Monthly Archives: January 2011

Alimony in Lieu of Property

Under Illinois divorce law, the so-called “equitable distribution” principle (enacted in 1977) allows courts to allocate marital property in myriad ways.  The asset mix in the “marital pot” in numerous cases, however, does not lend itself to a percentage division that a court is likely to order (or on which the parties might ideally agree).  Lack of liquidity is a common reality; and, in some such cases, the would-be property transferor may prefer to draw on future income so as to effect a buyout of marital property claims.  Commonly, this thinking leads to an arrangement in which, in lieu of property delivered to the other ex-spouse on entry of a judgment, a stream of future payments is structured as alimony for federal income tax purposes, buttressed with contractual terms providing for the stream to “ride through” most standard terminating events (such as remarriage, cohabitation, or death of the payor), as well as for the stream to be non-modifiable.    Sometimes    such    a   stream  of  payments  is secured by an encumbrance on property.  Various reasons exist for future alimony payments to be made in lieu of a turn-over of property at the time of entry of a divorce judgment; most frequently, illiquidity and overall tax planning are the primary motivating factors.

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How to Avoid Financial Distress in Divorce

In today’s economic environment, it is a very difficult decision to opt for a divorce and end a dysfunctional relationship.  Today there can be enough stress in people’s lives to make them hesitant to compound that problem by adding the stress of a divorce.  However, there is a proven and slowly growing alternative to the traditional adversarial divorce. More frequently in today’s economy, people are pursuing alternative resolutions such as mediation.

Mediation is not for everyone. It requires two people who still respect one another, who can communicate without inserting emotional baggage into the conversation, and who share the common goal of maintaining a productive relationship for the benefit of their own future and their children’s. One usually hears the horror stories of bad divorces, but there are also many successful divorces. As a former judge, I presided over hundreds of cases.  As a lawyer, I have represented hundreds of clients. Over the years, I came to realize that, in most cases, there is good in people that a qualified mediator can build on.

In mediation, spouses meet with a qualified neutral professional, usually an experienced attorney, to discuss their problems, exchange financial information, and work with the mediator to attain their own settlement without involvement of the courts, retained experts, accountants, or litigious attorneys. It takes special people to mediate their differences in a positive manner so that their settlement suggestions constructively build a successful resolution.  In this way, the parties avoid prolong conflict and extensive costs.

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Equitable Doesn’t Mean 50/50

A Primer on How Property is Divided in an Illinois Divorce Case

If you follow the tabloids and Hollywood divorces, you might mistakenly believe that property is automatically divided 50/50 in a divorce.  While that is true in community property states like California, it is not true in Illinois.  Illinois is an equitable distribution state, which means marital property is divided in “just proportions,” not necessarily 50/50.   In deciding what are just proportions, the court considers a myriad of factors, including, but not limited to, each spouse’s contribution to the marital estate, homemaking contributions, waste of property, length of marriage, debt obligations, age and health, custodial provisions for children, and tax consequences.  In short, there is not much that the divorce court is not required to consider in dividing property in just proportions.  Significantly, the division of property does not turn simply on which party made the greatest financial contributions to the marriage.  Non-financial contributions, such as homemaking and child rearing activities, are equally important, especially in long-term marriages.

In my experience, most judges faced with the task of dividing the marital estate start with an internal mind set of “why shouldn’t this be a 50/50 division?” and then allow the lawyers to argue why their respective clients should get a disproportionate division.  In Illinois, some reported cases affirm as equitable 90/10 division of property in favor of one spouse; on rare occasions even a 100/0 division is found to be just.  Property division is a fact-specific determination, but the vast majority of the cases reflect a division within the 50/50 to 60/40 range.

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