The financial implications of a divorce can affect you for the rest of your life. This can be especially true when there is a significant income disparity between spouses. A large income disparity can occur when the wife was a stay-at-home mother while the husband was self-employed and the sole income earner for the family. Or, perhaps both spouses worked, but the wife is the CEO of a company, and the husband works part-time as a barista at Starbucks. There are many different situations where a high-income spouse can greatly out-earn the other, but in every case, there are issues that can arise in divorce that you should be aware of.
Determining Income for Support Purposes
Maintenance and child support are now calculated in Illinois by a computer program. The individual income of each spouse is put into the computer program along with a few other details, and the program generates the appropriate support numbers. This works easiest when both parties receive W-2 forms or 1099 forms each year. However, when one spouse is a high-income spouse with a much higher income earner than the other, it is likely that their income presents some complications.
For example, for spouses employed by large corporations, there can be restricted stock awards, clawback bonuses, performance bonuses, commission pay, and the like. If this spouse is self-employed, there can be draws taken from the company, dividends, and personal expenses that might be paid by the company that you don’t see in a paycheck or on a pay stub. All of these things affect the calculations of support when a high-income spouse is involved.
On top of that, if the total income of the high-earning spouse or the combined income of both parties exceeds $500,000 per year, the Court is not required to follow the same statutory guidelines for the calculation as those couples who make less than that amount per year. In all of these cases, it is beneficial to seek help from an experienced Chicago divorce attorney.
Determining Taxes for Support Purposes
Along with being able to include all sources of income from the high earning spouse, the correct amount of taxes also needs to be determined as well when calculating child support and maintenance. If the high earning spouse owns their own business, and it is closely held business, chances are that there is a comingling of business expenses and personal expenses in a shared account. Also, being self-employed and having your own business usually entails taking many specific deductions so they get the full benefit of being a business owner on their taxes. However, not all of these deductions they claim on their taxes is appropriate when you are trying to calculate net income for purposes of determining support. The statute can direct you as to what deductions are allowed and what are not. An experienced family law attorney can review your spouse’s financial documents to ensure they are not taking excessive deductions, therefore reducing their income to try to pay less in support.
Allocation of the Marital Estate – Assets and Debts
If one spouse earns substantially more than the other spouse, that can also affect how the Court divides the marital estate, including assets and debts, as well as any additional expenses there might be for the children of the marriage. The Court can consider one party’s much higher income as a factor in determining that spouse is better able to succeed financially in the future; therefore, it may warrant a disproportionate split of the marital estate and marital debts.
If one spouse has a better and higher earning potential in the future, after the divorce is finalized, then the Court can consider that and potentially award the spouse making less or with no income a higher percentage of the marital assets. This could mean 60%, 70%, or more of the marital assets like the equity in the house, the bank accounts, and retirement. The Court can also order the spouse who earns a lot more than the other spouse to pay more or all of the marital debt from the marriage – this can include credit cards, loans, the home mortgage, etc. If your spouse is going to be making more and more money in the future while your income stays the same, they then have the ability to pay for more of what is owed. It’s important that you get the help of an attorney, like an experienced attorney at Anderson & Boback, who can get the share of the marital estate you deserve.
High-Income Spouse and the Allocation of Attorney Fees
When one spouse is greatly out-earning the other spouse, the Court can also order that the higher income earner contributes to the other spouse’s attorney fees during or at the end of the case. This contribution could be a certain percentage of the fees or potentially all of the fees, depending on how far apart the respective parties’ incomes are. The attorneys at Anderson & Boback can help by filing the required motions in court to request help with your attorney fees if you are not able to pay, or your spouse has the greater ability to pay those fees instead.
When a divorce involves a high-income spouse, the financial issues become more complex. To ensure your interests and protect your financial future, seek legal advice from divorce attorneys with expertise in high-asset divorce.