IICLE Family Law Flash Points - August 2016

1.         First District holds earned fees already paid are not subject to disgorgement.  After a hearing on wife’s petition for interim fees pursuant to Section 501(c-1), the trial court found that both parties lacked sufficient access to assets or income to pay reasonable attorneys’ fees and ordered: (1) an allocation of funds which were held in wife’s attorney’s trust account; and (2) disgorgement of $16,000 from husband’s attorney, the total of which resulted in each party being allocated $50,500.  Husband’s attorney took the issue up on appeal on a friendly contempt and the Appellate Court reversed.  Departing from the Second District’s opinion in In re the Marriage of Squire, 2015 IL App (2d) 150271, the First District stated that if “leveling of the playing field” was the sole consideration in deciding the issue, they would have reached the same conclusion in Squire.  However, the fact that the legislature chose to use the word “available” when referring to funds that could be subject to disgorgement was significant.  The Court noted the burden lawyers and law firms would face if they had earned fees, paid themselves, and then used that money to pay salaries, overhead litigation expenses, but were then later required to pay out a disgorgement order.  In the same case, the Court also held that wife was not required to liquidate her non-marital retirement account in order to pay her attorneys’ fees.  In re the Marriage of Altman and Block, 2016 IL App (1st) 143076.

2.         Trial court reversed regarding marital character of stock acquired in complex estate planning transaction during the marriage.  Wife was a beneficiary of a trust established by her father for the benefit of her mother and her and her siblings.  After his death, the family had significant discord over many issues.  The family engaged in protracted probate litigation over the issue and eventually settled the matter whereby wife ultimately received 100% of the stock in the family’s closely held company.  The transaction was funded by more than $3.6 million in cash from the father’s estate and trust and several loans to the company in excess of $4 million. Security for the loans included the company’s real estate, a $1 million dollar life insurance policy on wife, and three properties titled to wife individually that both parties were on the mortgages.  Both parties also signed personal guaranties on the loans. Husband took the position that wife had purchased the stock during the marriage with the assistance of marital collateral and personal guaranties.  The trial court found the stock to be marital and the Appellate Court reversed.  Wife acquired the stock under circumstances that were consistent with a distribution from the original trust under which she was a beneficiary. Furthermore, the transaction involved loans in excess of $4 million and by stipulation, the only marital property that was ultimately pledged as collateral was worth $57,500, a substantially small value compared to the totality of the loans.  Furthermore, the personal guarantee was merely a tertiary form of repayment, as testified to by the bank’s loan officer, and had never been called. In re the Marriage of Asta and Pappas,  2016 IL App (2d) 150160.

3.         Contribution by wife of $247,000 into 529 plans not considered dissipation.  Husband appealed the ruling that wife had not dissipated the sum of $247,000 by placing the proceeds from the sale of stock from a former employer into their children’s 529 plans.  Wife had been the breadwinner throughout the marriage and at the time of trial was earning $348,880.  Husband was a musician throughout the marriage and at the time of trial was working as a salesman earning $28,500.  Wife testified that after acquiring the stock the parties discussed and agreed to use it to fund the children’s college funds.  Husband admitted that they had discussed the issue, but denied that any agreement was ever reached.  The Appellate Court upheld the trial court noting that throughout the marriage wife had handled all of the family finances with little to input or objection from husband.  Husband also challenged virtually every ruling on appeal including: imputing $115,00 to him as income; the calculation of wife’s income even though it was stipulated to; the valuation of the marital residence even though it was to be sold; the valuation of wife’s capital account; the division of the marital assets; the amount of $4,300 per month in permanent maintenance to him; that he be required to pay 50% of the children’s uninsured medical expenses; the award of $15,000 out of $43,000 owed on his attorneys’ fees; and the allocation of the child-related tax exemptions. The trial court was upheld on all issues. In re the Marriage of Evanoff and Tomasek,2016 IL App (1st) 150017.