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Family Law

: The Illinois Family Lawyer

By Peter Olson, Esq.

Is it alimony/maintenance?? Important question...if it's alimony then that money is tax deductible by the payor and it's treated as income for the recipient. I.e...big tax consequences.

If alimony is part of a divorce judgment it has to be clearly defined as such:

--Must be paid pursuant to a divorce or separation agreement;
--Parties must live in separate households;
--Payments must be designated to end when the recipient dies;

A recent case dealt with the big question above (Proctor v. IRS). The former husband in a divorce had been ordered to pay part of his disposable pension payments to his former wife as a "property settlement." This payment was not in any way said to NOT be alimony.

Well, the husband tries to claim these payments as tax deductible alimony and guess what, the tax court agreed! A nice little tax burden to the former wife.

My general thoughts are that alimony/maintenance must be defined very clearly because you have both the family law issues but then there are also the tax issues. Further, it's tricky when a person has a pension that's already in payment status. If the former husband were not yet retired then a QDRO would have been entered and clearly that's property division.

Full post as published by The Illinois Family Lawyer on January 09, 2008 (boomark / email).