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Christopher Bullock once wrote, “’tis impossible to be sure of any thing but Death and Taxes.” This phrase was more famously adapted by Benjamin Franklin after our young nation had ratified its new Constitution. It should not come as a shock to anyone that every financial move we make has tax implications, and divorce is no different. While there are a plethora of financial issues that give rise to tax issues in divorce, the most common of these is alimony – known in Illinois as maintenance.
Currently, spousal maintenance is considered taxable income to its recipient, and the payor is allowed a deduction equal to the amount of maintenance paid. The effect of this tax treatment is that the payor has more income available to pay maintenance and actually gets a benefit by providing support to his or her ex-spouse. Depending on the parties’ financial circumstances, this may be the most mutually beneficial way to achieve an equitable financial settlement. From a lawyer’s perspective, the alimony deduction is a great pitch point on any settlement proposal that asks your client to pay maintenance. The ability to deduct the maintenance payments from your taxable income softens the blow of having to write a monthly check to one’s ex. That’s all about to change, thanks to the Tax Cuts and Jobs Act signed into law late last year. Divorces must be finalized before December 31st, 2018 to benefit from the alimony/maintenance deduction. Any divorce finalized after the end of the year, regardless of when it was filed, will have the new law applied; the payor will no longer be allowed to deduct maintenance, and maintenance will not be counted as taxable income to the recipient.
This change has been widely decried by family law practitioners across the country. Removing the maintenance deduction generally decreases the amount of income available to provide support to the family unit and eliminates one of the incentives to settlement. The American Bar Association recently passed a resolution urging Congress to reinstate the alimony deduction.
Partly in response to these concerns, the Illinois legislature has made changes to the portions of the Illinois Marriage and Dissolution of Marriage Act (“IMDMA”) that pertain to maintenance. The first change has nothing to do with taxes. The legislature added language that specified that the maintenance question has two parts – 1) is an award of maintenance appropriate under the circumstances? 2) if the circumstances warrant a maintenance award, what is the appropriate amount and term of the maintenance award? In my view, the statute has always contemplated a two-part analysis, although some of my colleagues have advocated an abbreviated approach, jumping right to the formula calculation. The amendments to the statute make amply clear that the two step approach is the correct one. Second, the formula for calculating the amount of maintenance for families with a gross annual income under $500,000 will change effective January 2019. In cases where the parties’ annual income exceeds $500,000, maintenance is determined using a multivariate approach which considers factors such as the parties’ standard of living, earning capacities, and incomes. Where the formula applies, the maintenance amount will be calculated as the difference between 33 1/3% of the payor’s net income and 25% of the recipient’s net income; the unamended formula utilizes 30% and 20%, respectively. The term of maintenance will still be determined using the length of the marriage and multiplier dictated by statute according to the duration of the marriage.
We can guess at the impact of the new tax rules and maintenance formulas. I’m guessing that we will see an increase in settlements involving lump sum transfers of assets to take advantage of other tax benefits. Where maintenance is involved, cases may become more contested as one of the big incentives to agree to pay spousal maintenance will be gone in 2019. Again, these are just educated guesses. Only time will tell what the actual impact of the new tax rules and maintenance formula will be.
As school starts up again, I've been spending a lot of time helping one of my favorite non-profits get facilitators ready to administer its after school curriculum. One of my favorite lessons in this curriculum uses various activities to help teach of the most valuable skills a child can have – reacting thoughtfully. This becomes to one of the most important skills an adult may have, especially in the context of a divorce or co-parenting.
Put another way, it is the power to THINK before we act. Far too often in our daily lives, this doesn’t happen. Humans are reactionary by nature. Something happens, or someone says something to us, and we immediately react. While every case is unique, one piece of advice I find myself giving to each and every client – think before you react. The simple act of stopping to take a breath to evaluate what just happened and the potential responses will save you a lot of time (and maybe money!) in the future. A solution or reply that is purely motivated by emotion is not typically ideal, but it is important and okay to acknowledge your own emotions. What does the situation make you feel? Why might you feel that way? By asking ourselves these questions, we help ourselves to understand our own emotional triggers which is the first step towards managing them. Next, one must think about the golden rule. How would you want to be treated or responded to in this situation? Putting the shoe on the other foot is never a bad thing.
Finally, think about the facts and context of the situation. After taking a minute to think about the matter, the context, and your feelings about it, you are in a much better position to provide a healthy response. Approaching situations in your divorce or in your co-parenting may not eliminate the drama from your relationship with your ex, but it will help immensely. Knee jerk reactions rarely solve any problems. Just like we teach our children to stop, drop, and roll in case of fire – we must remember to stop, think, and respond as we confront challenges in our adult lives.
If you have more questions or concerns about your divorce or family law matter, contact The Nally Law Group today. We are among Chicago's best family law attorneys; we're here to help you!
Part of being a business owner in the digital age is keeping up with the hottest internet search terms relative to your business. One of the most common searches across the country is ‘how do I choose the right divorce attorney’.
I’d like to respond “just hire me, I’m the best!” but it just isn’t that simple. I’m a great attorney, and I am confident in my abilities, but there’s a lot of great attorneys out there. Navigating a divorce is a difficult venture under the best of terms, and your attorney is the captain of your ship. You just don’t want to hire the first sailor you see on the dock.
Many attorneys offer free or low-cost consultations. Take advantage of that. Talking to an attorney presents an important opportunity for you to test your comfort level with that person. Ask questions. Be as open as you can. You’ll be spending a lot of time with your lawyer. Seriously. You need to hire someone you trust and feel comfortable sharing with. Your attorney can only represent you well if you share all relevant, however unsavory, information with him or her.
Know your goals and be honest about your situation. Some attorneys are more primed for litigation, some are well-versed in the collaborative process, some are both. If you and your ex are fairly amicable, a lawyer gunning to litigate may rock the boat too much. The contrary is also true, if it there are things (like money, custody) that you and your ex just can’t see eye to eye on, a negotiator may not be well equipped to take your ship into battle. Maybe concerns about your children top your financial concerns. Some lawyers specialize in custody disputes, while many have more experience dealing with financial issues. It’s important to note that skills are not mutually exclusive. A very skilled financial litigator may be an equally skilled negotiator or custody litigator.
The internet is a vast resource. Check out reviews for the attorneys you’re considering. Take what you read with a grain of salt. If you see something negative – ask the attorney about it. Check out the professional memberships an attorney has – is he or she a member of the local bar association? Does he or she have any special certifications? This speaks a lot about how well he or she may work with colleagues in the field a.k.a. your ex’s attorney.
At the end of the day, you need to feel confident that your ship is being taken care of and steered in the right direction. It’s up to you what that means. I can tell you that I’m a great captain, but many of my esteemed colleagues are equally as good. It comes down to your gut instinct – if you feel like it works for you, roll with it.
Unless you’ve been living under a rock, you’ve heard the words “attorney-client privilege” a lot in the past few days. There’s a lot of information floating around that understandably has led to a lot of confusion. Here’s what you need to know:
At the end of the day, unless you are engaged in some unsavory acts, your conversations with your attorney, whether written or verbal, are protected by the attorney-client privilege. While this certainly is not an exhaustive description of the attorney-client privilege and confidentiality, hopefully it is enough to clear up any confusion you might have.
We are always happy to answer your questions. Contact the Nally Law Group to find out how we can help you with your family law issues.
Below is a written statement I submitted to my legislators regarding HB4113:
While the intentions behind HB 4113 may be good, the legislation represents a drastic change to Illinois law that would be disastrous for Illinois’ children. While those outside the family law arena may perceive HB 4113 to propose minor changes, HB 4113 actually puts a finger on the scales of justice and compromises the fairness of custody litigation in Illinois.
I’ll be honest: I do not love the proliferation of the fathers’ rights and mothers’ rights ideologies. It’s just not reality – neither parent has a set of rights that is unique or superior to that of the other. A belief that one parent has an inherent set of rights different or superior to the other fosters polarization and animosity when in reality all anyone really wants (at least should want) is what is best for his or her child. When a party digs in and becomes so entrenched in an ideology or feeling of entitlement, it spells disaster for everyone involved. Not unlike the political environment we find ourselves in these days, anything less than a blowout win and the complete evisceration of the opposition becomes unacceptable to this person. Under such conditions, we are all losers – the parties, the lawyers, and most of all the children. I am a family law practitioner; I’ve practiced law for nearly ten years. In my practice, I have represented mothers, I have represented fathers. I have not once advocated for a certain parenting time division or parenting plan provision based merely on the fact that my client was a mother or father. Further, I have never received a ruling from a judge based on whether the parent was a mother or father.
As they currently stand, the Illinois Marriage and Dissolution of Marriage Act (“IMDMA”) and the Illinois Parentage Act provide ample guidance for Illinois judges when it comes to decisions about parenting time and parenting responsibilities (f.k.a. custody). The statute enumerates explicit factors to be considered including the child’s relationship with both parents, the particular needs of the child, and each parent’s ability to put the child’s interests above his or her own. The overarching standard, of course, is the best interests of the child. Each case and each child present its own unique set of circumstances that must be evaluated and weighed before a decision can be made. By presuming that equal parenting time is in the best interests all children, HB 4113 ignores the subjective nature of family law cases. I have seen many cases where equal parenting time was in the best interests of the children, and I generally agree with the proposition that children are better served with the involvement of both parents; however, I still believe that a wholesale pre-determination of parenting time is misguided for a number of reasons.
Even more troubling than the proposed presumption is the proposed change in the burden of proof. Under HB4113, the burden of proof shifts to any party seeking anything but an equal parenting time schedule; the presumption may only be overcome by “clear and convincing evidence.” This burden is very high, and nearly renders any challenge to an equal parenting time schedule over before it starts. A challenge to an equal parenting time schedule would require protracted litigation – in other words, attorneys’ fees, guardian ad litem fees, lost wages from days spent in court, etc. Not many can afford to sustain litigation at the level necessary to meet the clear and convincing standard that would be necessary to defeat the presumption. Additionally, victims of abuse would be forced in continuing contact with their abusers over the course of litigation. This proposed change in the burden of proof only magnifies how ill-advised HB 4113 is.
The cherry on top of the bad idea sundae is the proposal that would require a party to prove the other is an unfit person before parenting time may be restricted. In other words, before parenting time can be restricted, a parent must be the standard necessary to terminate the other’s parental rights. If this is enacted into law, the potential of harm to children will increase exponentially. There are a vast number of reasons why a party may seek to restrict the other’s parenting time that have little to do with the other parent’s fitness; this proposal ignores this and completely ignores the best interests standard.
The gold standard to remember in this instance is the best interests of the children. It is the cornerstone by which Illinois cases are decided. If this legislation is enacted, the legislature will be putting the interests of best interests of a few litigants above those of Illinois children. I implore you all to vote against HB 4113.
 With the exception of breast-fed infants, for obvious reasons. Even in those instances, the court has made an effort to fashion a schedule that provides ample parenting time for dads.
 “’Clear and convincing evidence’ means that measure or degree of proof that will produce in the mind of the trier of fact a high degree of certainty as to the truth of the allegations sought to be established. This evidence requires a greater degree of persuasion than is necessary to meet the preponderance of the evidence standard.”
In late September, Governor Rauner signed off on amendments to Section 504 of the Illinois Marriage and Dissolution of Marriage Act (“IMDMA”) enacted by the legislature in June. Section 504 is the primary provision governing maintenance, or spousal support in dissolution actions. The amendments make three big changes, effective in June 2018.
First, the income threshold for the applicability of the formulaic approach to maintenance is raised to $500,000 from $250,000. In other words, rather than engaging in a multivariate analysis to determine maintenance where the parties’ combined annual incomes exceeds $250,000, the court will apply the mathematical formula prescribed by statute. In addition to alleviating the disparity between Illinois’ maintenance and child support statutes, this change may actually decrease maintenance paid in cases which fall under the new income threshold. At the very least, it provides for more parity and predictability in maintenance determinations for those cases involving a combined gross annual income under $500,000.
The second change affects how the term of maintenance is calculated. Currently, the term is determined by taking the length of the marriage times a multiplier proscribed in accordance with the length of the marriage. For example, maintenance for a 6 year marriage would endure 2.4 years or about 29 months (6 X 0.4 = 2.4). The current multiplier jumps 20% for each additional 5 years of marriage. The amended statute evens out this drastic jump, gradually increasing the multiplier for every 2 years of marriage. Judges still will have the discretion to award permanent maintenance for marriages over 20 years.
Finally, a new provision has been added which explicitly authorizes the court to provide the payor a credit for any temporary maintenance paid pursuant to 501 of the IMDMA. This credit can provide great relief to those paying temporary maintenance throughout potentially lengthy dissolution proceedings and removes the incentive for payee spouses to intentionally prolong litigation.
You can find the updated version of Section 504 here.
For answers to your questions about Illinois’ updates to the dissolution statute as well as any other domestic relations issues, don’t hesitate to contact the Nally Law Group today. We are ready to help.
Q. How long do I have to live in Illinois before I can file for divorce?
A: Roughly three (3) months. The Illinois Marriage and Dissolution of Marriage (“IMDMA” for short) requires that at least one of the parties reside in Illinois for a period of 90 days prior to filing or the entry of the final judgment. However, if your case involves minor children, 90 days is not enough for an Illinois court to have jurisdiction to deal with the custody issues.
Q: I just moved here, but my ex still lives in another state. Can I get divorced in Illinois?
A: Assuming the residency requirements are met, yes. It is important to be cognizant of the possibility of your ex filing where he or she lives because that state will typically also have the jurisdiction to enter a divorce judgment. Further, if you have children or property in the other state, an Illinois court lacks jurisdiction to deal with those.
Q: What do I need to file for divorce?
A: Actions for dissolution of marriage are initiated by the filing of a Petition and the issuance of a Summons by the court clerk. You will need your cover sheet, Petition for Dissolution of Marriage, the Summons, and the filing fee (in Cook County, the filing fee is currently $359).
Q: Do I have to have an attorney?
A: No. There is no requirement that you have an attorney, but it is strongly advised. As a pro se litigant, you are required to follow all the same procedures and rules that attorneys are. Attorneys have a greater knowledge of and familiarity with the court system and applicable law and are in a greater position to ensure that all of the issues in your case are dealt with appropriately. Think of an attorney as a tour guide – you know what you want, and the attorney knows the best way to get you there.
Q: Do I have to have grounds to get divorced in Illinois?
A: No, Illinois is a no fault state. While the previous version of the IMDMA provided parties with the option of proceeding under various fault grounds, all grounds were eliminated from the statute effective January 2016, rendering Illinois a pure no fault state.
Q: What’s the difference between legal separation and dissolution?
A: The biggest is that in a legal separation, the parties remain married even after a judgment is entered. Under a legal separation, the court can award maintenance (aka alimony) but lacks the ability to divide property absent a written agreement by the parties. Legal separations can be converted to dissolutions without filing a brand new case. Unlike separation, a judgment of dissolution ends the marriage; further, the court has the ability to award maintenance, divide property, award maintenance, and enter custody orders. Legal separations are rarely done because absent extraordinary circumstances, they have minimal benefits.
Q: What if my spouse and I reconcile and decide not to go through with the divorce?
A: There a number of options. In Cook County, your case can be moved to the reconciliation calendar, which keeps the case open but puts it on hold. Other counties have similar procedures, but even if they don’t, a judge has the discretion to schedule a longer status date than normal to give you and your spouse time to work it out. If the reconciliation is successful, ultimately, the dissolution case will be dismissed without prejudice.
Q: How can I get custody of my kids?
A: First of all, in Illinois ‘custody’ is referred to as allocation of parental responsibilities. The concept commonly identified as legal custody is known in Illinois as the allocation of parental responsibilities for decision making; this includes things such as health care, education, religion, and extracurricular activities. The allocation of parental responsibilities re: parenting time is the concept understood as physical custody. When determining the allocation of parental responsibilities, the court looks to serve the best interests of the child(ren) by considering a number of factors like the child(ren)’s relationship with each parent, the parents’ willingness and ability to co-parent, the needs of the child(ren), and any other factors the court deems relevant.
Absent evidence to the contrary, each parent is deemed fit, and it is widely considered to be in the best interests of the child(ren) that both parents be actively involved in the child(ren)’s life. There is no easy answer to the custody question, as it depends on the circumstances of each case.
Q: My friend is going through a divorce and the judge made her and her ex go to mediation. What is mediation and will I have to go to mediation?
A: Mediation is a widely used method of alternate dispute resolution. Both parties meet with a neutral mediator to facilitate discussions to try to reach a settlement of the issues in the case. For most cases, it is optional; however, in Cook and Lake counties, mediation is required in all cases in which allocation of parental responsibilities is at issue.
Q: Does my ex have to pay my attorneys’ fees?
A: While each party is generally responsible to pay the initial retainer, the IMDMA does give the court discretion to order one party to pay attorneys’ fees incurred or to be incurred by the other. A party can be ordered to contribute to the other’s attorneys’ fees both while the action is pending and as part of a final judgment of dissolution.
Illinois is ‘level the playing field’ state, meaning that the law wants both parties to have the ability to “adequately participate.” Once a petition for attorneys’ fees is filed, the court will evaluate the request based on the parties’ financial circumstances, the reasonableness of the attorneys’ fees, and the amount of fees paid by both parties.
Q: I don’t make enough to live on my own, how am I supposed to cover my expenses while the divorce is still pending?
A: You do not have to wait for a final judgment to get maintenance and/or child support. The court has broad discretion to award spousal and/or child support on a temporary basis and may also make orders regarding joint debts, such as mortgages or car payments, and possession of the marital home. If you anticipate that you will be coming up short, it is a good idea to file a Petition for Temporary Relief as soon as possible.
Q: How many times will I have to go to court before my divorce is final?
A: The short answer is - at least once. The number of court appearances in one case can vary greatly from case to case, and if you have an attorney, there are a number of court appearances that he or she can go to that do not require your attendance. For example, judges rountinely schedule status dates for cases on their call for the purpose of making sure the case is progressing and not stagnating – if you have an attorney, you do not have to attend these routine appearances. However, typically your presence will be required at substantive hearings and pretrial conferences.
If a settlement is reached, you will have to go to the prove-up and testify regarding some basic information and the substance of the agreement. If a settlement is not reached, the case will ultimately go to trial, where you will be required to attend.
Depending on the circumstances of the case, I frequently refer clients to a financial adviser. In addition to putting clients in a better position for the future, working closely with a financial adviser helps us to get a more complete picture of the parties' assets and liabilities. Armed with this knowledge, we can advocate for positions which maximize returns, tax benefits, and minimize risk for our clients. See the below link for more helpful tips:
Just before Christmas, President Obama signed the National Defense Authorization Act for 2017 into law. What does this have to do with family law? Well, not a lot – except for one thing. One of the Act’s provisions completely changes the methodology for dividing a military pension.
Generally speaking, pension benefits, whether vested or unvested, are considered to be marital property and subject to equitable division in a dissolution action. While the division can vary depending on the overall property distribution award, a spouse can expect to receive one-half of the marital portion of the pension or retirement benefit. It is often necessary to consult financial experts to value the pension or ascertain the exact amount the participant spouse can expect to receive upon retirement. With military pensions, the non-participant spouse has traditionally been awarded one-half of the marital portion of the retiree’s final retired pay. Under the new provision, which is rapidly becoming known as the “frozen benefit rule,” the divisible portion of the pension of a servicemember who is still currently serving will be limited to the pay the servicemember would receive if he or she retired on the date the division order is entered rather than the servicemember’s actual retirement pay. In other words, the retirement benefit is cut off as of the date the judgment of dissolution is entered. While specific regulations have yet to be drafted, the potential ramifications of the “frozen benefit” rule will likely affect all pending and future dissolution actions involving any active duty servicemembers.
For more information regarding the special concerns inherent in dissolution actions involving servicemembers, contact the Nally Law Group today.