Maintenance, or the payment of support for a current or former spouse is many times charged with emotional reactions from both participants. For agreements which were entered into prior to December 31, 2018 or those modified thereafter, maintenance will continue to be a tax deduction to the paying party and income to the recipient. For those agreements entered beginning January 1, 2019 maintenance will be taxed to the paying party and the recipient will receive the payment as NET income.
The first question asked is, “Does one spouse require support from the other?”
There are a number of factors set forth in the statute:
- Earning Capacity;
- Standard of Living during the marriage; and
- All other Relevant Factors
If the answer is “Yes” that one spouse requires support from the other, the next questions are: “How much?” and, “For how long?”
Since 2017, Illinois has had guidelines for both the amount and duration of a maintenance award. There have been some revisions in 2018 and 2019, including further defining the duration and adjusting the percentages due to the changes in the taxability of maintenance.
The Current Calculation of Guideline Maintenance as of 2019
If the spouses have a combined GROSS income of $500,000 or less, the guidelines apply. The guideline is a calculation of 33.3% of the paying spouse’s NET income, less 25% of the receiving spouse’s NET income. For example, if Mary earns a net income of $400,000 and John earns a net income of $60,000, the guideline would require a payment of $118,320 annually (33.3% of $400,000 = $133,320, less 25% of $60,000 = $15,000). This formula applies unless the award would give John 40% or more of the combined net income. Since 40% of $460,000 (John’s and Mary’s combined incomes) is $184,000, John’s income of $60,000 plus maintenance of $118,320 = $178,320, so it is less than the 40% cap.
The duration of the payments depends on the length of the marriage with an increase of 4% for each year of marriage after year five and before year 20. If the marriage lasts five years or less, the maintenance paid is equal to 20% of the number of months of the marriage. If more than 20 years, the award is to be equal to the length of the marriage, or for an indefinite term. If a marriage is 10 years or less at the time of filing for divorce, it can be set to a fixed term. Hotly debated is the question of maintenance terminating within the time constraints for marriages of 10+ years.
What is GROSS income when calculating maintenance? The answer is income from all sources. This includes not just wages, but also perquisites of employment such as income from exercising stock options; vesting of a restricted stock award or grant; deferred compensation; pension income; investment income; trust distributions or any other form of payment. In unusual circumstances, maintenance may be paid from assets.
When the parties have more than $500,000 in annual gross income, the guidelines are not strictly applied over the maximum calculation. In these circumstances, the amount and duration are to be determined by negotiation and agreement or, by a court, after considering the above listed factors and additional factors which take on more meaning in high income cases, including these items:
- Any impairment to earning capacity due to devoting time to domestic duties (being a stay at home mom or dad);
- Length of the marriage;
- Skills of the party seeking maintenance;
- Contribution to the other spouse’s career or education; and
- Any other relevant consideration
What is NET income when calculating maintenance? The most common answer is gross income as defined above minus the standardized tax amount – total of federal and state income taxes for a single person claiming the standard tax deduction, one personal exemption, and the applicable number of dependency exemptions for the minor child or children of the parties, and Social Security and Medicare tax calculated at the Federal Insurance Contributions Act rate. In certain circumstances, net income may be gross income minus the individualized tax amount either by agreement or as determined by the court after hearing.
As you can see, maintenance awards can be merely formulaic or quite nuanced. Your attorneys at Boyle Feinberg Sharma, P.C. (BFS) will discuss your particular circumstances, as every family is unique. For compassionate counsel and aggressive representation, contact Boyle Feinberg Sharma (BFS) at 312-376-8860.