Retirement And Maintenance In An Illinois Divorce

Maintenance, formerly known as “alimony” in Illinois, is a way to further ensure an equitable division of finances between two spouses who have unequal incomes. One spouse has relied on the other spouse for regular financial support, the Illinois legislature states the supporting spouse should continue to support their ex-spouse in a definite amount for a period of definite time. Ordering maintenance for a defined duration of time makes sense if the supporting spouse is going to be working for the entirety of that defined duration of time. But, if the supporting spouse is likely to retire during that defined duration, certain considerations must be taken.

from Russell D. Knight | Family Lawyer Chicago https://rdklegal.com/retirement-and-maintenance-in-an-illinois-divorce/

How To Value And Divide A Business In An Illinois Divorce

There is probably no more byzantine and complex process in an Illinois divorce than valuing and dividing a business. The business-operating spouse will always want to keep the business while claiming the business is worthless. The spouse who doesn’t operate the business will want a grandiose share of the business’s value…without really knowing what that value is. A business’s value will surely go to trial or be negotiated fiercely. The business owner and his or her spouse must know how an Illinois court determines the value and division of a business. More importantly, the litigants’ divorce lawyers must understand completely how a business is valued by experts who disagree and how to apply those valuations to the body of Illinois that governs the valuation and division of businesses in an Illinois divorce. Is a Business Marital or Non-Marital In An Illinois Divorce? Every asset in an Illinois divorce must first be determined to be marital or non-marital. “The court shall make specific factual findings as to its classification of assets as marital or non-marital property, values, and other factual findings supporting its property award.” 750 ILCS 5/503 For business interests non-marital property is, typically, property acquired before the marriage or via an inheritance/gift. [T]he following…is known as “non-marital property:” “property acquired before the marriage” 750 ILCS 5/503(a)(3) “property acquired by gift, legacy or descent or property acquired in exchange for such property” 750 ILCS 5/503(a)(1) The non-marital property MUST stay with the party in whose name that non-marital property remains. “[T]he court shall assign each spouse’s non-marital property to that spouse.” 750 ILCS 5/503(d) “Real property and business interests acquired after marriage are presumed to be marital property unless they were purchased with nonmarital funds.” IN RE MARRIAGE OF SCHMITT, 909 NE 2d 221 – Ill: Appellate Court, 2nd Dist. 2009 “The business interest of a spouse acquired subsequent to marriage constitutes `marital property’ subject to equitable distribution upon dissolution.” In re Marriage of Schneider, 343 Ill.App.3d 628, 634, 278 Ill.Dec. 485, 798 N.E.2d 1242 (2003) Businesses that have portions thereof that were acquired before the marriage, ex: a building that was bought after the marriage, will have those potions deemed to be non-marital. The increase in value of those pre-marital properties will also be deemed non-marital. Business properties “owned before the marriage are…nonmarital property. They are no doubt worth more now than they were then. However, the increase in value of […]

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Double Dipping In An Illinois Divorce

A financially successful person makes a lot of money and saves a lot of money. After an Illinois divorce, a financially successful person will be expected to divide their savings with their ex-spouse and pay their ex-spouse maintenance (formerly known as alimony). The ex-spouse will have half of the successful professional’s assets AND a portion of the successful professional’s income for a set period of time (or forever). Is this fair? Does it ever end? There may be one viable objection to paying both half your assets and maintenance to the your ex-spouse: double dipping. “Commentators use the phrase “double dipping” to describe the seeming injustice that occurs when property is awarded to one spouse in an equitable distribution of marital assets and is then also considered as a source of income for purposes of imposing support obligations.” In re Marriage of Eberhardt, 387 Ill. App. 3d 226, 232 (Ill. App. Ct. 2008) (citation omitted) Double dipping is discouraged because of the distinction between what is modifiable and what is non-modifiable in an Illinois divorce. The division of assets in an Illinois divorce is permanent and non-modifiable. “The provisions as to property disposition may not be revoked or modified, unless the court finds the existence of conditions that justify the reopening of a judgment under the laws of this State.” 750 ILCS 5/510(b) In contrast, maintenance is modifiable if there’s been some kind of significant change in either party’s life. “An order for maintenance may be modified or terminated only upon a showing of a substantial change in circumstances.” 750 ILCS 5/510(a-5) The party paying maintenance can file a motion to modify upon retirement. Typically, when the maintenance payor retires, they begin to live off their savings from a tax-deferred retirement account such as a 401k. Because 401ks defer the taxes owed on the saved money to the time that the money is withdrawn, those withdrawals look like income on a tax return. The maintenance receiver is NOT entitled to a portion of that 401k distribution “income” because the underlying money was already awarded in the property distribution of the Marital Settlement Agreement. An “ordered [change] in maintenance [is] actually a modification of the parties’ property settlement agreement rather than a modification of the maintenance provision of the dissolution judgment based on a substantial change in circumstances. While maintenance provisions are modifiable upon a showing of a substantial change in […]

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Stock Options And Divorce In Illinois

The term “stock options” has a certain mystique. Stock options seem like a sophisticated financial instrument for the rich and about-to-be-rich…and they kind of are.  The problem with sophisticated financial instruments like stock options, is that they are hard to divide in an Illinois divorce.  So, how do you divide stock options in an Illinois divorce? What Are Stock Options? There are two classes of options that people refer to when they say “stock option” One type of stock option is a sophisticated way to buy or sell stocks by betting on the stock’s future value without actually buying the stock. This is usually just called an “option.” This is financial device is not what people usually refer to as a “stock option” in a divorce. I discuss options first, before employee stock options to clarify how the concept of an option works. An option gives an investor the right, but not the obligation, to buy or sell a stock at an agreed upon price and date. Whether you have the right to buy or sell a stock through an option is referred to as “calls” or “puts.” A call is a bet that the stock will go up.  A call might cost as little as $ 2. But it could give you the right to buy a share of Wal-Mart for $ 30.  If Walmart’s stock goes up to $ 50.  You can use your call to buy it for $ 30. That’s an $ 18 profit after the $ 2 call price. A put is a bet the stock will fail.  So, you can bet the right to sell a stock at a price and assume the price will be less than that.  So, if you have a General Electric put for $ 80 and General Electric is priced at $ 50.  You can buy a share of General Electric at $ 50 and then sell it via your put at $ 80 and keep the $ 30 difference. These types of stock options usually only last for a short period of time. They never last more than 2 years. Because of the short time frame, these types of independently exercised stock options are never divided in a divorce because the expiration date usually passes before the divorce is finalized. Type of Option Description Call Option A call option gives the investor the right to buy a stock […]

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Postnuptial Agreements In Illinois

Divorce is terrible. Divorce changes everything in both parties’ lives and in their children’s lives. However, the status quo of living in misery and distrust cannot remain either. There must be some kind of half-measure, some kind of remediation in between marriage and divorce. Often, parties will look to a postnuptial agreement (also known as a “postnup” or an antenuptial agreement) as a way to delay divorce and set new terms for an eventual divorce. How does a postnuptial agreement work in Illinois? A postnuptial agreement is “an agreement entered into during marriage to define each spouse’s property rights in the event of a death or divorce.” Black’s Law Dictionary (11th ed. 2019). Agreements happen between couples before a divorce is finalized all the time…and Illinois courts will acknowledge them. “To promote amicable settlement of disputes between parties to a marriage attendant upon the dissolution of their marriage, the parties may enter into an agreement containing provisions for disposition of any property owned by either of them, maintenance of either of them, support, parental responsibility allocation of their children, and support of their children” 750 ILCS 5/502(a) In Illinois a contract is “an agreement between competent parties, upon a consideration sufficient in law, to do or not to do a particular thing.” People v. Dummer (1916), 274 Ill. 637, 640. Why A Postnuptial Agreement Can Be A Good Idea In Illinois When divorce is a possibility (but not a certainty), it may be a good idea to set the terms of that divorce in advance via contract. If the terms of a potential divorce are not set in advance, the terms of the potential divorce will be the Illinois Marriage and Dissolution of Marriage Act, 750 ILCS 5/et al. “If the parties decide to settle their property rights by mutual agreement rather than by statute, they are bound to the terms of their agreement.” In re Marriage of McLauchlan, 2012 IL App (1st) 102114, ¶ 21. Marital property that would, normally, be divisible can become non-marital and, thus, non-divisible in an Illinois divorce. Non-marital property can be “property excluded by valid agreement of the parties, including a premarital agreement or a postnuptial agreement.” 750 ILCS 5/503(a) A postnuptial agreement could be entered into reflecting that the parties’ fiscal relationship has completely changed over the years (maybe the parties became wealthy and one party wants to keep a business while the other party has no interest […]

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Attorney’s Fees In An Illinois Parentage Case

In a divorce, each party’s money is also the other party’s money. So, Illinois divorce courts will liberally order one party to pay the other party’s attorney’s fees during the course of an Illinois divorce. In a parentage action, where the parties have a child or children together but have never been married, each party’s money is their own money. Additionally, the statutes that govern attorney’s fees in an Illinois divorce are all contained in the Illinois Marriage and Dissolution of Marriage Act. If the parties aren’t married, they should not be relying on the the “Marriage Act.” Instead, unmarried couples must use the “Illinois Parentage Act of 2015” to determine their rights in court. The Illinois Parentage Act allows for one party to pay the other party’s attorney’s fees (and many other fees). “The court may assess filing fees, reasonable attorney’s fees, fees for genetic testing, other costs, necessary travel expenses, and other reasonable expenses incurred in a proceeding under this Act. The court may award attorney’s fees, which may be paid directly to the attorney, who may enforce the order in the attorney’s own name.” 750 ILCS 46/802 A parentage court is directed to use the exact same factors as the attorney fee section of the Illinois Marriage and Dissolution of Marriage Act. “Any party may be represented by counsel at all proceedings under this Act. Except as otherwise provided in this Act, the court may order, in accordance with the relevant factors specified in Section 508 of the Illinois Marriage and Dissolution of Marriage Act, reasonable fees of counsel, experts, and other costs of the action, pre-trial proceedings, post-judgment proceedings to enforce or modify the judgment, and the appeal or the defense of an appeal of the judgment to be paid by the parties.” 750 ILCS 46/809(emphasis mine) There are no explicit “relevant factors” listed in Section 508 of the Illinois Marriage Act but it can be presumed that the standard for awarding attorney’s fees is the same for Illinois parentage courts as it would be for Illinois divorce courts: “the financial resources of the parties.” “The court from time to time, after due notice and hearing, and after considering the financial resources of the parties, may order any party to pay a reasonable amount for his own or the other party’s costs and attorney’s fees.” 750 ILCS 5/508(a) The Illinois Parentage Act of 2015 buttresses this […]

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Leaving Children Marital Assets In An Illinois Divorce

People might hate each other during a divorce but they love their kids. To avoid conflict, parties to a divorce may forgo dividing assets for simply awarding those assets to a child or children. Giving away marital assets to children can be memorialized in an Illinois Marital Settlement Agreement. Realistically, if you gave the marital property away to a child, neither party owns the property and the property does not need to be addressed in the Marital Settlement Agreement. Directions regarding marital property as written in a Marital Settlement Agreement must be enforced. The Marital Settlement Agreement will be read and enforced as a contract. “A marital settlement agreement is construed in the manner of any other contract” Blum v. Koster, 919 NE 2d 333 – Ill: Supreme Court 2009 Leaving Items To Children After Your Death In A Marital Settlement Agreement Not infrequently, parties to a divorce wish that their children receive the marital property…but only after they are done with it. “Done with it” usually means when the parties are dead. Both parties’ wills should be updated to reflect the agreement reached in the Marital Settlement Agreement. If a will is not appropriately updated, Marital Settlement Agreements can be binding on the probate courts which determine the distribution of assets after death. “Where a domestic relations order has been entered, the trial court retains jurisdiction to enforce its order, as further performance by the parties is often contemplated.” Smithberg v. Illinois Municipal Retirement Fund, 192 Ill. 2d 291, 297-98 (2000) An Illinois divorce’s “property settlement agreement defined the nature and extent of the rights and liabilities of the parties with respect to the marital real estate, and [a probate] court [is] required to direct performance of those obligations under the decree so as to fully execute its terms.” In re Estate of Coleman, 395 NE 2d 1209 – Ill: Appellate Court, 2nd Dist. 1979 “[P]roperty issues survive the death of a party where the divorce judgment is entered prior to the party’s death.” Sondin v. Bernstein, 126 Ill.App.3d 703 (1984) Binding Promises To Children In A Marital Settlement Agreement Before the death of a party, leaving items to children (or anyone else) can get really complicated. The obligation to turn over the marital property to the children can be likened to creating a debt to the minor child(ren). Each party is agreeing to satisfy that debt to the child(ren). […]

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