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How is Income Defined for Child Support Calculations?

Marriage of Schell, 2021 IL 126802

When most people think of “income” they think of wages from their job, bonuses, and commissions. For purposes of child support, however, income is a much broader concept. In Marriage of Schell, the Illinois Supreme Court further expanded the definition of income to essentially include assets an individual inherits.

Relevant Facts

In August 2014, Sandra Schell filed for divorce against Mark Schell. When the parties’ marriage was dissolved, the parties had five children, three of whom were still minors.

While the divorce proceeding was pending, Mark inherited approximately $615,000 from his mother’s estate. Most of the $615,000 was  in two IRA accounts that had belonged to his mother. Mark did not liquidate the IRA accounts. Mark nonetheless had to withdraw, on a monthly basis, various amounts from the IRA accounts he inherited under IRS tax rules.

There was no dispute that the $615,000 that Mark inherited was non-marital property belonging to Mark.

What Happened in the Lower Courts?

In the Circuit Court, Sandra did not apparently argue that the entire $615,000 should be treated as income. Instead, Sandra argued that withdrawals from the IRAs represented income. The Circuit Court disagreed and refused to base a child support calculation on those withdrawals.

The Fifth District disagreed with the Circuit Court, and held that the mandatory distributions from the IRAs represented income.

The Illinois Supreme Court’s Decision

The Illinois Supreme Court affirmed the Fifth Circuit’s decision.

The Illinois Supreme Court started its analysis with the Illinois statute that addresses child support: 750 ILCS 5/505. The Court pointed out that for purposes of calculating child support, the statute defines “gross income” as “all income from all sources.” This statutory definition sweeps in all “income” but does not expressly define the word “income.” With respect to what actually constitutes “income,” the Court identified at least three different formulations for the definition of “income:”

  1. “a gain or recurrent benefit received by an individual,”
  2. “gains and benefits that enhance a noncustodial parent’s wealth and facilitates that parent’s ability to support a child,” and
  3. “any form of payment to an individual.”

Taken together, these three statements seem to cover any “new” money or assets an individual receives.

When Assets are Not Considered Income for Support Calculations

The Court spent considerable time discussing when assets held by a parent would not represent “income” for the purpose of calculating child support. The Court focused on the problem of double counting. The Court differentiated the facts in Schell from the situation the Court addressed in Marriage of McGrath, 2012 IL 112792. In McGrath, the child’s father was unemployed and used money from his savings account to pay for his day-to-day living expenses. The money contained in the savings account was money that the father in McGrath had received from the distribution of the marital estate in the parties’ divorce. The Court held that these periodic withdrawals from the father’s savings account did not represent income because they were not “new” additions to the father’s wealth:

The money in the account already belongs to the account’s owner, and simply withdrawing it does not represent a gain or benefit to the owner. The money is not coming in as an increment or addition, and the account owner is not ‘receiving’ the money because it already belongs to him.

While the Court relied on McGrath in Schell, the Court did not focus on the test it used to decide McGrath. Instead, the Court stressed that lower courts would need to determine if funds held by a parent were previously considered for purposes of child support. While this is close to the test used in McGrath, it is not identical. The holding in McGrath did not really develop a rule as to when funds or assets in an account would represent income. The Court in McGrath did not need to make such a determination because the funds came from a distribution of marital assets that the Court felt comfortable categorically excluding from the definition of “income.”

In Schell, the Court focused on whether the funds or assets withdrawn from the IRAs were ever evaluated by a court when calculating child support. The withdrawals were not previously considered in a child support calculation so the Circuit Court could consider those withdrawals when calculating child support. One issue raised by the Court’s analysis is that the entire inheritance Mark received would theoretically represent an addition to Mark’s wealth that was not previously evaluated for child support purposes. The Court did not set forth a limiting principle that would exclude the entire inheritance. The Court did not need to address this broader issue because the issue presented to the Court was limited to the mandatory withdrawals Mark made from the inherited IRA accounts.

Another question is how the court will treat inheritances that consist of property such as expensive jewelry, real property, rare coins, or other type of assets. The court defined income, at one point, as “gains and benefits that enhance a noncustodial parent’s wealth and facilitate that parent’s ability to support a child.” There exist a number of reasons why courts should not consider these types of inheritances as “income,” but the Court’s statements concerning what constitute income are broad enough to include many diverse types of assets and property.

The Court in Schell reaffirmed that it will broadly construe the word “income” for child support purposes. The definitions used by the Court are expansive and could sweep in property that traditionally is not viewed as income. How far the Court will go on this issue is unclear, but it has not yet identified limiting principles that would put some boundaries on the definition of “income.”

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