In some cases, a party will be ordered to pay spousal maintenance to their ex-spouse after their divorce. Before ordering maintenance, a court will consider many factors, including the income of both spouses and the length of the marriage. Whether you’re the payor or on the receiving end, DuPage County family lawyer Chuck Roberts discusses the most common issues related to spousal maintenance in Illinois and how to deal with them – both during and after your divorce.
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Hosted by: Diana Shepherd, Editorial Director, Divorce Magazine Guest speaker: Chuck Roberts, Family Lawyer For 33 years, family lawyer Chuck Roberts of Momkus McCluskey Roberts – one of the largest firms in DuPage County, Illinois – has been providing family law services to clients in Illinois. A Fellow of the American Academy of Matrimonial Lawyers (AAML), Roberts is experienced in handling complex cases, including high-stakes divorces and child custody disputes. To learn more about Chuck Roberts and his firm, visit www.momlaw.com.
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What are the main factors that spousal maintenance is based on in Illinois? The statute directs the court to take a look at a number of different items as it considers the amount of money that will be given to the spouse that’s going to receive maintenance by the paying spouse. In Illinois, we have a new provision that’s recently gone into effect. It changes the factors and the characterization a little bit, but at least for the initial inquiry, the court is going to look at the amount of income and the amount of property that’s been assigned to each party, and that includes not only marital property but non-marital property as well. The court has to consider the needs of each party; the realistic present and future earning capacity that each side has – that means their employment ability and other ability to generate revenue from other sources; any impairment that might exist on either side – for example, we see that sometimes if a spouse has been primarily responsible for housekeeping duties and has been the homemaker, they may not have had the ability to obtain education, training, and experience to allow them to earn substantial sums in the future, and that’s a factor that the court is very interested in; and the amount of time that it might take for someone to acquire appropriate education, training, or skills or to find a job. The amount of maintenance that somebody could receive could adjust in the future based on the expectation of the court as to the amount of time that it takes to do that. One thing that the court’s always very interested in is, how long is this marriage? How long have these parties been together? The court is certainly going to look at a situation differently, if it’s one of those cases where maybe folks got married and it lasted for a year or two and they got into problems early on, compared to those long-term situations. Long-term in Illinois is beginning to be defined as something 20 years and longer in duration. The judge is going to consider the age of the parties, their health, their station in life, and their occupation. I think we already covered the amount and their sources of income, vocational skills, employability, and liability. Those are going to be of interest to the court. The tax consequences of whatever property they received, the Judge has to consider that. If property has been apportioned to one spouse that carries with it significant tax consequences, we need to find the money to be able to pay that tax that sometimes is received in the form of maintenance. That’s another factor that the court has to consider. There are a lot of different threshold questions that the Court has to resolve for itself in the process of determining an appropriate maintenance award, and those are probably the primary factors that the Court is going to consider.
If the amount of support is based partially on the payor’s income, what do you do if the payor is self-employed in a cash-based business and you suspect that he or she is not declaring some or even most of his or her income? Those cases are really interesting for the lawyer who is representing the other spouse in their dissolution of marriage case. Those are some of the trickiest situations that we run into, because when it’s a closely held business that’s operated by the spouse who’s going to be paying maintenance, they have broad discretion on how to handle the finances of personal and corporate, how to handle business expenses, how to pay themselves, whether or not to pay themselves. There are all kinds of factors that go into that. In my firm, we have a group of forensic accountants that we work with regularly, and these people are not only forensic accountants but they’re certified fraud examiners because they have specific skills that enable them to get into the financial statements of businesses and try to help the lawyer and the client understand exactly what the income situation is – the true expenses along the way that will help us value the business enterprise. We’re able to look and see whether or not there’s actually cash that perhaps isn’t being properly deposited in a bank account. Those are certainly tricky situations. An example that I’m always pleased to share with people is, a number of years ago we represented somebody whose spouse was involved in a local restaurant operation. Restaurants, of course, are sometimes guilty of not necessarily putting all the cash that might be received in the bank. One of my forensic accountants went in, and because we were unable to actually trace the cash that was going through the restaurant, they went back and noticed that plastic forks were served with every meal at this restaurant. Of course, the number of meals and the cash were being underreported by the owner of the business. And so, the forensic accountant actually did an analysis by looking at the number of forks that were purchased by the restaurant and was able to actually back into some numbers that were useful in terms of getting the case resolved. There are different ways to look at it. It’s not just necessarily tracing the cash; it sometimes can be collateral things that have happened that helped give us an indication as to the actual scope and magnitude of what’s going on, on the business side.
That is a really interesting story. I don’t think I’ve ever heard anyone describe a situation like that before. We were able to do some good for the client with that, and that’s one of the advantages of having a group of forensic people that are available to us in every situation that we needed to help sometimes uncover selfish behavior by the other spouse.
Does this ever get the spouse into trouble with the IRS? Sometimes it does, and those are really tricky situations, because in the process of proving that not all of the cash has been either deposited or taken into account in the federal tax filings that are made by the business owner, there’s a possibility of some exposure to the IRS for the innocent spouse, for the spouse who hasn’t engaged in that behavior. Many times there are joint tax returns that are filed, and that can create some problems. It’s a process to be undertaken delicately, but it has to be done, because if it’s not, then the non-business-owning spouse is going to be severely handicapped in terms of the amount that they receive in the process.
If someone was not awarded spousal maintenance at the time of divorce, can they go back and request it if their circumstances change? Generally speaking, unless maintenance is reserved at the time of the divorce, once that divorce decree is honored, that bars the party from receiving maintenance. That’s a final determination. The fact that circumstances change or that someone finds themselves in a different situation in the future, that’s regrettably not something that’s subject to later modification.
If someone is struggling to pay spousal support – perhaps due to a job loss or serious illness – can the amount be reduced? It depends on the determination that was originally made by the Court, and the form that the maintenance award was placed in the divorce decree. Generally, if the maintenance obligation is modifiable, then it is subject to modification, based on a substantial change in circumstances. That substantial change in circumstances, as you suggest, could be due to a different employment or different job or job loss. In this economy, we see that very often. It could be due to a serious health condition that’s limited someone’s ability to generate income or to find the revenue to pay the maintenance award with. The change in circumstances, though, needs to be beyond the paying spouse’s control. If I just decide to voluntarily leave one job and take another position that pays half of what I used to earn, that probably is not going to support a request that the amount of maintenance that I have to pay a former spouse be reduced. If the circumstances are genuine and they’re beyond the ability to influence or control of the paying spouse and it’s not designated as non-modifiable, then often we are able to successfully reduce the maintenance obligation for someone.
You mentioned modifiable spousal support. Can you tell us a little bit about what are the pros and cons of modifiable versus non-modifiable spousal support? It depends often on the circumstances that the parties are in. My analysis depends on which side I represent. The advantages to a non-modifiable award are that no matter what happens to the other side, that maintenance is going to continue absent one of the statutory terminating factors. The maintenance would end, generally speaking, upon the death of the person who is paying it, upon the death of the person who’s receiving it, upon the re-marriage of the person receiving it, or continuing cohabitation on a conjugal basis by the person who’s receiving it. Any one of those four events terminates the payment of maintenance. The modification, if it’s non-modifiable, means that the maintenance will continue on of the amount that’s originally ordered and not be subject to either increase, if the person who’s receiving it has something befall them that increases their needs, nor is it subject to a decrease, if the person who’s paying it finds themselves in a position where they have reduced income or assets or ability to pay. So, it provides stability, but with such stability comes some risk. The risk particularly sets forth the potential problems that can happen on the side of the party who’s paying it. Modifiable means that in a substantial change in circumstances, if the income of the person who’s paying goes up significantly, the party who’s receiving maintenance can file a petition and go in and ask the court for an increased level of maintenance. If there are circumstances where the ability to pay has been reduced, and that’s beyond the control of the person who’s paying, then that side can go in and ask for a reduction. There’s stability and risk that comes with a non-modifiable, and on the modifiable side, it offers some protection but also the risk of the payments being increased in the future depending on what happens with the side who’s paying.
Are those paying maintenance expected to continue making payments if their ex moves in with a new romantic partner, and is it any different if their ex remarries? If their ex remarries, then it’s almost universally true that the maintenance will terminate. There’s a mechanism where on occasion that doesn’t happen, but in the vast majority of cases, a remarriage will terminate the maintenance obligation. It’s a little bit trickier when the allegation or the assertion is that someone is living with someone. Illinois law requires for that to be a basis to terminate maintenance. It needs to be on a continuing basis – so it needs to be a full-time arrangement – it needs to be tangible in nature, and in addition to that, typically the court is looking for some kind of financial overlap between the co-habiting parties. Financial overlap can be found where one person is contributing to another’s expenses or maybe there’s a joint bank account, or other things are happening whereby the parties that are living together are holding themselves out for all practical purposes as husband and wife – they just haven’t memorialized the arrangement with a legal marriage.
Can you explain the differences in tax treatment of spousal support versus child support? The child support component of payments is not a taxable event. If someone receives a certain amount of money in child support, they do not declare that as income nor does the party who paid the child support claim it as a deduction for either federal or state tax purposes in Illinois. Maintenance, however – spousal support is what we used to call alimony – is a taxable event. There are some little wrinkles that the IRS has set up over the years to try to make sure that if money is changing hands and being called alimony, that it really is alimony. Assuming that those fairly simple tasks are met, the person who pays it takes that amount of money as a deduction right off the bottom of the front page of their federal tax returns. It comes right off the gross income. The party who receives it, it gets treated as ordinary income, so they pay tax on it. In general, maintenance is a taxable event, child support is not.
Does spousal support typically end with the payor’s death? If so, what can the recipient do to protect against the payments ending with the payor’s death or even serious disability? In Illinois now, we have a provision where typically these spousal support payments do terminate when the paying spouse dies, but it can be secured now and by court order. It can be secured with a life insurance policy. That’s really an important provision because, historically, if some tragedy were to occur to the party who’s paying, it would leave the recipient totally unprotected. We’re seeing much more frequently now with this new provision that maintenance awards are protected with a life insurance requirement. Absent that statute, there wasn’t historically an insurable interest in the party who’s paying and it was difficult to obtain life insurance to secure the obligation. But this new provision has really helped us in terms of protecting the recipient. On the disability side, that’s a little bit trickier. If it can be negotiated so there’s some kind of disability coverage and that can be incorporated into a divorce decree, that can many times make sense for the party who’s on the receiving side, but absent that, generally speaking the court is not going to be ordering some kind of disability provision.
Can you tell us about the major changes in the new Illinois statute regarding spousal maintenance? We’ve had a new law that went into effect January 1, 2016, and the new law sets forth that for those situations where the combined income of husband and wife is less than $250,000, that there are now what’s called “guideline provisions” or “guideline maintenance” that the law provides for. It’s triggered by the duration of the marriage. If I have a situation where a divorce petition is filed within the first five years of the marriage, then the court is going to enter an order, a guideline order for two-tenth times the length of the marriage would be the duration, and the amount of maintenance is calculated by taking 30% of the payor’s gross income and subtracting 20% of the recipient’s gross income. Let’s say that a husband is going to pay a former wife maintenance, and let’s pretend that the husband is making $100,000 and the wife is earning $50,000. To do the calculation, we’d look at 30% of the husband’s income, which should be $30,000, and we’d subtract 20% of the wife’s income, which should be $10,000. After you do that little math, you come up with $20,000 a year is the amount of maintenance that would be paid by the former husband to the former wife, and then the duration is calculated under the statute. For less than five years, it’s 0.2 times the duration of the marriage. If the marriage is five to ten years in length, it’s 0.4. If it’s 10 to 15, it’s 0.6; 15 to 20 years in duration, you’d multiply the amount of time that the marriage has gone on by 0.8; and if the marriage is over 20 years, then in the court’s discretion, the maintenance award can be either permanent or can be for the number of years that the marriage has actually existed.Back To Top
Certified Divorce Financial Analyst
Business Valuators / CPAs