structures changing, and more women serving as the primary or sole breadwinner these days, the gender bias for alimony no longer exists. In fact, statistics indicate that some 40 percent of wives now earn more than their husbands, and the pursuit of alimony among men is becoming more and more common.

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Illinois alimony attorneysSpousal support, though less frequently awarded in divorce than it used to be, is still an option for disadvantaged spouses. However, many things have changed over the last few years. For example, more women are the primary breadwinners in their families, so more men are pursuing spousal support. Another major difference is that the formula for calculating alimony changed back in 2015. Discover how to tell if you may be eligible for spousal support, and how it is calculated in an Illinois divorce today.

Are You Eligible for Spousal Support?

Despite the common misconception, alimony is not always awarded, just because it is requested. Instead, spouses who wish to receive alimony must fit a few criteria before they are considered eligible by the courts. For example, the courts may award alimony when:

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Posted on in Spousal Maintenance

DuPage County maintenance and alimony attorneys, alimonyIf you are considering divorce, you may have concerns regarding whether or not you will have to pay alimony, also known as spousal support or maintenance. Spousal support is less common than it once was, but it is still ordered in some divorces.

Factors the Court Takes into Consideration

The court considers several factors when determining a spousal maintenance award. Maintenance calculations are separate from child support (for the most part) and are not influenced by any marital wrongdoing or fault. The factors the court will look at include the income and property of each spouse, the financial needs of the spouses, the length of the marriage, and the future and present earning capacity and job prospects of the spouses. Additionally, the court will look at whether the spouse requesting alimony contributed to the education or training of the other spouse, the health of the spouses, and any other considerations the court finds relevant.

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DuPage County divorce attorneys, divorce vocabularyDivorce is the legal process that many couples will decided to initiate under Illinois law. However, as with many legal processes, the legal jargon, or vocabulary, often prevents people from understanding the process. However, a clear understanding of the divorce vocabulary can assist people to cut through the legal jargon and understand what is happening in their divorce case.

  • Alimony or spousal support, is the legal term for money that a supporting spouse pays to his or her former spouse. The amount of the payment will be based on a number of factors, including the length of the marriage and each spouse’s income.

  • Child support is similar to alimony and is a payment from a non-custodial parent to ensure that the child has the necessities for life. However, child support is paid based on the legal idea that parents have certain rights and responsibilities, even when a child’s parents end their marriage.

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Illinois alimony lawVirtually all areas of law at least have the potential to change over time. Sometimes, the change comes in the form of court decisions, and other times it is through legislative action. Attorneys are responsible for keeping informed of changes in the law and any related procedure in order to provide their clients with competent representation.

Such a change has recently occurred within this state. In Illinois, Governor Pat Quinn signed a new law into effect that will change the alimony law in the state beginning in January of 2015. This law is expected to affect the maintenance and spousal support awarded to ex-spouses in divorce cases in the new year, and its exact effects will vary depending on the circumstances of each case.

New Law

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alimony oudated conceptDivorce cases certainly involve a change of circumstance for both parties, whether the dissolution of the marriage was expected or not. As such, certain laws are in place to ease the transition for one party, or both parties in some cases. Specifically, the concept of alimony is generally intended to allow an ex-spouse who may have sacrificed a career or education in favor of the family gain some financial stability for a period of time upon divorce.

The law in most states, including Illinois, sets guidelines for alimony and factors for the court to consider in determining an amount of alimony award, if any. However, there are a number of other states with arguably antiquated laws which allow for lifetime receipt of alimony with little consideration given to factors such as length of marriage or a change in circumstance of either party. Lawmakers and advocates across the country are debating the concept of alimony and whether the idea of post-divorce spousal maintenance is outdated.

Positions on Alimony

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Posted on in Divorce

divorce finances, gray divorce, divorce after 50, DuPage County divorce lawyer, divorce attorney in IllinoisAny couple that decides to divorce will have financial considerations to take into account, but issues surrounding divorce finances may affect those couples who divorce later in life the most. Ending a marriage after the age of 50 can have its own set of issues to address when it comes to preserving financial security. Often, couples of that age have investments, savings, accumulated assets, and retirement accounts to sort through.

Questions to Ask

Many older couples in this situation may need to take actions that they would not have had to if they remained married, such as going back to work or selling their home. However, there are steps these individuals can take to minimize the the financial effect their divorce will have. According to a financial advice article recently published, there are certain questions divorcees can ask before, during, and after a divorce proceeding to ensure financial security.
  • Where is the money? Those who are getting divorced need to identify and determine what marital property will be eligible for division. This generally includes money earned during the marriage and assets or items purchased with that money. Items that many may not realize are marital property include pension plans, retirement accounts, life insurance policies, and tax returns.
  • What are the tax consequences? Any future tax bills must be factored into all settlement offers. An offer that seems fair on its face may not be so equitable when taxes are considered. Tax consequences must especially be considered when it comes to alimony payments, which are usually considered taxable income to the recipient and a tax deduction for the payor.
  • How can we split our retirement savings? Depending on the type of retirement account, transfers can either be straightforward or complex. IRAs can usually be handled by the divorcing spouses and addressed within the divorce decree, while splitting 401(k)s and pension plans can be more complicated. Early and well-informed action in this area can provide huge financial benefits.
  • Should I keep the house? While many people who divorce later in life feel strongly about keeping their home, it may not be a wise financial move, especially if they forgo other assets in the negotiating process to do so. Sometimes, it is more beneficial and financially wise to sell the home and split the profits.
  • Will I still be insured? In the past, many couples may have actually avoided divorce for fear of being denied individual health coverage. Now, new laws like the Affordable Care Act should help to relieve some of those concerns, as well as marketplace or COBRA coverage under an ex-spouse’s employer health plan.
  • How should my estate plan change? Couples divorcing later in life are advised to change all of their estate planning documents as soon as they make the decision to divorce, in order to best improve their chances of protecting their property and preserving their final wishes.
Divorce Attorney If you are considering divorce, the experienced attorneys at the Davi Law Group, LLC can help you. Please feel free to contact us today for a consultation. Our offices are located in Wheaton, Warrenville, and Chicago.
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