Posted on March 26, 2023

Escrow In An Illinois Divorce

A divorce has a lot of moving financial parts. Divorcing people are earning money. Divorcing people are spending money. Divorcing people are selling assets. Divorcing people are buying things.

As my dad used to say when he held up a coin, “It’s made round to go ‘round.”

How do we keep track of this marital money as the parties inevitably divide their financial connection entirely in a final Illinois divorce judgment.

Often, an Illinois divorce court will order that marital money be held in escrow until further order of court.

Escrow is “[a] legal document or property delivered by a promisor to a third party to be held by the htird party for a given amount of time or until the occurrence of a condition, at which time the third party is to hand over the document or property to the promisee…An account held in trust or as security” Black’s Law Dictionary (11th ed. 2019)

One can imagine many occasions in a divorce where money is presumed to be paid over to the other side…but it’s not certain when or how as the final terms of the divorce are not certain. The most common use of escrow in a divorce case is putting the proceeds from the sale of a marital residence in escrow until the final division of marital assets and debts is agreed or decided on.

Typically, one of the attorneys for the divorcing parties holds the money in escrow. The attorneys are not going to steal the money…their licenses are worth way more than the money in escrow.

Escrowed money can be ordered by an Illinois divorce court via an injunctive order. To grant injunctive relief, the trial court must find that “(1) the [litigant] has demonstrated a clearly ascertained right in need of protection; (2) irreparable injury will occur without the injunction; (3) no adequate remedy at law exists; and (4) there is a probability that the plaintiff will succeed on the merits of the case.” Village of Westmont v. Lenihan, 301 Ill. App. 3d 1050, 1055 (1998)

Usually, injunctive relief does not apply to money because money is fungible. You can always make more money and pay what you owe with that new money. Therefore, when it comes to money, injunctions are not appropriate because an “adequate remedy at law exists”

Furthermore, an Illinois divorce court ordering money into escrow can amount to a prejudgment attachment.

“Attachment is a remedy by which a party’s property is secured and held to satisfy a debt that the other party hopes to prove.” Carriage Way Apartments v. Pojman, 527 NE 2d 89 – Ill: Appellate Court, 2nd Dist. 1988

People’s money should not be seized until we definitely know who is the rightful owner. This is America!

“[T]here is no such thing as equitable attachment in this State and the theory of taking away the control of a person’s property by means of an injunction for the purpose of anticipating a judgment which may or may not thereafter be obtained by a litigant is abhorrent to the principles of equitable jurisdiction.” Lewis v. West Side Trust & Savings Bank (1937), 288 Ill. App. 271, 278,

An Illinois court order to put money in escrow is not a prejudgment attachment if “the trial court was exercising its equitable power to protect the two minor children and their right to support.” In re Marriage of Patel, 2022 IL App (1st) 211650

However, when the money is likely to be used and never seen again, “dissipated,” and the money should be used for child support THEN an injunction may be allowed.

“[T]he purpose of the preliminary injunction was to prevent respondent from dissipating assets that could eventually provide for her legal remedy. For the same reason, we reject respondent’s contention that the third criterion—the adequacy of legal remedies was not established because petitioner could recover the past-due support through legal remedies.” In re Marriage of Davenport, 388 Ill. App. 3d 988, 991 (Ill. App. Ct. 2009)

This means that if there is not a past due child support obligation…there should never be an order for escrowing any funds in an Illinois divorce.

Illinois divorce courts do not need a full hearing to issue an injunction to escrow marital funds.

Illinois divorce courts only need “a fair question as to the existence of the right claimed and that the circumstances lead to a reasonable belief that the moving party will be entitled to the relief sought.” Village of Westmont v. Lenihan, 301 Ill. App. 3d 1050, 1055 (1998)

A judge should, however, entertain some argument about whether to escrow marital funds otherwise the the order becomes “sua sponte.

So “important are the basic principles of our system that a party receive notice and an opportunity to respond to a potentially dispositive motion.” Peterson v. Randhava, 729 NE 2d 75 – Ill: Appellate Court, 1st Dist., 1st Div. 2000

“By its very nature, a sua sponte ruling deprives a party of notice and an opportunity to raise objections because the court acts on its own and without any warning.” Peterson v. Randhava, 729 NE 2d 75 – Ill: Appellate Court, 1st Dist., 1st Div. 2000

The escrowed money remains in escrow until further order of court.

Money can “be held in escrow pending the trial of the cause. If there is any inequity in this temporary order it can be addressed in the trial court at the hearing for permanent maintenance and division of marital property and debts.” In re Marriage of Meyer, 557 NE 2d 242 – Ill: Appellate Court, 1st Dist. 1990

Once that order to escrow the funds is entered…good luck reversing that order.

“The order to place [money] into an escrow account is similar to interim or temporary orders entered in dissolution proceedings wherein relief was granted but not found to be injunctive [and therefore not appealable] in nature for purposes of appeal.” In re Marriage of Tetzlaff, 711 NE 2d 346 – Ill: Appellate Court, 1st Dist., 6th Div. 1999

“The decision to grant or deny a preliminary injunction rests within the sound discretion of the trial court, and the decision will not be disturbed on review absent an abuse of discretion. ” In re Marriage of Davenport, 388 Ill. App. 3d 988, 991 (Ill. App. Ct. 2009)

Any order regarding the money beyond placing the money in escrow is appealable, however.

An “injunction [is appealable that] requires a party to do far more than place certain funds in an escrow account. [An injunction is appealable if the injunction] requires a party to list a piece of real property for sale, sell the property, and then distribute the proceeds of the sale to the court for apportionment. [Such an] order is not “temporary”…because it requires specific performance and it requires the alienation of a unique asset instead of just concerning the mere location of a pool of money. The trial court’s order in [such a] case cannot be undone—it is a mandatory permanent injunction appealable under Illinois Supreme Court Rule 307” IN RE MARRIAGE OF ROMAN-KROCZEK AND KROCZEK, 196 NE 3d 1102 – Ill: Appellate Court, 1st Dist., 2nd Div. 2021

Make sure money doesn’t just disappear. Get that money ordered to be put in escrow properly.

Alternatively, do not let your hard-earned money be put in escrow if there is no equitable reason…and there’s only one equitable reason: past due child support.

Either way, hire an experienced Illinois divorce attorney to make sure your money is kept where it belongs. Contact my Chicago, Illinois family law firm today to get a free consultation.

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Russell Knight

Russell D. Knight has been practicing family law as a Chicago divorce lawyer since 2006. Russell D. Knight amicably resolves tough cases while remaining a strong advocate for his client’s interests.

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