Tag: child support

What Is Included in “Gross Income” For Calculating Spousal Maintenance in Illinois?

Posted on by Louis Fine

“How much do you make?” While that may not be an appropriate or welcome question in casual conversation, it is the fundamental inquiry used to calculate the amount of spousal maintenance obligations awarded in an Illinois divorce. But for many divorcing couples, especially for those with high-net-worth, significant investments, or multiple sources of wealth, determining the actual amount of “income” which will be the foundation of these calculations involves a lot more than looking at pay stubs. Whether you are seeking a maintenance award or want to keep any such payments to a minimum, it is important to understand what constitutes “income” under Illinois Marriage and Dissolution of Marriage Act (the “Act”)

New Spousal Maintenance Guidelines  

In response to the 2017 federal tax overhaul that eliminated the tax deduction for spousal maintenance payments, Illinois lawmakers in 2018 changed the guidelines for determining how monthly payments are calculated.

As of 2018, these guidelines now apply to couples with a combined “gross income” of less than $500,000. For divorces finalized in 2019 or later, the award should be 33.3% of the payor’s net (not gross) income, minus 25% of the recipient’s net (not gross) income. The amount calculated as maintenance, however, when added to the gross income of the payee, may not result in the payee receiving an amount that is more than 40% of the combined net income of the parties.

Since net income is derived from gross income, defining the spouses’ “gross income” is the key to figuring out maintenance awards, both under the guidelines and for couples over the $500,000 threshold.

“Gross Income” Defined

Section 504 of the Act, which covers spousal maintenance, defines “gross income” as “all income from all sources,” and refers to the definition of gross income used in Section 505 of the Act regarding child support. Under that section, “gross income” means “the total of all income from all sources, except for:

  • Public assistance benefits
  • Benefits and income received by the parent for other children in the household.

Outside of those exceptions, almost every dollar, every appreciation in value, every dividend paid and every capital gain is included in gross income. The Illinois Supreme Court has ruled that the definition of “income” under the Act mirrors that found in Webster’s Dictionary:

“As the word itself suggests, ‘income’ is simply ‘something that comes in as an increment or addition * * *: a gain or recurrent benefit that is usu[ually] measured in money * * *: the value of goods and services received by an individual in a given period of time.’”

In re Marriage of Rodgers, 213 Ill. 2d 129 (2004)

Over the years, Illinois courts have made decisions about the specific forms of income to be included in gross income for purposes of spousal maintenance calculations. These include:

  • Monetary gifts
  • “Loans” in name only, such as those from a family member, a corporation, or a business the payor spouse has an ownership interest in when there is little or no expectation that the loan will be repaid or any evidence to support the claim that it is a loan rather than a gift -such as documentation, requests for repayment, or reporting the money as a loan on tax returns.
  • Salaries, bonuses, and commissions
  • Pension proceeds
  • Workers’ compensation benefits
  • Interest and appreciation of an IRA
  • Liquidation of an IRA
  • Distribution of stock sold pursuant to an employment bonus-based option

Spousal Maintenance Questions? Call Chicago Divorce Attorney Louis Fine Today

An experienced divorce attorney, working in concert with accounting and tax professionals, can ensure that the amounts used to calculate maintenance obligations include every appropriate income stream and exclude those carved out by the law so that any maintenance award is fair and equitable.

If you have questions or concerns regarding gross income or spousal maintenance generally, please give me a call at (312) 236-2433 or fill out my online form to arrange for a consultation.

Dogging It: Voluntarily Tanking Your Income Won’t Get You Out of Your Child Support Obligations

Posted on by Louis Fine

Divorce can bring out the worst in people. Underhanded actions and tricks designed to hurt the other spouse and gain an advantage in the proceedings are all too common. In many cases, a spouse will engage in devious tactics to try to reduce the amounts he or she must pay for child support.

Since support obligations are in part determined based on the assets and income of the parent from whom payments are sought, a less-than-honest spouse may try to make it appear that they have significantly less money than they actually do. This can involve concealing or transferring assets. Sometimes, however, a spouse will also intentionally reduce their income through “voluntary underemployment” or taking a job that pays less than they previously were earning, solely to stick it to the other parent or deny them the child support they deserve.

Luckily, Illinois law provides a way for parents who are intentionally tanking their income to be held to account.

“Potential Income” Used to Determine Child Support Obligations

In Illinois, the basic formula for arriving at a child support amount (subject to variations based on specific circumstances) involves:

  • calculating each parent’s net income, then
  • combining net incomes to determine Total Family Income, then
  • using the Illinois Child Support Estimator to determine the Basic Child Support Obligation, then
  • allocating the Basic Child Support Obligation proportionally based on net incomes.

Initial support obligations are calculated as part of the divorce proceedings but can later be modified at the request of one of the parents if there has been a substantial change in circumstances, such as an increase or decrease in the amount of one of the parent’s incomes. But if it can be shown that a reduction in a parent’s net income – such as quitting a job or taking a much lower paying job – was voluntary and done in bad faith, an Illinois court can base its support calculations on the parent’s “potential income” rather than their actual, reduced income.

Specifically, Section 505(a)(3)(F)(II)(3.2) of the Illinois Marriage and Dissolution of Marriage Act provides that If a parent is “voluntarily unemployed or underemployed, child support shall be calculated based on a determination of potential income.” A court will calculate that income by determining the parent’s employment potential and probable earnings level based on:

  • the parent’s work history
  • the parent’s occupational qualifications,
  • prevailing job opportunities
  • the ownership by a parent of a substantial non-income producing asset, and
  • earnings levels in the community.

If there is insufficient work history to determine employment potential and probable earnings level, there is a rebuttable presumption that the parent’s potential income is 75% of the most recent United States Department of Health and Human Services Federal Poverty Guidelines for a family of one person.

Every one of us has our own unique career journey which can include ups and downs, setbacks and advancements. Whether a parent’s career choices will be held against them in terms of their child support obligations will depend on their unique facts and circumstances and whether or not those choices were made in good faith or were made solely to skirt their obligations under the law.

Louis R. Fine – Chicago Child Support Attorney

If you have questions about child support, please give me a call at (312) 236-2433 or fill out my online form to arrange for a consultation. When we meet, we can go through all of your questions, and I will be there to listen to you as well as advise you. I look forward to assisting you

“Potential Income” Used to Determine Child Support Obligations

In Illinois, the basic formula for arriving at a child support amount (subject to variations based on specific circumstances) involves:

  • calculating each parent’s net income, then
  • combining net incomes to determine Total Family Income, then
  • using the Illinois Child Support Estimator to determine the Basic Child Support Obligation, then
  • allocating the Basic Child Support Obligation proportionally based on net incomes.

Initial support obligations are calculated as part of the divorce proceedings but can later be modified at the request of one of the parents if there has been a substantial change in circumstances, such as an increase or decrease in the amount of one of the parent’s incomes. But if it can be shown that a reduction in a parent’s net income – such as quitting a job or taking a much lower paying job – was voluntary and done in bad faith, an Illinois court can base its support calculations on the parent’s “potential income” rather than their actual, reduced income.

Specifically, Section 505(a)(3)(F)(II)(3.2) of the Illinois Marriage and Dissolution of Marriage Act provides that If a parent is “voluntarily unemployed or underemployed, child support shall be calculated based on a determination of potential income.” A court will calculate that income by determining the parent’s employment potential and probable earnings level based on:

  • the parent’s work history
  • the parent’s occupational qualifications,
  • prevailing job opportunities
  • the ownership by a parent of a substantial non-income producing asset, and
  • earnings levels in the community.

If there is insufficient work history to determine employment potential and probable earnings level, there is a rebuttable presumption that the parent’s potential income is 75% of the most recent United States Department of Health and Human Services Federal Poverty Guidelines for a family of one person.

Every one of us has our own unique career journey which can include ups and downs, setbacks and advancements. Whether a parent’s career choices will be held against them in terms of their child support obligations will depend on their unique facts and circumstances and whether or not those choices were made in good faith or were made solely to skirt their obligations under the law.

Louis R. Fine – Chicago Child Support Attorney

If you have questions about child support, please give me a call at (312) 236-2433 or fill out my online form to arrange for a consultation. When we meet, we can go through all of your questions, and I will be there to listen to you as well as advise you. I look forward to assisting you

Parents Can’t Rely on “Off the Books” Child Support Agreements

Posted on by Louis Fine

During a divorce, the more issues the parties can reach agreement on, the better. It is almost always in both spouses’ best interests to resolve disputed matters on their own rather than having a judge impose a solution upon them. But there are limits as to what parties can agree to, especially when it comes to child custody and child support issues.

Before any such agreements can become part of a final Illinois divorce decree, a judge needs to approve them to ensure that they comply with the law and are in the best interests of the child. But long after the ink has dried on the divorce judgment, parents may mutually decide to change arrangements as to custody, visitation, or support. If they do so without court approval, however, it may come back to bite them in a very costly way.

Court Approval Needed for Any “Agreement” Modifying Support

Several Illinois cases have dealt with variations of the following situations: A custodial parent “agrees” not to enforce the non-custodial parent’s existing child support obligations. Maybe the non-custodial parent agreed to no longer be involved in the child’s life in exchange for being released from his or her obligations, or perhaps the custodial parent decided not to push the issue for a period of time because the other parent had fallen on hard times. Sometimes, a parent may take no action for years to seek payment of past due child support amounts, leading the other parent to believe that they are no longer on the hook. But nobody ever asks the court to officially modify the support or custody arrangements contained in the final judgment for dissolution of marriage.

What inevitably happens next? The parent owed many years-worth of child support payments decides to file a motion seeking the past due amounts from the other parent, much to that parent’s shock and consternation. That shock will be compounded with the need to write a huge check when the judge rejects the arguments that there was an “agreement” or that it is unfair to expect payment of this huge sum all at once when their spouse sat on their hands for years doing nothing to enforce support obligations.

Agreements Unenforceable, Delay in Enforcement Irrelevant

In the case of In re Marriage of Smith, for example, a mother petitioned the court to order her ex-husband to pay $60,000 in past due child support payments that had accrued over almost two decades. The husband claimed that the mother told him that she would waive her right to periodic support payments if he purchased several unspecified items for the girls, which he did.

The court found that no such agreement actually existed, and entered a judgment against the father for all past amounts due. But the court emphasized that even if there was such an agreement, it would be unenforceable, and any defenses premised on either an agreement or on a delay in seeking enforcement of child support obligations were invalid.

Specifically, the court held that:

  • Agreements modifying support without judicial approval are unenforceable. Allowing former spouses to modify a court-ordered child support obligation by creating a new agreement between themselves without judicial approval would circumvent judicial protection of the children’s interests. Therefore, parents may create an enforceable agreement for modification of child support only by petitioning the court for support modification and then establishing, to the satisfaction of the court, that an agreement reached between the parents is in accord with the best interests of the children.
  • Unreasonable delay in bringing a child support enforcement action is not a defense. Under Illinois law, the defense of “laches” is premised on the idea that a claim should be barred if the claimant’s unreasonable delay in raising that claim has prejudiced the opposing party. But the Illinois Supreme Court has held that, in the context of a laches defense to a claim for a support arrearage, a spouse is not injured simply because he is forced to pay the accumulated support in one lump sum as opposed to weekly payments as ordered. Similarly, it won’t likely be considered prejudicial for a payor to have to go back and assemble years-worth of financial documents which he or she failed to previously provide as required in the original support order.

All of the foregoing is not to say that divorced parents shouldn’t agree to changes to their support, visitation, or custody arrangements if they believe it would be mutually beneficial and be in the best interests of their child. But if a judge doesn’t sign off on that agreement, it isn’t worth whatever paper it may have been printed on.

More Fairness + More Complexity = New Illinois Child Support Law

Posted on by Louis Fine

Following the massive overhaul of Illinois divorce and family law that became effective last year, additional changes have been made that will alter how child support obligations are calculated in the state. If you pay or receive child support, you may be able to modify the established amounts after the law becomes effective on July 1, 2017.

Hard Percentages Replaced By “Income Shared” Approach

Currently, the calculation of child support in Illinois is based on a pretty simple formula. A hard percentage of the non-custodial parent’s net income is used to determine the amount that he or she has to pay, with that percentage going up for each additional child who needs support.

But when parents divide parenting time more or less equally, and a child spends significant time staying with the “non-custodial” parent, putting all of the support obligations on that parent, or not taking into account the income of the other parent, doesn’t make much sense.

Many other states recognized this reality and changed their child support laws as part of the same alterations Illinois adopted last year, when terms like “custody” and “visitation” were replaced with “allocation of parenting time” and “allocation of parental responsibilities.”

Now, child support will be “allocated” between the parents just as time and responsibilities are. Specifically, the old percentage formula has been replaced by what is called an “income shared” approach under which each parent is designated a portion of child support obligations depending on how much they financially contributed to the overall household income when the marriage was still intact. It also takes into consideration the amount of time the child spends with each parent pursuant to the agreed-upon or court-ordered parenting plan that is now part of every Illinois divorce involving children.

How the New Child Support Law Works

Starting July 1, child support will be calculated by:

  • calculating each parent’s net income, then
  • combining net incomes to determine Total Family Income, then
  • using a chart contained in the new law to determine the Basic Child Support Obligation, then
  • allocating the Basic Child Support Obligation proportionally based on net incomes.

But there’s more. If each parent exercises 146 or more overnights per year with the child, called “shared parenting, the Basic Child Support Obligation is then multiplied by 1.5 to calculate the shared care child support obligation. Then, using the percentage of time the child spends with the other parent, child support is calculated from one parent to the other. Then, the two amounts are netted out.

Seem confusing? It is. While the new law may result in more equitable child support arrangements, it also will also result in more complexity in determining what those arrangements will be. A seasoned Illinois child support lawyer can help you navigate these changes to the law and advise you of your rights and options.

Louis R. Fine – Chicago Child Support Attorney

If you have questions about child support and how the changes to Illinois may affect you and your children, please give me a call at (312) 236-2433 or fill out my online form to arrange for a consultation. When we meet, we can go through all of your questions, and I will be there to listen to you as well as advise you. Together, we will turn the page so you can begin the next chapter of your life with clarity and confidence.

Who Should Pay for U? – College Costs After Divorce

Posted on by Louis Fine

Overjoyed or crushed? For high school seniors across the country at this time of year, acceptance or rejection letters from the colleges they wish to attend are determining which of those emotions they feel upon opening their mail. For parents of those seniors, the pride they feel about their child’s acceptance is likely accompanied by confusion and anxiety about the financial aid process and how they will help pay for four (or more) years of tuition that seems to increase at an exponential rate every year.

For divorced parents, a child heading off to college also means the end of child support and with it the question of who is going to foot the bill for their child’s college expenses. In Illinois, college costs are referred to as “post-majority expenses” and the question of who pays them depends on several factors.

Look to Your Judgment of Dissolution First

First, check your judgment of dissolution. If your marital settlement agreement, which divided all your property and set forth provisions regarding child custody and support, addressed post-majority expenses, they will be incorporated into the court’s final judgment. Illinois law gives family law courts the right to require one or both parents to pay a child’s higher education costs, even after the child graduates high school and turns 18.

The Illinois Marriage and Dissolution of Marriage Act

If your marital settlement agreement says nothing about college costs, and the judgment of dissolution is also silent on the issue, all hope is not lost. In Illinois, either parent can petition the court for college expenses, both before and after a child becomes a legal adult. More importantly, it doesn’t matter if your marital settlement agreement or final divorce decree failed to address the issue of post-majority expenses.

Section 513 of the Illinois Marriage and Dissolution of Marriage Act allows both moms and dads to ask the court to order the other parent to contribute to “the educational expenses of the child or children of the parties, whether of minor or majority age.” Such an application for educational expenses “may be made before or after the child has attained majority” and any order for the payment of college expenses terminates when the child receives a baccalaureate degree,” so no order will include the costs of graduate school.

In the majority of cases, the parent with the higher income is required to pay a larger percentage of the expenses, although courts occasionally order the child to kick in a portion of the bill.

Act Quickly to Receive the Support You Need

Too often, parents delay filing a petition for post-majority expenses until college fees are upon them. If you wait until your child is packing up for the first day of school, you could get stuck with the bill for the first semester.

If you have questions or concerns regarding your child’s college costs after a divorce, please give me a call at (312) 236-2433 or fill out my online form to arrange for a consultation.