Spousal Maintenance Changes in 2019

 Posted on November 02, 2018 in Divorce

Change is once again coming to the Illinois Marriage and Dissolution of Marriage Act (IMDMA), and this time it is taking aim at the calculation method for spousal maintenance, formerly known as alimony. Spousal maintenance is governed by Section 504 of the IMDMA and is the contribution that one party (the “Payor”) gives to the other party (the “Payee”) based upon a calculation which is currently dependent upon the GROSS* incomes of the parties. 

In order to determine if spousal maintenance is appropriate, the court will first make a determination using the facts of the case and applying them to various factors that they deem to be relevant. If the court decides that maintenance is appropriate, they will then move forward and determine the guideline calculation.

Generally, guideline maintenance is awarded if the parties’ combined GROSS annual income is less than $500,000.00, and the Payor has no obligation to pay child support, maintenance, or both from a prior relationship.

If the application of guideline maintenance, when combined with child support obligations, would result in an obligation that is larger than 50% of the Payor’s NET* income, the court may determine maintenance that does not use the law's guidelines.

Any award that deviates from the guideline calculation shall be made after the court’s consideration of all relevant factors. If the court deviates from the applicable guideline, the court shall state in its findings the amount of maintenance or duration that would have been required under the guidelines and the reasoning for any variance from the guidelines. The court shall also state whether the maintenance is: (1) fixed-term; (2) indefinite; (3) reviewable; or (4) reserved by the court.

How Is Guideline Maintenance Currently Calculated?

Currently, guideline maintenance is calculated by using the following method: (1) taking 30% of the Payor’s GROSS annual income; (2) subtracting 20% of the Payee’s GROSS annual income; and finally (3) making sure this number, when added to the GROSS income of the Payee, does not exceed 40% of the combined GROSS income for the parties. The end result would be the amount of maintenance the Payee is eligible to receive per year.

Example: For a Payor with a GROSS annual income of $100,000.00 and a Payee with a GROSS annual income of $50,000, the calculation would be as follows:

$100,000 x 30% = $30,000; $50,000 x 20% = $10,000

$30,000 - $10,000 = $20,000 (amount of eligible maintenance)

$100,000 + $50,000 = $150,000 x .4 = $60,000 (40% threshold)

Since the Payee’s GROSS income with the support of $20,000 added is above the 40% ($60,000) GROSS for the parties, the Payee will only be eligible to receive $10,000 in spousal maintenance per year.

So What Is the Big Change?

Beginning January 1, 2019, maintenance will be calculated by using the following method: (1) taking 33 1/3% of the Payor’s NET annual income; (2) subtracting 25% of the Payee’s NET annual income; and (3) making sure this number, when added to the Payee's NET income, does not exceed 40% of the parties' combined NET annual income.

Example: A Payor with a GROSS annual income of $100,000.00 would NET approximately $74,000 after applicable tax and allowances, and a Payee with a GROSS annual income of $50,000 would NET approximately $40,500 after applicable tax and allowances. The calculation would be as follows.

$74,000 x 33.3% = $24,420; $40,500 x 25% = $10,125

$24,420 - $10,125 = $14,295 (amount of eligible maintenance)

$74,000 + $40,500 = $114,000 x 40$ = $45,800 (40% threshold)

$45,800 - $40,500 = $5,300

In this scenario, the Payee’s NET income with the support of $14,295 added crosses the 40% ($45,800) threshold and therefore the Payee will only be able to receive maintenance in the amount of $5,300.

How Long Does a Maintenance Obligation Last?

The length of the marriage is then used to determine the duration for which the maintenance will continue. The longer the marriage lasts, the longer a maintenance obligation can go on for. If the parties have been married for 20 years or more, the maintenance award can become permanent. NO CHANGES are going to be made for the determination of the length of a maintenance award. Maintenance will last for a percentage of the length of the marriage, as follows:

• Less than 5 years - (.20) or 20%
• At least 5 years but less than 6 years - (.24) or 24%
• At least 6 years but less than 7 years - (.28) or 28%
• At least 7 years but less than 8 years - (.32) or 32%
• At least 8 years but less than 9 years - (.36) or 36%
• At least 9 years but less than 10 years - (.40) or 40%
• At least 10 years but less than 11 years - (.44) or 44%
• At least 11 years but less than 12 years - (.48) or 48%
• At least 12 years but less than 13 years - (.52) or 52%
• At least 13 years but less than 14 years - (.56) or 56%
• At least 14 years but less than 15 years - (.60) or 60%
• At least 15 years but less than 16 years - (.64) or 64%
• At least 16 years but less than 17 years - (.68) or 68%
• At least 17 years but less than 18 years - (.72) or 72%
• At least 18 years but less than 19 years - (.76) or 76%
• At least 19 years but less than 20 years - (.80) or 80%
• 20 or more years: For a marriage of at least 20 years, the court may choose to order maintenance for a period equal to the length of the marriage or for an indefinite term.

What if I Already Have a Maintenance Order in Place?

If the parties have a Maintenance Order entered with the court before January 1, 2019, the calculation using the parties GROSS incomes will continue to be used for any modifications that may take place in the future. Additionally, payments shall continue to be treated the same for federal income tax purposes, unless there is an express agreement between both parties to handle taxes in a different manner. This type of agreement must be included in the maintenance modification order.

Why Is This Happening? 

The change in the calculation method is due to recent changes in the IRS code. Once the new calculation method takes effect on January 1, 2019, the Payor will not be able to deduct the maintenance payments from their GROSS income for federal income tax purposes. Likewise, the Payee will not be obligated to include the maintenance payments in their GROSS income for tax purposes.

If you think that this issue may affect you, or if you have any questions or concerns regarding the spousal maintenance change, contact our office at 630-426-0196 to schedule your initial consultation with one of our attorneys at any of our locations. 

Notes:

*GROSS income is the income received by the party BEFORE applicable taxes

*NET income is the income received by the party AFTER applicable taxes