In re Dahm-Schell

2021 IL 126802

185 N.E.3d 1269

452 Ill.Dec. 533

IN RE MARRIAGE OF Sandra D. DAHM-SCHELL, Appellee, AND Mark R. SCHELL, Appellant.

Docket No. 126802

Supreme Court of Illinois.

Opinion filed November 18, 2021.

Dustin S. Hudson, of Neubauer, Johnston & Hudson, P.C., of Fairview Heights, for appellant.

Rhonda D. Fiss, of Law Office of Rhonda D. Fiss, P.C., of Belleville, for appellee.

JUSTICE NEVILLE delivered the judgment of the court, with opinion.

¶ 1 In entry of a judgment for a divorce, the circuit court of St. Clair County excluded an inheritance respondent Mark Schell received in calculating his child support and maintenance obligations under sections 504 and 505 of the Illinois Marriage and Dissolution of Marriage Act (Act) ( 750 ILCS 5/504, 505 (West 2018)). Petitioner Sandra Dahm-Schell filed a motion for reconsideration. After denying the motion, the circuit court certified the following question for interlocutory review pursuant to Illinois Supreme Court Rule 308 (eff. Oct. 1, 2019): "Whether inherited mandatory retirement distributions are income for purposes of child support and maintenance calculations."

¶ 2 The appellate court determined that the certified question, as written, would not materially advance the ultimate termination of the litigation. 2020 IL App (5th) 200099, ¶ 1, 448 Ill.Dec. 159, 175 N.E.3d 1069. The court reframed and answered the following question: " ‘Whether mandatory distributions or withdrawals taken from an inherited individual retirement account (IRA) containing money that has never been imputed against the recipient for the purposes of maintenance and child support calculations constitute "income" under 750 ILCS 5/504(b-3) (West 2018) and 750 ILCS 5/505(a)(3) (West 2018).’ " Id.

¶ 3 The appellate court answered the question in the affirmative and remanded to the circuit court for further proceedings. Id. ¶ 27. We allowed respondent's petition for leave to appeal. Ill. S. Ct. R. 315 (eff. Oct. 1, 2019). For the following reasons we affirm the judgment of the appellate court.

¶ 4 I. BACKGROUND

¶ 5 Sandra Dahm-Schell and Mark Schell were married on November 7, 1992. In August 2014, Sandra filed for divorce, and while the divorce action was pending, Mark's mother died, and he inherited approximately $615,000. The inheritance included checking accounts and investment accounts, the majority being held in two individual retirement accounts (IRAs).

¶ 6 On October 11, 2016, the circuit court entered a judgment of dissolution of marriage, and at that time the parties had five children, three of whom were minors. In the dissolution judgment, the circuit court determined that, based upon the 2015 financial statements provided by Mark, he had earned income of $8301.83 at his job and $462.33 per month in dividends from the inherited IRAs. His total monthly gross income was $8764.16. The parties stipulated that the inheritance was Mark's nonmarital property, and Mark was subsequently awarded all of the inheritance. When calculating child support and maintenance obligations, the circuit court did not include Mark's inheritance as part of his income.

¶ 7 In November 2016, the parties filed motions for the circuit court to reconsider its dissolution judgment. Sandra argued in her motion to reconsider that Mark's income should include his inheritance and should have been considered by the circuit court in calculating the proper amount of child support and maintenance required to be paid by Mark.

¶ 8 While the motions for reconsideration were pending, Mark petitioned the circuit court to reduce the amount of child support and maintenance he was obligated to pay Sandra. He contended that a reduction was necessary since his employer reduced his pay by 20% and that one child had graduated high school and became emancipated.

¶ 9 In response to the parties’ motions to reconsider, the circuit court entered amended judgments on December 18, 2017, and December 28, 2017, respectively. These judgments reaffirmed the court's prior determination that only "the dividends from [Mark's] inheritance shall be considered and added to his monthly income for maintenance and child support purposes."

¶ 10 Pursuant to the Internal Revenue Code (Code), Mark is required to take distributions from the inherited IRAs in the sum of approximately $894.25 per month. At the time of his March 2018, financial statement, in support of his petition to modify child support and maintenance, Mark had a gross income of $9439.84 per month if the mandatory distributions were included, or $8545.59 per month if the distributions were not included.

¶ 11 A. Circuit Court Decision

¶ 12 On May 3, 2018, the circuit court held a hearing on Mark's motion to reduce child support and maintenance. Mark testified that he received $10,731 per year in mandatory IRA distributions from the inherited accounts. He stated the funds were the "mandatory required minimum distribution" under the Code. He further stated that, upon receiving the distributions, he immediately transferred the money into another nonmarital retirement account held in his name. Mark indicated that these funds should not be considered income for the purpose of calculating support. Mark also testified that the inheritance was nonmarital property. However, Mark conceded that the dividends received from the inherited IRAs should be considered income.

¶ 13 On September 5, 2018, the circuit court entered an order declining to include Mark's "inherited mandatory retirement income when calculating maintenance and child support." Sandra filed a motion to reconsider, arguing that the court erred when it failed to include Mark's inheritance in his support obligations in its initial and amended supplemental judgments. The court denied the motion in January 2019. Sandra attempted to appeal the September 5, 2018, order, but the appeal was dismissed for lack of jurisdiction because it was not a final and appealable order.

¶ 14 On February 18, 2020, Sandra moved to certify the issue of whether mandatory IRA distributions constituted income as a question for interlocutory appeal pursuant to Illinois Supreme Court Rule 308 (eff. Oct. 1, 2019). Noting no objections by either party, the circuit court granted the motion and certified the following question: "Whether inherited mandatory retirement distributions are income for purposes of child support and maintenance calculations."

¶ 15 B. Appellate Court Decision

¶ 16 The appellate court subsequently granted Sandra's petition for leave to appeal and on November 30, 2020, answered a related but slightly different Rule 308 question to materially advance the ultimate termination of the litigation. 2020 IL App (5th) 200099, ¶ 1, ––– Ill.Dec. ––––, ––– N.E.3d ––––. The appellate court reframed and answered the following question in the affirmative: " ‘Whether mandatory distributions or withdrawals taken from an inherited individual retirement account (IRA) containing money that has never been imputed against the recipient for the purposes of maintenance and child support calculations constitute "income" under 750 ILCS 5/504(b-3) (West 2018) and 750 ILCS 5/505(a)(3) (West 2018).’ " Id.

¶ 17 In reaching this conclusion, the appellate court observed that the term "gross income" has the same meaning in regard to both child support payments and maintenance payments, " ‘except maintenance payments in the pending proceedings shall not be included.’ " Id. ¶ 13 (quoting 750 ILCS 5/504(b-3), (b-3.5) (West 2018)). In addition, the appellate court noted that the term "gross income" is defined in the Act as " ‘all income from all sources.’ " Id. (quoting 750 ILCS 5/505(a)(3)(A) (West 2018)). The court recognized that the definition lists numerous specific benefits or payments that are exempted from being counted as income, none of which were applicable here. Id.

¶ 18 The appellate court pointed out that this court, in In re Marriage of Mayfield , 2013 IL 114655, ¶ 16, 371 Ill.Dec. 11, 989 N.E.2d 601, has held that income includes gains and benefits that enhance a noncustodial parent's wealth and facilitate that parent's ability to support a child or children. 2020 IL App (5th) 200099, ¶ 13, 448 Ill.Dec. 159, 175 N.E.3d 1069.

¶ 19 The appellate court then addressed this court's holding in In re Marriage of McGrath , 2012 IL 112792, 361 Ill.Dec. 12, 970 N.E.2d 12, explaining that at issue was whether money that an unemployed parent regularly withdrew from his savings account must be included in the calculation of income when setting child support under section 505 of the Act. 2020 IL App (5th) 200099, ¶ 14, 448 Ill.Dec. 159, 175 N.E.3d 1069 ; see 750 ILCS 5/505 (West 2018).

¶ 20 The appellate court recognized that, in McGrath , this court stated:

" ‘The money in the account already belongs to the account's owner, and simply withdrawing it does not represent a gain or benefit to the owner. The money is not coming in as an increment or addition, and the account owner is not "receiving" the money because it already belongs to him.’ " 2020 IL App (5th) 200099, ¶ 14, 448 Ill.Dec. 159, 175 N.E.3d 1069 (quoting McGrath , 2012 IL 112792, ¶ 14, 361 Ill.Dec. 12, 970 N.E.2d 12 ).

¶ 21 The appellate court reasoned that in McGrath , because that money had already been considered income at some time prior to the withdrawal, the money withdrawn could not now also constitute income; thus, what has been referred to as " ‘double counting’ " was avoided. Id. ¶ 18. The court explained that double counting entails improperly counting the money both as income first when it is earned or initially received and then again when it is withdrawn. Id. ¶ 22.

¶ 22 The appellate court determined that the proper mechanism for establishing that an IRA distribution or withdrawal is "income" for the purposes of child support and maintenance is to first ascertain the source of the money at issue and whether that money has been previously imputed against the individual receiving the distribution or withdrawal so as to avoid...