Category Archives: Family Law

INCOME TAXES AND DIVORCE – WHAT YOU NEED TO KNOW BEFORE APRIL 18TH

It can be confusing to know exactly what to do at tax time if you are contemplating divorce or actually in the process of divorcing. Below are some guidelines to keep in mind as tax time draws near.

Filing Status

IRS rules provide that if you are married on December 31st of the tax year, then you are still married for purposes of that year’s tax returns [Note – there is an exception to this rule where the spouses did not reside together for the last 6 months of the relevant tax year]. Similarly, if your divorce judgment is entered on the 31st of December, then you are considered single for that tax year and must file separate. Simply filing for divorce alone does not result in a change in your tax filing status.

Maintaining Status Quo or Taking an Alternate Course

The first question I ask my clients is “What have you done historically?” If the parties have always filed their taxes “Married Filing Jointly” then that very well may be the best way to continue to file taxes until the divorce is finalized.

However, the analysis doesn’t end there since the status quo may not necessarily result in the most tax savings possible. There may be instances where the parties get a better collective tax benefit by filing “Married Filing Separately.” In cases where it is uncertain which tax filing status nets the best overall benefit, I have my client request pro forma tax returns from his or her tax preparer under both filing statuses. The filing that nets the best benefit is then utilized.

Additionally, there may be circumstances where “Married Filing Jointly” nets the parties the best overall tax benefit, but I may still advise against it. Those scenarios are typically when there is a concern that the other spouse is not accurately and truthfully claiming all income. Because tax liability (tax, interest and any penalty) for an erroneously or fraudulently filed joint tax return can flow to both spouses, it is sometimes best for one spouse to forego any tax benefits from a joint filing to have peace of mind that no liability will be assessed to him or her personally for errors or omissions on the part of the other spouse.

Allocating Tax Liabilities and Refunds

The allocation of tax liabilities and refunds depends on many factors and is a case-by-case analysis. The final determination of what percentage of the refund is allocated to whom and who is liable for the tax bill (as well as the cost of preparation fees) is a result of negotiation or if the parties cannot agree, the order of the court. In short, a tax refund or liability is treated just like any other asset or liability of the marriage.

Filing income taxes incorrectly during a divorce proceeding can result in costly litigation and additional accountant’s fees to amend returns, which could result in any refund being quickly depleted. The best course is to have an initial conversation with both your attorney and accountant before filing so that the optimal path is chosen.

More predictability for Maintenance Awards in Illinois starting January 1, 2015

Despite the new guidelines, a Judge may deviate from the payment amount and/or duration of the payments if he or she finds that there are compelling reasons to do so and makes specific findings regarding that deviation.
Despite the new guidelines, a Judge may deviate from the payment amount and/or duration of the payments if he or she finds that there are compelling reasons to do so and makes specific findings regarding that deviation.

There is a significant change to maintenance awards (formerly known as alimony) effective January 1, 2015 under the Illinois Marriage and Dissolution of Marriage Act (“IMDMA”).   Under the old statute, Judges were given very broad discretion to decide a maintenance award after weighing several factors.  The problem with the old statute was that a maintenance recipient with the same set of factors could be given a vastly different maintenance award among different Judges within the same courthouse and on a broader scale, between state counties.  The changes to the maintenance statute include new objective calculations to determine a maintenance amount and duration, thus giving both parties more predictability and hopefully ensuring more consistency among Judges and Counties.

The new law involves a two-step process. First, the court determines whether maintenance is appropriate, based on factors including but not limited to the length of the marriage, the employment and employability of the parties, and the financial needs of the parties.   Next, once the court determines that maintenance is appropriate, so long as the combined gross income of the parties is below $250,000 and no multiple family situation exists, it applies the guidelines to calculate a monthly payment amount, with a fixed term of years for the payments which is dependent on the length of the marriage.

In guideline maintenance cases under the new law, the math starts with taking the difference of 30% of the payor’s gross income and 20% of the payee’s gross income.  This is the maintenance award (with a built-in cap that allows the payee spouse to receive in total no more than 40% of the parties’ combined gross incomes).   To determine the length of the award, a multiplier is used taking into account the length of the marriage.  For marriages 20 years and more, the length of the maintenance could be the length of the marriage or it could be permanent.

Despite the new guidelines, a Judge may deviate from the payment amount and/or duration of the payments if he or she finds that there are compelling reasons to do so and makes specific findings regarding that deviation. 

Another unique change to the maintenance statute is that for marriages of less than 10 years, the court may now designate the termination date as a “permanent termination,” rather than allow the payee spouse to ask for additional maintenance at the end of the term, which appears to be implied for marriages which are greater than 10 years in length.[i]

The new maintenance rules should make it easier for divorcing parties to calculate maintenance awards in advance, and with that anticipated certainty, it may be easier to settle more divorce cases with less litigation, saving clients time and money.   In Illinois, maintenance can be awarded on a temporary basis at the beginning of a family law matter as well as at the conclusion of the case and may be reviewable at a set date or upon a substantial change of circumstances among the parties involved.

As a family law practitioner, one of the biggest issues with divorce cases involving a potential maintenance award is being able to predict what the outcome may be for the client.  The new statute and guidelines do offer more objective criteria so that is appealing.   However, the rigidity in the duration of the award can be concerning as I do not believe it provides incentive for the payee spouse to seek and obtain employment and become self-sufficient, which in many cases are the main goals of a maintenance award.   If the spouse knows that he or she is getting a fixed amount regardless of whether he or she goes back to work, then I can see situations where there will instead be a disincentive to make those efforts at becoming self-supporting.  Only time will tell whether the positive aspects of these changes outweigh the negative ones.

To learn more about Law Office of Jennifer Guimond-Quigley and the family law services Jennifer provides, please visit the firm’s website, Facebook and LinkedIn sites. Jennifer frequently shares resources and tips for Chicago area families experiencing a variety of family-related concerns.

[i] 750 ILCS 5/504 (b-4.5) effective Jan 1, 2015.

REMOVING CHILDREN FROM THE STATE IN PARENTAGE AND DIVORCE CASES

When parents residing in Illinois disagree on one parenting moving out of state with the child(ren), the parent wishing to move must seek approval from an Illinois court.
When parents residing in Illinois disagree on one parenting moving out of state with the child(ren), the parent wishing to move must seek approval from an Illinois court.

Few people dispute that it is in the best interest of children to have both fit parents actively involved in their lives.  In an ideal world, that would involve co-parenting and parents sharing time and opportunities to be a consistent and supportive presence in their children’s lives.  Sometimes, however, situations arise for one of the parents that can lead to a change in the parenting arrangement.   A parent can be offered an opportunity to move out of state for employment or to accompany a new spouse for a new job or job reassignment.

When parents residing in Illinois disagree on one parenting moving out of state with the child(ren), the parent wishing to move must seek approval from an Illinois court.

In some cases, a mediator may help the parents find a solution that works for everyone.   However, the reality is that the parent remaining in Illinois will usually be left with much less parenting time or exercising parenting time will become much more costly and for these reasons, parents usually come to an impasse on the subject of removal.  If litigated, a judge will consider the totality of the situation, including but not limited to the age of children involved, their preference (if of sufficient age), the opportunities for the parent in the new state, the opportunities for the child(ren) in the new state, the effect on the current parenting schedule, the financial impact travel will have on the noncustodial parent, the presence of extended family in the new state, and any other factor that the Court determines is relevant to the best interest of the child.   The burden of proof that the move is in the best interest on the child(ren) is on the party wishing to move.

Illinois provides statutory guidelines for removal cases and case law has provided additional clarification in interpreting the statute.

The Illinois Marriage and Dissolution of Marriage Act (IMDMA) states in pertinent part as follows:

“The court may grant leave, before or after judgment, to any party having custody of any minor child or children to remove such child or children from Illinois whenever such approval is in the best interests of such child or children. The burden of proving that such removal is in the best interests of such child or children is on the party seeking the removal. When such removal is permitted, the court may require the party removing such child or children from Illinois to give reasonable security guaranteeing the return of such children.” 750 ILCS 5/609(a)

The factors the court will consider in deciding permanent removal cases are as follows[i]:

  • The likelihood for enhancing the general quality of life for both the custodial parent and the children;
  • The motives of the custodial parent in seeking the move to determine whether the removal is merely a ruse intended to defeat or frustrate visitation;
  • The motives of the noncustodial parent in resisting the removal;
  • The best interests of a child to have a healthy and close relationship with both parents, as well as other family members; and
  • Whether a realistic and reasonable visitation schedule can be reached if the move is allowed.

For more information about temporary or permanent requests to modify a parenting agreement to allow for the removal of a child from Illinois, please contact Jennifer Guimond-Quigley.

To learn more, please visit the firm’s website, Facebook and LinkedIn sites.

[i] In re Marriage of Eckert, 518 NE 2d 1041, 119 Ill. 2d 316 (1988)

Prenuptial and postnuptial agreements: Creating predictability in matters of love and marriage

Premarital agreements are also a good way to protect premarital assets and family-run businesses from later claims by the spouse, should the marriage end. We often see examples of how marriage can be a blessing or a curse. With articles in social media and programs on television highlighting everything that can go wrong, it is no wonder people are a little nervous to get married these days. One way of easing the stress associated with taking the plunge is to execute a Premarital agreement.

Premarital agreements offer the wedding couple peace of mind in knowing what will happen to property, debts and other benefits of marriage in the event the marriage ends by way of divorce or death of one of the parties. Premarital agreements are extremely important in second marriages, especially when children are involved. Entering into a premarital agreement can help the couple decide under what conditions one of the parties may receive maintenance payments, what assets will be preserved for the benefit of the children from the first marriage, and what debts will remain with one of the parties. Of course, there are some provisions of the Illinois Marriage and Dissolution of Marriage you cannot change with a premarital agreement, such as child support, and those potential obligations should be considered when contemplating a premarital agreement.  Premarital agreements are also a good way to protect premarital assets and family-run businesses from later claims by the spouse, should the marriage end.

Attorney Jennifer Guimond-Quigley is experienced with drafting, negotiating, and interpreting Illinois prenuptial and postnuptial agreements. The source of law controlling premarital agreements is the Illinois Uniform Premarital Agreement Act[1] (“IUPAA”) enacted by Illinois as of December 2009, and applying to premarital agreements executed or modified on or after January 1, 1990. To be enforceable, the premarital agreement must be in writing and signed by both parties. Full disclosure of each person’s assets and liabilities is a key factor in enforcing the agreement. If one of the parties to the agreement knowingly fails to disclose debts, property, or income, the agreement is voidable. Premarital agreements must be voluntary and if one party is pushed into one or tricked (in the event of lack of full financial disclosure) the agreement may not be enforceable.  It’s also good practice for both sides to be represented by independent counsel.

If a premarital agreement is challenged in court (in the event of death or divorce terminating the marriage) the statutory rules control the outcome of a challenge to enforce the agreement. Under the Uniform Premarital Agreement Act parties to a premarital agreement may contract to the following[2]:

  • (1) the rights and obligations of each party in any of the property of either or both of them whenever and wherever acquired or located;
  • (2) the right to buy, sell, use, transfer, exchange, abandon, lease, consume, expend, assign, create a security interest in, mortgage, encumber, dispose of, or otherwise manage and control property;
  • (3) the disposition of property on separation, marital dissolution, death, or the occurrence or nonoccurrence of any other event;
  • (4) the modification or elimination of spousal support;
  • (5) the making of a will, trust, or other arrangement to carry out the provisions of the agreement;
  • (6) the ownership rights in and disposition of the death benefit from a life insurance policy;
  • (7) the choice of law governing the construction of the agreement; and
  • (8) any other matter, including their personal rights and obligations, not in violation of public policy or a statute imposing a criminal penalty.

On the other hand, married couples may not have a prenuptial agreement, but are having issues and one or more parties are contemplating divorce.  Or, a spouse may be asking the other spouse to quit their job and become a stay at home parent, thereby reducing or eliminating that spouse’s employability outside the home.  A postnuptial agreement (as opposed to a prenuptial agreement) can address those concerns to ensure the spouse who is giving up a career or who agrees not to proceed with a divorce action can be assured that he or she will have an equitable outcome down the road if there is a separation or divorce.

On the other hand, married couples may not have a prenuptial agreement, but are having issues and one or more parties are contemplating divorce.  Sometimes peoples’ circumstances significantly change and a couple may want to amend or cancel a previously executed premarital or postnuptial agreement. The same rules of voluntary disclosure apply to amending agreements. Additionally, some couples may want to save time and money by drafting and executing their own agreement by trying to find an online form and providing each other with a list of their assets and liabilities.  While I encourage parties to attempt to work out the major details of their prenuptial agreement themselves (if possible) and to submit a preliminary list of that proposed agreement along with their list of assets, liabilities and income, it is not advisable for a couple to actually draft and execute the agreement without seeking counsel to ensure that the agreement meets the requirements of Illinois law.

Attorney Jennifer Guimond-Quigley is experienced with drafting, negotiating, and interpreting Illinois prenuptial and postnuptial agreements. To learn more, please visit the firm’s website, Facebook and LinkedIn sites. Jennifer frequently shares resources and tips for Chicago area couples in the process of partnering up in marriage or civil union or ending their relationship.

[1]750 ILCS 10/1 et seq.

[2] Source: 7 Nichols Ill. Civ. Prac. § 131:88; Nichols Illinois Civil Practice; Database updated May 2013; Part XII. Special Remedies and Distinct Types of Actions or Proceedings; Chapter 131. Family Law; Shirley Meyer, J.D. and Harry C. Lee, J.D.; See also 750 ILCS 10/4.