Family law usually is comprised of issues relating to child support, maintenance (spousal support), and other financial issues that the court hears and rules on.
Of particular interest is a recent decision from the Illinois Appellate Court in Dahm-Schell v. Schell, 5th District, 2020. The question at issue is “whether inherited mandatory retirement distributions are income for purposes of child support and maintenance calculations”. The court here said “yes.”
In most family law cases, a preliminary question is how much each party earns and what sources of income do they have? This includes savings accounts, cash that has been tucked away in a safety deposit box, checking accounts, investment dividends, retirement accounts, etc. The court will need to determine what is “income” and whether that income should be used to calculate and resolve issues of support or division of assets.
In this most recent case, the court decided if the money in an individual retirement account (“IRA”) that one party inherited from his mother counted as income.
The court’s rationale was straightforward: when determining “income” for calculating maintenance or child support, anything that “comes in as an increment or addition” or is a “gain or benefit measured in money” is income.
This straightforward answer comes with a caveat: we don’t want to count money twice. This is best demonstrated with, you guessed it, an IRA. Imagine a separating couple, Alex and Blake. Say Alex’s income is plugged into those equations for calculating maintenance or child support. Alex then pays the appropriate amount to Blake, as the court orders. If Alex then uses some of the remaining money to pay into an IRA, and Alex receive payments later from that same IRA, that money shouldn’t be counted again for calculations of support. The funds Alex paid into the IRA, that he later receives back cannot be used in recalculating support.
What sets our real-world case in Dahm apart, however, is that the money in the IRA was inherited, not earned, by the party. The court tells us that how he got the money made all the difference.
In light of the Court’s logic, IRAs do count as income, inherited or otherwise, unless the money paid into the IRA has previously been counted as income for the purposes of support calculations.
Separations are complicated enough without extra math. Call Kiswani Law today at (708) 210-9247 to schedule an appointment and make sure your case is being handled effectively, efficiently and you’re getting the fair outcome you deserve.