When is Income, Income? A Rhetorical Question. Not in Illinois.

The Illinois Supreme Court proclaimed that family courts are not bound by the Internal RevenueiStock_000005303068Small Service definition of income in establishing or setting a child support order. In 2004, in the case of In Re Marriage of Rogers, the Supreme Court reversed two Appellate Court decisions that had previously ruled that the Internal Revenue Service Code, and the definitions therein, control or have a significant bearing on the definition of the word “income” as would be used in child support statutes relating to the setting of child support.

In Rogers, the father was receiving regular monthly gifts from his mother and the question was whether or not those gifts should be considered by the Trial Court in establishing the father’s net income for the purpose of setting child support. The Supreme Court held that it should, and, in doing so, stated that when a child support obligor receives funds that represent a benefit which enhanced the obligor’s wealth, it should be considered income for the purposes of establishing child support. The Court went on to say that the lack of a guarantee of recurrence of such funds is not controlling in setting the child support pursuant to the statutory guidelines.

In 2012, the Illinois Supreme Court, in the case In Re the Marriage of McGrath, revisited the issue of how the Trial Courts should determine or define income for the purpose of setting child support. It used a much more simplistic approach in addressing the question.

In McGrath, the Court said a simple measure is, did the obtaining of money create an addition to the assets or wealth of the obligor. In essence, is it an addition? In McGrath, the father was withdrawing funds from his savings account to pay for his living expenses. He was withdrawing approximately $8,500 per month. The father was otherwise unemployed. The McGrath Court reversed the Trial Court’s and the Appellate Court’s holdings that the money he was withdrawing from his savings account was income for the purpose of setting child support. While deciding the issue in the McGrath case, the Supreme Court refused to answer the question of whether or not withdrawals from an IRA or 401(k) would be considered income for the purpose of setting child support because, before it, was only the question of withdrawal from a savings account. The Court recognized that there is a split of decisions in the Appellate Courts relating to the issue of whether or not withdrawals from an IRA or 401(k) can be considered income for the purpose of setting child support. (See Note 1 below.)

The Illinois Supreme Court said clearly that the Trial Court erred in using the withdrawal from a savings account as income for the purpose of setting child support because the withdrawal did not amount to an addition to the obligor’s wealth or assets. HOWEVER, it remanded the case to the Trial Court with the instructions and direction that, when a Court is applying percentage guidelines to the net income of the obligor and in doing so finds that the amount the obligor would be paying is inappropriate based upon the needs of the child and the financial resources of the child, the Court can order that a reasonable amount be paid from the assets of the obligor.

It is apparent from the Illinois Supreme Court’s decisions that it has created a standard and method of assuring that the obligation to pay child support is neither oppressive to the obligor or the child support recipient.

Despite the clear intention of the Illinois Supreme Court to resolve child support issues with reasonable common sense approaches, there are some courts that adhere to a strict, narrow interpretation of the child support statutes.

Case in point: In Re Aaliyah L.H., 2013 Ill.App.2d, 120414. In this case, the father has a daughter, Amira, from a previous relationship, for whom he was ordered to pay child support and provide medical insurance. He is also the father of Aaliyah. Under the father’s health insurance plan, the premiums were the same whether there was one child or two children. Therefore, there was no additional payment that was added when he placed Aaliyah on his plan. The total premium, whether one or two children, was $485.00 per month.

The Trial Court ordered that the father could not deduct his health insurance premium in establishing net income when determining what the child support should be for the second child, Aaliyah, because it is not an additional cost to the father. The Appellate Court reversed holding that “the statute is clear on its face. It does not indicate that the deduction can be taken only if the insurance premiums increase for adding an additional child”. With the escalating cost of healthcare and today’s culture of first, second, and at times, third families, is it a reasonable and common sense approach to deprive the second child or third child a percentage of the payor’s actual net income? The Aaliyah case was not appealed to the Illinois Supreme Court. Maybe the Legislature should be asked to express its intention in this area.

(Note 1):  It is this writer’s opinion that IRA and 401(k) accounts contain both the original amount deposited and subsequent amounts deposited which do not increase one’s wealth or assets, but they also include earnings on those deposits which have in fact increased one’s wealth or assets.  Therefore, a blanket statement that they can or cannot be used has not yet been established by the Supreme Court.

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