For many couples, getting a divorce can be a big financial burden. Going from being a dual-income family to having to run a household on one income can be tough on anyone. In situations in which one spouse may be greatly disadvantaged financially after a divorce, a judge might deem it appropriate to award that person spousal maintenance. In Illinois, spousal maintenance, which is also known as alimony or spousal support, is calculated using a specific formula, and it usually only lasts for a specific period of time. If you are getting a divorce, you should understand the basics of Illinois spousal maintenance.

Calculating Spousal Maintenance

If a spouse is awarded spousal maintenance, the formula set forth by the Illinois Marriage and Dissolution of Marriage Act (IMDMA) will be used to determine the amount of the maintenance award. The formula applies to any couple whose combined gross annual income is less than $500,000. The formula is as follows:

• 33.3% of payor’s net income - 25% of payee’s net income = Maintenance award

The law also states that the amount determined in that formula is not permitted to be more than 40 percent of the combined gross income of both spouses. The length of time the maintenance award is paid depends on the length of the marriage. The IMDMA sets forth a list of multiplying factors that determine the payment period.

What happens to spousal maintenance after you retire? If you are the person paying maintenance, it would be wrong for you to assume that your maintenance payments will end when you retire. You can terminate maintenance payments only when:

• You reach the agreed termination date
• A significant decrease in your income or increase in the recipient’s income makes it appropriate to end payments
• The recipient remarries
• The recipient fails to make an effort to become self-supporting

Retirement may give you grounds to decrease your maintenance payments, but terminating payments is unlikely. There are several factors that determine whether and how much you can modify spousal maintenance when you retire.

How Long Is the Spousal Maintenance Supposed to Last?

The duration of your spousal maintenance payments can be a set number of years or indefinite, pending future review or requests for modification. Two circumstances are needed for a court to grant indefinite maintenance:

Spousal maintenance that is awarded during a divorce is meant to last for a defined length of time, usually determined by the length of the marriage and the needs of the recipient. In Illinois, maintenance may be permanent if the couple was married for at least 20 years or the recipient spouse has little chance of being able to support themselves. Sometimes, the divorce agreement may state that the parties will review the maintenance after a certain number of years to determine whether it should be extended or terminated. A recent Illinois case, in re Marriage of Brunke, involved two former spouses disagreeing during their maintenance review about whether the maintenance payments should continue and be increased. The court’s ruling on the case explains which factors a court may consider when reviewing a maintenance agreement.

Rehabilitative Maintenance

One of the most important factors is whether the spousal maintenance agreement included a requirement that the recipient attempt to financially support themselves, which is known as rehabilitative maintenance. The court may terminate maintenance if there is a rehabilitative requirement and the recipient did not make a good faith effort to obtain employment or seek a better-paying job. “Good faith effort” accounts for factors such as whether the recipient:

• Has turned down reasonable employment opportunities
• Is in the process of obtaining education or training that would qualify them for jobs
• Is at an age that would make it difficult to find new employment

In the case of in re Marriage of Brunke, the payor claimed that maintenance should be terminated because the recipient had made little effort to find a job, but the court ruled that the recipient’s age of 68 makes it unlikely that she will ever be able to get a job that would support herself.

Starting with divorce agreements created this year, people who pay spousal maintenance as part of a divorce can no longer claim those payments as a deduction on their federal income taxes. The alimony tax deduction was used as an incentive for a spouse to pay more maintenance after the divorce. Maintenance recipients will save on taxes because the payments are no longer part of their taxable income. However, they may have more difficulty negotiating a maintenance agreement with their spouses and may not receive as much maintenance as they would have when the deduction existed. There are financial strategies available during divorce that you can use as an alternative to spousal maintenance or that could replicate some of the benefits of the alimony deduction.

1. Property Division: You could forgo spousal maintenance and give the recipient spouse more marital properties instead. There is more certainty in the value of properties than in what you might pay or receive in spousal maintenance over several years. The transfer of money or assets between spouses during a divorce is non-taxable.
2. Lump-Sum Payment: The spousal maintenance could be paid as a lump sum as part of the divorce. You would be free of continuous maintenance payments and any financial ties to each other once your children are adults. However, you must determine what a fair lump-sum payment would be and have the money available to make that payment.
3. Retirement Benefits: You could use the money that you would have paid towards spousal maintenance and invest it in a retirement fund, which your spouse would receive payments from. In some situations, contributions to retirement plans can be tax-deductible. The recipient spouse would pay taxes on the money they receive from the fund but may collect more money than they would have from spousal maintenance. This plan is most effective if you are both near retirement age, so you can avoid early withdrawal penalties.
4. Charitable Remainder Trust: If you have philanthropic interests, you could create a charitable remainder trust with your spouse as the beneficiary. The fund would pay to the beneficiary for a set period of time, and the remaining money would be donated to a charity. As with the alimony deduction, the payor could receive tax deductions for the contributions, and the recipient would be taxed for the payments.

Contact a St. Charles Divorce Attorney

The changes to the federal tax law have made reaching a spousal maintenance agreement more complicated. A Kane County divorce lawyer at Goostree Law Group can help you negotiate a reasonable maintenance agreement. To schedule a free consultation, call 630-584-4800.

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You and your spouse may have paid for life insurance during your marriage to financially protect each other in case one of you died. Now that you are getting divorced, what you need from a life insurance plan has changed. It makes sense to remove your spouse as a life insurance beneficiary because you do not want him or her to profit from your death. You can make your children the sole beneficiaries of the plan or cancel the plan if you do not have children. However, keeping a former spouse as a life insurance beneficiary can provide financial backing for spousal maintenance payments after a divorce.

Monetary Security

A court awards spousal maintenance when one spouse was reliant on the other to pay for their accustomed standard of living. If you will receive maintenance after your divorce, being a beneficiary on your former spouse’s life insurance policy will assure that you will be financially supported in the event of his or her untimely death. Your former spouse may change the life insurance plan to reflect the fact that you are divorced, such as:

• Reducing the benefits that you would receive so that it would be no greater than what you would be owed for spousal maintenance; and
• Switching from a long-term plan to a short-term plan because the maintenance payments may be temporary.

Enforcing Life Insurance

A spousal maintenance payor may reject the suggestion of also paying for life insurance to benefit his or her ex-spouse. As long as the children are financially protected, the payor may not care about a former spouse’s financial security. As the maintenance recipient, you can request that the court require your former spouse to have you as a beneficiary on a life insurance policy.