Irreconcilable Differences: Spring Newsletter 2022

The Future of Family Law Since 1981.

I R R E C O N C I L A B L E

D I F F E R E N C E S Divorce, Parenting & Family Law Spring Newsletter 2022

Why "Income" For Purposes Of Support Is Counter-Intuitive For High Income Earners

Timothy Daw | tdaw@sdflaw.com Decades ago, after the imposition of child support guidelines creating formulaic determinations of child support, Court’s struggled with what should be included and excluded from income that was not otherwise provided by statute. Even for simple cases, when dealing with W-2 earners, some deductions allowed for tax purposes had to be added back (i.e. 401(k) deductions).

“Income from all sources” For high income earners, especially business owners, there was and is a myriad of other economic benefits being received that had to be accounted for child support purposes. For example, for business income (schedule E or C income), what the business owner receives, or receives the benefit of, could be greater or less than what is declared for income tax purposes. The Court’s eventually found that because the statute provided that income from all sources would be used for the calculation of child support, the courts were not constrained by federal tax laws as to the definition of income (what was reflected on someone’s tax returns); instead the courts were directed to focus on income as “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” (see In re Marriage of Rogers).

Until relatively recently there was no formulaic approach for spousal support (maintenance). The courts had the discretion to determine maintenance based on subjective factors. As the law evolved in child support decisions using the enhanced definition of income, courts by judicial interpretation began using these concepts in determining maintenance obligations. In

high income earner cases, this led to frequent disagreements over the levels of support based on income earned, funds received and later the inclusion of income/funds capable of being received.

“Income from all sources” extended for spousal support With the adoption of formulaic maintenance guidelines in 2015, the legislature made clear that the income from all sources was to be used for both child support and maintenance purposes.

The clash of professionals and conflicting concepts In representing a client who will be paying or receiving support, the divorce lawyer should be working with various professionals (accountants, financial advisers, etc.) to obtain and interpret financial information to determine support obligations. The non-divorce professionals have great difficulties with the expansive nature of what could be income for support purposes.

Typically, an accountant or financial adviser will rely

Why "Income" For Purposes Of Support Is Counter-Intuitive For High Income Earners

only on declared income (personal and entity tax returns, W-2s, 1099s, K-1’s, etc.). The concept of using cash flow actually received directly or indirectly or capable of being received as opposed to ‘declared income’ creates friction between professionals all trying to represent the best interest of their common clients.

Ultimately it is up to the divorce practitioner to educate not only the client, but also the financial professional working with the client.

Being overly restrictive in the identification of income for support purposes creates confusion and unrealistic expectations. The same is true if income is interpreted in an overly expansive manner. This could be considered as an asset or investment that is not ‘a gain or recurrent benefit’.

In the wake of uncertainty, is there an alternative?

While what constitutes income for purposes of support remains in flux, the trend in the law is to expand the sources of funds available to be considered as income.

A logical focus is what the family has historically used to pay living expenses. However, because divorce involves the establishment of two primary households and additional expense structures, what was spent before divorce is not necessarily determinative.

Since there is no concise or clear definition of income that can be used, divorce practitioners can be creative in trying to expand or contract the definition of income for the benefit of their clients. The most expansive concept of income could be: what is actually or capable of being received that benefits a person which is or can be used to pay expenses that is not a double count of funds previously used to calculate support or the invasion of assets; however, appreciation of such assets can be income.

The law continues to evolve (see the recent case Illinois Supreme Court case of In re Marriage of Schell, 2021 IL 126082). In the coming years the income concepts will be refined, and conflicts resolved; however, until such resolutions occur, lawyers and financial professionals will need to work together to quantify the best results for a client given the focus on cash flow or what could be cash flow.

For high income earners, a request can be made for the Court to deviate from guidelines. In this scenario, in addition to the actual historic expenditures of the family, subjective considerations are available which can include standard of living during the marriage (maintenance), the standard of living that would have been enjoyed had the parties not divorced (child support), any sacrifices to the career of the recipient of spousal support for the family, etc.

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"Top Lawyers: Women Leaders" Recognized by IL Leading Lawyers and IL Emerging Lawyers for 2022

Schiller DuCanto & Fleck is pleased to announce that 15 of our attorneys have been recognized among the 2022 “Top Lawyers: Women Leaders” lists by Illinois Leading Lawyers and Illinois Emerging Lawyers, featured in Chicago Life Magazine, a supplement to The New York Times.

Congratulations to the following partners who were recognized as "Top Women Leaders" by Illinois Leading Lawyers for 2022: Jennifer Dillon Meighan Harmon Claire McKenzie Andrea Muchin Tanya Stanish

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Brittany Heitz Goodlett Jessica Bank Interlandi Kathleen McNamara Karen Pinkert-Lieb Anita Ventrelli

Kudos to the following attorneys who were named as "Top Women Leaders" by Illinois Emerging Lawyers for 2022: Jacqueline Stephens Breisch Jennifer Enloe Elaine Knowles

Shaska Dice Kara Francis

Leading Lawyers selections are based on a multi-phase peer review process whereby less than 5% of all licensed lawyers in each state earn recognition. Lawyers cannot pay to be listed by Leading Lawyers. Less than 2% of all lawyers licensed in each state earn distinction

by Emerging Lawyers. To learn more about the methodology, visit leadinglawyers.com.

Schiller DuCanto & Fleck Happenings Schiller DuCanto & Fleck is deeply committed to the principle of community service. We believe it is both an ethical responsibility and moral obligation to give back to the communities in which we live and work.

Recent Sponsorships Jay Dahlin

Shaska Dice

Congratulations to Jay Dahlin and Shaska Dice on their partner elevations!

Jay has been elevated to Senior Partner. He is an experienced trial attorney who has successfully handled numerous financial and custodial cases throughout northern Illinois’ domestic relations courts as well as international family law litigation.

Shaska has been elevated to Partner. She represents high net worth clients in family law matters such as divorce, custody, parentage, and post-decree proceedings. Shaska is an experienced trial litigator who has litigated pre- and post-decree cases involving complex financial and parenting matters in Cook, Lake, and DuPage counties.

DuPage County Bar Association Annual Judges' Nite Performance 20th Annual Lake Forest/Lake Bluff Rotary Club Foundation’s Economic Breakfast Lake County Bar Association Family Law Seminar

Upcoming Sponsorships

CASA of DuPage Golf Classic - May 19, 2022 LCBA Annual Golf Outing - June 23, 2022 Race Judicata - June 30, 2022

Upcoming CLE Presentation

Crypto Assets 101 And Discovery Issues

Reed Chisenhall

Joshua Shancer

Our firm is pleased to announce the addition of new associates Reed Chisenhall and Joshua Shancer.

Reed focuses his practice on a variety of high net worth pre and post-decree family law matters including the dissolution of marriage, allocation of parenting time and parental rights, child support, maintenance, modification, orders of protection, and parentage.

Joshua focuses his practice on complex high stakes divorce and parentage issues including marital settlements agreements, relocation, maintenance, orders of protection, as well as estate planning (including wills, trusts, and powers of attorney).

Bitcoin, Ethereum, Dogecoin and hundreds of other crypto assets have exploded in popularity in recent years. Surveys show that more than 16% of Americans have invested in, traded, or used cryptocurrency. Many forecasters expect this trend to continue.

Join our firm on May 10, 2022 from 11:30am - 1:30pm as we host the CLE program "Crypto Assets 101 and Discovery Issues." This in-person presentation, which will be held at our firm's Chicago office located at 321 N. Clark St., will feature Joe Carlasare, Co-Chair of Cryptocurrency, Blockchain and FinTech Practice Group with SmithAmundsen, LLC. The program is approved for 2 general CLE credits.

To register, contact knega@sdflaw.com.

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Common Misconceptions About Premarital Agreements

Kathleen McNamara | kmcnamara@sdflaw.com Premarital agreements (“PMAs”), contracts that parties enter into prior to marriage, generally address the parties’ rights in three contexts: during the marriage, in the event of a party’s death during the marriage, and in the event of divorce.

Provisions addressing what happens “during the marriage” can be minimal or quite complex. For example, a PMA can either require the parties to contribute all of their employment income to a joint account during the marriage and pay their household expenses from that joint account, or provide that neither party contribute any employment income to a joint account and all income is kept as separate property. Or a PMA could specify that non-marital liabilities arising during the marriage must be paid with separate, nonmarital funds. The possibilities are endless.

What happens if the marriage progresses and the parties do not follow or enforce such “during the marriage” provisions? Can a claim be brought in a subsequent divorce to enforce them? Do the parties forever lose their ability to enforce those provisions? Is filing for divorce the only way to enforce them? What little caselaw exists on this issue indicates that a party who stands by and declines to enforce “during the marriage” provisions of a PMA, and then tries to enforce them during a subsequent divorce, will likely be out of luck.

The parties executed a PMA that contained a provision which stated that although the parties could file joint or separate income tax returns during the marriage, if they filed joint income tax returns, each party would pay any liability due from his or her separate funds in proportion to what each party’s respective tax liability would have been had they filed separate returns. The parties then proceeded to file joint income tax returns for each year

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Common Misconceptions About Premarital Agreements

during their ten (10) year marriage and did not allocate responsibility for the tax payments in accordance with the PMA. During the divorce proceedings the wife argued that had the tax provision been complied with, she would have paid less and her husband would have paid more in taxes. Therefore, the husband owed her a reimbursement for her overpayment of taxes pursuant to the tax provision in the PMA. It is well-settled under Illinois law that the parties to a contract can modify the contract’s terms through their conduct. The doctrine of laches is an equitable principle recognizing that where a party has failed to assert his or her right, and enough time has passed such that to enforce the right now would unfairly prejudice the other party, the right cannot be enforced. Accordingly, the wife’s claim for reimbursement was denied and the court specifically noted that the wife’s “lack of diligence in raising her contention for over 10 years after repeatedly and voluntarily filing joint tax returns in contravention of [the prenuptial agreement’s tax provision] barred her claim pursuant to the doctrine of laches.” See In re Marriage of Morris and Schmidt (2011 WL 10068607 (Ill. App. Ct. (1st Dist.) June 27, 2011).

If parties want to preserve the intent of the provisions in the PMA, they must remain cognizant of these provisions “during the marriage” and do their best to live by them. If that is impossible without filing for divorce – often an unappealing option – then the parties should consider memorializing their non-compliance with the PMA and quantify the amount of any claim, if possible, at that time. Had the wife in Morris written to the husband each year when their joint tax returns were filed, stating her objection to husband’s non-compliance with the PMA and quantifying how much she should have paid toward their tax obligations pursuant to the PMA, she likely would have fared very differently in the parties’ subsequent divorce and succeeded on her reimbursement claim.

While most parties to a PMA hope to put the document in a drawer and never see it again, they should be mindful of living with its provisions so that in the unfortunate event of divorce the terms of the PMA will be upheld.

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Featured in Chicago Magazine

ALLISON ADAMS*

JACQUELINE BREISCH*

JAY DAHLIN

TIMOTHY DAW

CHIMENE GRANADOS*

BRENDAN HAMMER

MEIGHAN HARMON

BURTON HOCHBERG

CARLTON MARCYAN

BRIDGET MAUL*

CLAIRE MCKENZIE

ANDREA MUCHIN

DILLON O'TOOLE*

ERIC SCHULMAN

TANYA STANISH

ANITA VENTRELLI

AMY SCHILLER*

DONALD SCHILLER

SHASKA DICE*

JESSICA INTERLANDI

JENNIFER DILLON

MICHELE JOCHNER

KAREN PINKERT-LIEB

THOMAS VILLANTI

KARA FRANCIS*

ELAINE KNOWLES*

BRITTANY GOODLETT*

GREGORY MAKSIMUK

PATRICK RYAN

ISHITA SARAN*

ERIKA WYATT

ADAM ZEBELIAN

*=Rising Stars List

Some say, "You're only as good as the company you keep." We say, that with our 32 Super Lawyers and Rising Stars honorees, we're in good company.

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