ILLINOIS DIVORCE LAW BLOG

Articles Posted in Divorce Trends and Developments

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A “source of funds” rule refers to a legal principle, primarily used in divorce proceedings, that determines whether a property should be classified as marital or separate based on the origin of the funds used to acquire or improve it; essentially, it means that if a spouse contributes premarital funds to purchase a marital asset, they may retain a separate interest in that asset proportional to their contribution. 

The husband filed for dissolution after 18 years of marriage, disputing whether two adjacent lots were marital property. One lot included the marital home, and the other had a barn for the wife’s horse training business. The husband purchased both lots before the marriage, but both were encumbered by loans paid off with a mix of marital and premarital funds. The properties appreciated significantly during the marriage due to market forces. The key issue was whether paying down the loans with marital funds created a marital interest in the properties.

The District Court concluded that the lots were nonmarital property, except for the marital contributions toward the loan principals. The court awarded the husband the properties and the wife a cash equalization payment for half of the marital contributions. The wife appealed, arguing that the properties should be considered marital due to the use of marital funds to pay down the loans.

The Court of Appeals affirmed the district court’s decision regarding the land portions of the lots, finding them nonmarital. However, it reversed the decision regarding the barn and other improvements on one lot, classifying them as marital property due to the joint efforts in their construction and operation. The court modified the equalization payment to the wife accordingly.

The Supreme Court reviewed the case and adopted the “source of funds” rule, which considers the marital estate’s acquisition of equity in the properties through loan paydowns with marital funds. The court reversed the Court of Appeals’ decision regarding the land portions of the lots and remanded the case for a new hearing to determine the equitable division of these properties, considering the source of funds rule. The decision regarding the barn and other improvements was affirmed.
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The issue of cohabitation in Illinois divorce cases is an interesting one.  Sometimes, a spouse that is receiving maintenance support engages in a relationship with a third party after the divorce. The payor spouse many times feels a bit cheated, in that a former spouse (payee)  receives financial support while at the same time dating someone exclusively and sharing their home with him/her.  In Mattson, a former husband felt burned that he was paying support to his ex-wife while she was engaging in a lengthy relationship with a Chicago sportscaster. The former husband hired private investigators to watch the former wife’s house. Former husband brought his case to Court.

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Marriage of Mattson: 2024 IL App (3d) 230307-U

Section 510(c) of the Dissolution Act provides that, “Unless otherwise agreed by the parties ***, the obligation to pay future maintenance is terminated upon the death of either party, or the remarriage of the party receiving maintenance, or if the party receiving maintenance cohabits with another person on a resident, continuing conjugal basis.” 750 ILCS 5/510(c) (West 2022). (Emphasis added.)

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A few years ago, I tried a lengthy case in Will County, Illinois that ended up on appeal on a few key issues. One of these issues is that at trial, I put in evidence and argued that the small company owned by the parties should have its retained earnings considered as marital property, insofar as the practice of this husband and wife company had been to distribute the retained earnings out to themselves as dividend income. While the trial judge held that they were part of the valuation of the marital business, the appellate court agreed with my approach, and ordered that the retained earnings be considered a cash asset of the marriage. This ruling was a significant financial win for my client, and my case ended up clarifying an area of Illinois law and was cited nationally on the following principle: retained earnings in a closely held corporation can be found to be a marital asset (outside of the value of the company itself) subject to distribution in the divorce.

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Retained earnings in a small corporation refer to the portion of the company’s net income that is not distributed to shareholders as dividends but rather kept within the company for reinvestment in its operations or for other purposes. Essentially, it’s the cumulative amount of profits that the company has retained since its inception, minus any dividends paid out to shareholders. Retained earnings are an important asset class in an Illinois divorce with a closely held company.

Retained earnings can be distributed to the shareholder(s) as a 1099 dividend, and many owners of small companies use retained earnings for this purpose. These dollars can also serve as a source of funding for various activities such as business expansion, research and development, debt reduction, or building up cash reserves. They are an important indicator of a company’s financial health and its ability to reinvest in itself for future growth.

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Children 4 Tomorrow
5th Annual PA Symposium
What We Need to Know about Psychological Child Abuse a.k.a. “Parental Alienation.”

Raising Awareness – Increasing Knowledge of Parental Alienation

WHEN: April 26, 2024
TIME: 8:00 AM – 5:00 PM (Central U.S. Standard Time)
WHERE: via Zoom

8 CLE’s – Legal (Judges & Attorneys)
8 CEU’s – Mental Health (LMSW, LSCW, LPC, LMFT
8 CPE’s – Teachers & Schools Administrators (TEA Accredited)

For more information, go to www.children4tomorrow.org or call 713-660-0760.

Presenters:
• Shawn Wygant (keynote speaker) Who Needs to Be Trained in PA & Why?
• Rod McCall – Death, Depression & Drugs: Results of high conflict divorce in children
• Stephen Morrison – A solution for the Family Courts for Seeing the Unseen PA issues
• Dana Laquidara – The Inside Struggle of an Alienated Child
• Jayna Haney – Understanding Grief in Divorces and Consequences in Disordered Mourning
• Ben Rodgers – Child Psychological Abuse Awareness & Preventions
• Suzanne Radcliffe – Unraveling “Parental Alienation” as a Judge, Attorney & an Advocate for Children
• Ryan Blue – How to Defend a PA Case
• John Brownlee – Yes, Betrayal and Grief
• Sheanea Carrington – Unlocking Opportunities: The Significance of an Internship
• Alan Blotcky – Understanding PA: Diagnosis and Treatment

Please Register here:

https://www.children4tomorrow.org/online-store/Children-4-Tomorrow-5th-Annual-Symposium-2024-p84693163
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In my practice, much of the emphasis on this blog is placed on complex child custody litigation, and how to manage these difficult issues with child custody litigation.  Yet, in some of my cases along with child custody issues there can be significant financial issues and division of property issues. One issue that sometimes arises is the valuation of a family owned business, or the valuation of a percentage share in a corporation our group of companies.

With certain exceptions  all property acquired during marriage through the time, skill and efforts of either spouse is considered marital property. The disposition of property is governed by Section 503 of the Illinois Marriage and Dissolution of Marriage Act (IMDMA). Under Illinois law, all property acquired by either spouse during a marriage is presumed to be marital property.

A business begun by one spouse after the date of marriage and before physical separation will need to be divided in a dissolution proceeding, and if you and your spouse cannot agree on its value it may need to be evaluated by an expert.  Under the IMDMA the Court can appoint its own expert to advise it about financial issues in a case, but more typically each arty will retain a CPA-level expert to determine values in the business and property interests, and then be available to testify at trial (if necessary) regarding the values that the Court should determine in a marital estate.

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https://amandasillars.com/blog/f/parental-alienation-literature-2016-and-beyond?blogcategory=Books

Amanda is the founder of the Eeny Meeny Miney Mo Foundation and the creator of the Australian Parental Alienation Awareness Day, on the 12th of October. Amanda is regularly consulted as an emerging subject matter expert in this field. Amanda’s goal, and that of the Eeny Meeny Miney Mo Foundation, is to educate parents, Family Court and mental health practitioners on parental alienating behaviours, the dynamics, processes and profiles, and the trauma, stress, and lifelong impact it has on children.

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Nearly 40% of the Parental Alienation literature has been published since 2016. Parental Alienation research has moved beyond an early stage of scientific development and has produced a scientifically trustworthy knowledge base.

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So what accounts for the post-holiday divorce?

Why Does Divorce Spike In January?

According to experts, the biggest reason that divorces rise following the holidays is a desire for one person in the marriage to start fresh and begin another year with a clean slate.

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In the USA alone, an alarming number of families, estimated over 22 million, are affected by parental alienation. Millions of children are held psychological hostage by parents they trust.

Through manipulation and coercion, innocent children are weaponized against the alienated parent. Children are involuntarily forced to align entirely with one parent and sever ties with the other. They are forbidden to love a parent with whom they were previously close to.

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Targeted parents and alienated children suffer the effects of this atrocity for a lifetime.

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Aside from memberships in leading psychological science groups such as the American Psychological Association, and memberships with Parental Alienation professional groups (clinicians, judges, scientists, lawers), I continue to study and develop professional skillsets in the understanding of PA and how it affects families, and how it can be mitigated within the court system.

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Module 1: How Can Parental Alienation Happen?

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How Will Temporary Court Closures Due to COVID-19 Affect Family Law Cases?

Many clients of our firm are asking this important question: What is the immediate impact on my case if my courthouse is closed for weeks or months, starting right now?

It has been only since last Friday that the various counties in Illinois announced via email and posts on their websites that the courthouses were to be closed for about 30-45 days, while the COVID-19 pandemic works its way through Illinois. Many of our cases were set for important hearings with our judges in March and April, and now these cases will have to be reset. Some will be reset by the courts, and others are being reset by agreement with opposing counsel.

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