Imputation of Income for the Purposes of Calculating Maintenance in Illinois

Section 504 of the Illinois Marriage and Dissolution of Marriage Act addresses maintenance.  The Internal Revenue Service calls it “alimony” on tax forms, and it’s sometimes called spousal support.

 

Under the law, upon the entry of a judgment for dissolution of marriage (a divorce decree), one spouse may be entitled to maintenance, either for a specific duration of time or permanently.  Before awarding maintenance to one spouse, the court must first determine whether an award of maintenance would be appropriate.  Just because the parties have been married a long time or have disparate incomes,that does not necessarily mean one spouse is entitled to maintenance.  Before the court may make a decision about how much maintenance is appropriate and for how long, the law requires the court to first decide whether maintenance is appropriate, after considering the following factors:

(1) the income and property of each spouse;

(2) the needs of each spouse;

(3) the realistic present and future earning capacity of each spouse;

(4) any impairment of the present and future earning capacity of the party seeking maintenance due to that party devoting time to domestic duties or having forgone or delayed education, training, employment, or career opportunities due to the marriage;

(5) any impairment of the realistic present or future earning capacity of the party against whom maintenance is sought;

(6) the time necessary to enable the spouse seeking maintenance to acquire appropriate education, training, and employment, and whether that spouse is able to support himself/herself through employment or any parental responsibility arrangements and its effect on the party seeking employment;

(7) the standard of living established during the marriage;

(8) the duration of the marriage;

(9) the age, health, station, occupation, amount and sources of income, vocational skills, employability, estate, liabilities, and the needs of each of each spouse;

(10) all sources of public and private income including, without limitation, disability and retirement income;

(11) the tax consequences of the property division upon the respective economic circumstances of each spouse;

(12) contributions and services by the spouse seeking maintenance to the education, training, career or career potential, or license of the other spouse;

(13) any valid agreement of the spouses; and

(14) any other factor that the court expressly finds to be just and equitable.

If the court weighs those factors and decides maintenance would be appropriate, it may then decide the questions of how much and for how long.  We analyzed those questions in a prior blog post titled, “The Law On Maintenance (a/k/a Alimony) Is Changing in Illinois: How It Will Be Calculated and What the Changes Mean For You.” https://www.dupagecountydivorcelawyerblog.com/2014/08/27/law-maintenance-aka-alimony-changing-illinois-will-calculated-changes-mean/#more-60

The statutory formulas are simple enough to apply when both spouses are employed.  However, it is often the case that one spouse isn’t working, and has no actual income. How does the court deal with the non-working spouse’s earnings in calculating spousal support?

Hard Work

Consider this scenario.  Lucy, a spunky and bright young woman, married Ricky, a dashing and successful musician.  Before the marriage, Lucy had earned approximately $60,000 per year as an actress and comedienne, which was enough to support.  However, approximately six years into the marriage, Lucy quit her job to become a full-time homemaker and primary caregiver for the family’s only child, Ricky Jr. Meanwhile, Ricky Sr. was often traveling for shows and tours, which gained him significant fame and financial success.

The couple decided to call it quits after 16 years of marriage, when Ricky Jr. was 10 years old.  At the time that Lucy filed for divorce, Ricky Sr. was earning a gross annual income of $180,000.  Lucy, after giving up her career to stay home for the sake of the family, had been out of the workforce for almost ten years.

Under these circumstances, would Lucy be entitled to maintenance?  Based upon the statutory factors, a court would probably order Ricky Sr. to pay spousal support to Lucy for a certain duration of time.  At the time of the divorce, her income is $0 while his is $180,000; she devoted the last 10 years or so to domestic duties to raise Ricky Jr.; Lucy and Ricky Sr. have been married a substantial amount of time, etc.

How much would Lucy be entitled to?  The answer may be complicated. Under a straightforward calculation using the statutory guidelines, she would theoretically be entitled to receive $54,000 per year ($4,500 per month).  That amount is the result of calculating 30% of Ricky Sr.’s gross income ($180,000 x 0.3 = $54,000) and subtracting 20% of Lucy’s gross income (20% x $0.00 = $0.00).

However, straightforward guideline calculations may not be appropriate because Lucy, while unemployed during much of the marriage, had been self-sustaining and earning a significant income prior to and during the first five years of marriage. She arguably could return to her prior work, if she wanted to.  Even if she could not earn what she previously did, she would likely have an income above zero.

In cases like these, the courts may “impute” income to the spouse in Lucy’s position.  In the case of Marriage of Evanoff, decided by the First District Appellate Court of Illinois, the court affirmed the trial court’s imputation of $11,500 additional income to a spouse earning $28,500 before calculating the maintenance award.

The court specifically noted the realistic “present and future earning capacity of each party,” one of the factors within the law to be considered in determining maintenance.  In this case, the wife had historically been the primary wage earner as a consultant and partner at firms such as Arthur Andersen, KPMG, and eventually Deloitte, while the husband had been a touring rock musician.  However, both acknowledged that they had shared in child-rearing responsibilities while the children were young (they were all adults by time the divorce was filed).  At the time of the divorce, the husband was employed in warehousing and sales earning $28,500.  He had a bachelor’s degree in communications and had worked as a professional musician for 10 years, but had not sought additional training or education. Even after the marriage had broken down, the husband “did not seek additional education or vocational training to advance his employment opportunities.”  Meanwhile, the wife earned $348,880 annually.

At trial, the court awarded the husband $4,300 per month on a permanent basis.  The husband filed an appeal on several issues, one being that the court should not have imputed $11,500 in additional income to him before calculating maintenance. Legally, he faced an uphill battle, though.  In order to succeed on appeal, the appellate court would have had to find that no reasonable person could take the view that the trial court did at trial (called an “abuse of discretion” standard).  In reviewing what happened at trial, the appellate court saw that the husband “openly admitted that he was waiting to see what happens in the divorce proceedings before expending anymore effort in seeking better employment.”

Returning to Lucy and Ricky’s case, while Lucy would likely be entitled to an award of maintenance, the court could consider income to Lucy before setting the award.  The imputation of income could slightly or significantly reduce her award.  For example, if the court reasonably believed Lucy could get a job earning $40,000 per year, her maintenance award would be $46,000 per year ($3,833.33 per month) (Ricky Sr.’s gross income of $180,000 x 0.3 = $54,000 minus 20% of Lucy’s imputed income of $40,000 = $8,000 = $46,000).  If the court imputed even more, her award would reduce further.

The circumstances when a court will impute income to one spouse is case specific.  Make sure to consult with the experienced legal professionals at Kollias & Giese if maintenance may be an issue in your case.