A financially successful person makes a lot of money and saves a lot of money. After an Illinois divorce, a financially successful person will be expected to divide their savings with their ex-spouse and pay their ex-spouse maintenance (formerly known as alimony).
The ex-spouse will have half of the successful professional’s assets AND a portion of the successful professional’s income for a set period of time (or forever). Is this fair? Does it ever end?
There may be one viable objection to paying both half your assets and maintenance to the your ex-spouse: double dipping.
“Commentators use the phrase “double dipping” to describe the seeming injustice that occurs when property is awarded to one spouse in an equitable distribution of marital assets and is then also considered as a source of income for purposes of imposing support obligations.” In re Marriage of Eberhardt, 387 Ill. App. 3d 226, 232 (Ill. App. Ct. 2008) (citation omitted)
Double dipping is discouraged because of the distinction between what is modifiable and what is non-modifiable in an Illinois divorce.
The division of assets in an Illinois divorce is permanent and non-modifiable.
“The provisions as to property disposition may not be revoked or modified, unless the court finds the existence of conditions that justify the reopening of a judgment under the laws of this State.” 750 ILCS 5/510(b)
In contrast, maintenance is modifiable if there’s been some kind of significant change in either party’s life.
“An order for maintenance may be modified or terminated only upon a showing of a substantial change in circumstances.” 750 ILCS 5/510(a-5)
The party paying maintenance can file a motion to modify upon retirement. Typically, when the maintenance payor retires, they begin to live off their savings from a tax-deferred retirement account such as a 401k.
Because 401ks defer the taxes owed on the saved money to the time that the money is withdrawn, those withdrawals look like income on a tax return. The maintenance receiver is NOT entitled to a portion of that 401k distribution “income” because the underlying money was already awarded in the property distribution of the Marital Settlement Agreement.
An “ordered [change] in maintenance [is] actually a modification of the parties’ property settlement agreement rather than a modification of the maintenance provision of the dissolution judgment based on a substantial change in circumstances. While maintenance provisions are modifiable upon a showing of a substantial change in circumstances, property settlement provisions are not.” In re Marriage of Munford, 173 Ill. App. 3d 576, 579 (Ill. App. Ct. 1988)
When one party is awarded an asset in an Illinois Marital Settlement Agreement, the other party waives any interest they might have to that asset and the asset’s income…forever.
In order to treat the income from an asset as income, there must be something in the Marital Settlement Agreement that explicitly says the income of an allocated asset will be treated as income for the purposes of maintenance.
“[T]here [must be an] indication in the clear language of the agreement that the parties intended to distinguish between waiver of the plans and waiver of the income derived from those plans.” McLauchlan v. McLauchlan, 966 N.E.2d 1151, 1158 (Ill. App. Ct. 2012)
More specifically, under current Illinois case law, double dipping is the concept that it is unfair to waive an interest in an asset yet still be paid from that asset.
Double dipping is allowed but ONLY if the maintenance receiving ex-spouse did not explicitly waive an interest in the asset generating the income. In Re Marriage of Dahm-Schell, 2021 IL 126802 (2021)
If the asset was deemed non-marital and thus, non-divisible, the party not awarded that asset cannot have waived their interest in the asset. Therefore, “nonmarital mandatory distributions and withdrawals received and reinvested in [a party’s] own retirement accounts are not excluded from the statutory definition of “income” under the Act.” In re Marriage of Dahm-Schell, No. 126802, 15 (Ill. 2021)
The default is that “[f]or purposes of th[e Child Support and Maintenance] Section[s of the Illinois Marriage and Dissolution of Marriage Act], the term “gross income” means all income from all sources” 750 ILCS 5/504(b-3).
Without the specific waiver of rights to an asset, double-dipping is no defense to the statute’s broad instructions to consider “income from all sources.”
Illinois divorce law has thousands of rules…and those rules have thousands of exceptions. Schedule a free consultation with my Chicago, Illinois family law firm to speak with an experienced Illinois divorce attorney who knows those rules…and all their exceptions.
