Olson Law’s Attorney Letter
The Law Office of Peter R. Olson Olsonlawfirm.net 312-629-9900 Winter 2009, Vol. III, No. 1
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Update: First-time Homebuyer Tax Credit
As part of The Housing and Economic Recovery Act of 2008, Congress created a $7,500 tax credit incentive to help first time home buyers get into a home and to stimulate the housing market and economy. First-time home buyers purchasing a home between April 9, 2008 and before July 1, 2009 are eligible for the tax credit. However, don’t be mislead, $7,500 is only the maximum amount of credit that a married couple, filing a joint tax return can claim. Generally, the initial credit for qualified buyers is equal to 10% of the purchase price of the principal residence and it cannot exceed $7,500 ($3,750 for married individuals filing a separate return or single individuals). So as long as your home’s purchase price was at least $75,000.00 you may be eligible for the maximum credit ($3,750 single or $7,500 married). The home must be used as a principal residence and be occupied within the time frame above. A first-time home buyer is any buyer who has not owned a principal residence, i.e. single family home, condo, townhouse, mobile home, houseboat, during the three years prior to the home purchase. Thus, even people who have bought a house before may still qualify for the tax credit. An important caveat for married couples regarding the tax credit is that if any spouse has owned a home as a primary residence in the past three years, then neither spouse may qualify for the first-time home buyer tax credit. Ownership of non-primary residences such as rental properties or vacation homes does not disqualify a first-time home buyer from the $7,500 tax credit. All you have to do is claim the tax credit on your federal income tax return. There are a few restrictions regarding the tax credit you should know about. First, the tax credit may not be available or only partially available based on your Adjusted Gross Income (AGI), and this varies for single vs. married couples. The tax credit is completely unavailable to single people with an AGI greater than $95,000 or married people filing jointly with more than $170,000 in AGI. The credit is evenly split for married couples filing separately, i.e. each spouse can only claim $3,750. Also, the tax credit is basically a zero interest loan as it will eventually have to be paid back to the government (without interest), over a 15 year period or when the home is sold. The first payment is not until 2 years after the credit is claimed. The payments are generally calculated as the credit amount divided by 15. Thus, a $7,500 tax credit would be paid back at $500 per year for 15 years or when the home is sold, which ever comes first. For specific questions regarding the tax credit and your specific tax situation, please call a tax professional. **As this newsletter goes to press, please be advised that Congress is considering changes to the above pursuant to the pending federal “stimulus legislation.” We have seen proposals to both increase the tax credit cap up to $15,000.00 and/or to eliminate the re-payment requirement of the credit. Please consult your tax professional before filing your fiscal 2008 federal income tax return.** _____________________________________________________________________________________________
When Mom or Dad Wants to Move after a Divorce or Parentage Case
Did you know that if you’ve been divorced or have a paternity case in Illinois where a court has ordered custody and visitation arrangements that you must get a court’s permission, prior to re-locating outside of Illinois? Today’s mobile society offers more relocation opportunities than ever before. But for divorced parents or unmarried parents subject to a court’s custody/visitation orders, the idea of picking up and moving out of state for a new job, a new life, or a new spouse gets complicated by the need to craft a new
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visitation schedule between the children and the nonmoving parent or worse by not being allowed to move. Often new visitation schedules give the non-moving parent larger blocks of vacation time during the school year and the summer, and they may require the children to travel long distances. If parents can’t agree on a new visitation schedule, the moving parent must apply to the court for permission to remove the child from Illinois, which puts the issue before a judge. Under the Illinois Marriage and Dissolution of Marriage Act (IMDMA), the court may allow a parent to remove a child from Illinois when it’s in the best interest of the child. So what’s in the best interest of the child? The statute makes children the focus of whether or not the “removal” should be allowed. Removal cases often present compelling and competing interests between the children, the parent seeking removal, and the nonmoving parent which makes the best-interest evaluation a delicate balancing act. The Illinois Supreme Court has held that courts should consider: (1) the likelihood of the proposed move to enhance the quality of life for both the custodial parent and the children; (2) the motives of the custodial parent in seeking to move; (3) the motives of the noncustodial parent in resisting; (4) the effect on the noncustodial parent’s visitation rights; and (5) whether a realistic visitation schedule can be reached if the move is allowed. However, no factor is controlling and the weight accorded to each will vary depending on the facts. Recently, courts have been reluctant to allow removal, especially when the non-custodial parent and extended family have a close relationship with the children and the move will not improve the children’s lives. In the most recent appellate court removal case, In re Marriage of Matchen , the second district affirmed the trial court’s denial of the mother’s petition for removal. In Matchen , two minor children lived with the mother, who became engaged to a man from the Wisconsin Dells, WI area. Both parties and the children resided in McHenry County, Illinois when the mother became engaged. She testified that she worked approximately 15 hours per week as a self-employed house cleaner, that her gross income for 2004 was $7,347, and that she did not have sufficient income to pay her bills. She also testified that her fiancé helped pay many of her daily living expenses, including rent, gas, and car repairs. The court found that the motives of both the mother requesting the move and the father opposing it were not disingenuous. Therefore, it focused on whether the move was likely to enhance the general quality of life for the custodial parent and children and how the move would affect the other parent’s visitation schedule. The appellate court found that the move to Wisconsin would not provide meaningfully better schools, recreational activities, or living arrangements than were available in Illinois. It was uncontested that the mother’s financial situation would improve with the move to Wisconsin, but the court asked whether those benefits outweighed the things the children would give up in the move. The Matchen court gave great weight to the children’s relationship with their father. The threat to that relationship outweighed the benefits of the move. The post-move visitation schedule would have required the children to travel six hours every other weekend to and from Wisconsin and lose weekday visits with their father. The court also gave great weight to the facts that the father exercised his visitation religiously and was involved and attended the children’s activities, and that the children could ride their bikes to his house and he could stop by occasionally at their house. Reducing this access to their father weighed heavily against removal. The court took issue with the mother’s pledge that she would bring the children back and forth from Wisconsin every other weekend, and although she listed stability as a major factor in favor of removal, the court found that only she would be in a more stable environment. Parents agree on removal? Put it in the court order. If you think that you may want to leave Illinois following a divorce or parentage case, if possible, get it ordered up front or have the other parent agree to the move up front. Parents can agree that the custodial parent may remove a child from Illinois without requiring the court to make an independent examination, since an agreement between the parents evidences that the decision is in the best interest of the child. However, the agreement
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must be entered as an order with the court in order to be binding. Removal under the Parentage Act In 2003, the Illinois Parentage Act (law governing cases with unmarried parents) was amended to make the removal provisions of the IMDMA apply to children born to unmarried parents. Last year, the supreme court set out procedural requirements for removal of children from Illinois under the Parentage Act. In Fisher v Waldrop, the supreme court ruled that (1) custodial parents must now seek leave of court before removing a child from Illinois, and they bear the burden of showing that the removal would be in the best interest of the child, and (2) section 13.5 of the Parentage Act allows the non-custodial parent to delay removal until a custodial parent’s petition can be dealt with on the merits. Under the Parentage Act, however, the focus of the injunction hearing is on the parents’ interest, as is evidenced by the following factors that the court may consider: (1) the extent to which the party opposing removal has been involved with the child; (2) the likelihood that parentage will be established; and (3) the impact an injunction would have on the custodial parent. What about a primary physical custodian’s right to move within Illinois? Generally, a custodial parent need not seek the court’s permission to move the children within the state. However, the parties can agree to restrictions and leave the issue for a court to determine. In other words, if you want to move from Chicago to Kenosha, WI (57 miles) you must get court approval but not if you want to move to Cairo, IL from Chicago (373 miles). In In re Marriage of McGillicuddy and Hare, the third district held that the mother had agreed to terms in the marital settlement agreement that provided for reconsideration of the residential parent in the event she moved outside of McDonough County, and by agreeing to those terms, the court must conduct a best interest hearing to determine where the children should primarily reside. The lesson? The language of the marital settlement agreement or joint parenting agreement should be carefully crafted to leave no ambiguity about whether the parent has the ability to move within the state. Problems most often occur in joint parenting agreements, where parents have joint decision making authority with respect to education. The non-relocating parent may use that provision to challenge a move of the custodial parent, claiming that he or she must be consulted about any change in school. A literal interpretation of such an agreement supports the non-custodial parent’s position. If you are the primary physical custodian, be aware of the presumption that court permission is not needed to move the child within the state. Conclusion As with most family law cases, the specific facts of each case will play the largest role should the court need to have a best-interest hearing. A parent seeking to remove a child from Illinois has a high burden to overcome if the nonmoving parent is actively involved in the child’s life. The custodial parent will have to show that significant benefits and meaningful enhancements in the child's life will result from the move. Terre Haute, Indiana to attend school, and when the father refused, she moved the children to Marshall in Clark County, not far from the Indiana border.
In In re Marriage of Findlay , the marital settlement agreement provided that the parties would jointly decide matters regarding the children, including but not Removal hearings can be long and protracted, and you limited to important questions of education, religion, should make a clear-headed, well-informed judgment and elective medical care, and in the event the parties about the wisdom of proceeding. were unable to agree the matter would be resolved by the court. The mother sought to remove the children to _____________________________________________________________________________________________
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Client question: How do I enforce a court’s order and alternatively what if I’m unable to comply with a court’s order?
That’s a fairly complex question but let me answer with the Cliff Notes version. A court enforces its orders through its power of contempt. This is the inherent concept that part of a courts ability to administer justice includes its ability to force someone to do something and sometimes to punish an individual for failing to do something that has been ordered. There are four different types of contempt of court: 1) Direct civil contempt; 2) Direct criminal contempt; 3) Indirect civil contempt; and, 4) Indirect criminal contempt. “Direct” means the action occurs within the court’s actual presence and indirect means the action occurs outside the court’s presence. I won’t spend much time discussing direct contempt because as a private attorney I generally am not too involved with direct contempt. Direct contempt rarely involves compliance with a court order but rather typically involves disrespect directly to a judge in open court. The use of Indirect civil contempt or Indirect criminal contempt are the more common scenarios with Indirect civil contempt far more frequent, particularly in the domestic relations field. Simply, this means that there’s alleged noncompliance with a court’s order that is occurring outside of the courtroom. The classic example would be an individual’s failure to pay child support. If you want to enforce a court’s order you must prove three elements: A) There’s an enforceable court order; B) There’s been a violation of a court order; and, C) The violation of the court’s order is willful or intentional, in other words an individual has the ability to comply with the court’s order and is simply choosing not too. Generally item C) above is where the action is. Most times there is not much question that there is a court order and that there’s a violation, the question is why? And typically that’s how a client must defend herself if you’re not complying with a court’s order, namely, you show the court a good and legitimate reason why you’re not complying. Back to the failure to pay child support example, if you can show a letter from your former company’s human resources officer regarding your firing from a job or medical records showing injury that won’t allow you to work, you likely won’t be held in contempt. But you need good, written records. When clients just orally testify about financial troubles they’re never successful, there must be thorough records. Contempt of court is serious business, even in non-criminal cases litigants can be jailed for failing to follow a court’s order. So what’s the difference between indirect civil contempt and indirect criminal contempt? Indirect civil contempt is far more frequently used and seeks to force someone to do something. For example, pay $5,000 child support or you’re going to jail. Once the money is paid you’d be released if it’s indirect civil contempt. Meanwhile, indirect criminal contempt is used to punish someone. For example, you were ordered to stop hiding your child from his mother at the end of every visit and yet it happens every weekend. You can be sentenced to six months or more in jail as a punishment. *Email your questions to Diane at dianeb@olsonlawfirm.net for future newsletter issues.* **DISCLAIMER: Actual resolution of legal issues depends upon many factors, including variations of facts and state laws. This newsletter is not intended to provide legal advice on specific subjects, but rather to provide insight into legal developments and issues. The reader should always consult with legal counsel before taking action on matters covered by this newsletter.
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Case law update – January 2009
_____________________________________________________________________________________________ In re the Marriage of Walker, No. 4-07-0730, 4th District (November 26, 2008). Trial court did not abuse its discretion when it awarded wife permanent maintenance after 26 year marriage with wife earning $37,000 and husband $204,000 by the court's calculation. Further, trial court was not required to believe husband’s testimony that his 2006 bonus was extraordinary. In addition, the court’s award of marital property based on approximately a 60/40 split, with the wife receiving mostly illiquid assets, is not error; and trial court had the authority to order the husband to maintain life insurance as security for his maintenance obligation. How might this apply to you? Maintenance (what was formerly known as alimony) is a lot like the division of property in a dissolution of marriage case in that it’s difficult to predict because Illinois law bases it on 12 separate factors. This is difficult because what happens in practice is that a court tends to latch on to a single or a couple of factors rather than truly weighing the many factors that the law requires. In our experience length of marriage and future earning capacity are the critical factors for a court to consider in potential maintenance cases. The three most common forms of maintenance are: permanent, rehabilitative (paid for a fixed period), and reviewable (paid for a specific period but then a court retains the right to review it in the future). Cases involving a permanently disabled spouse will nearly always result in some maintenance payment. In re the Estate of Fallos, No. 4-08-0218, 4th District (November 26, 2008). Trial court’s order, denying the adult ward’s petition to terminate or modify plenary guardianship is against the manifest weight of the evidence. Although the ward is profoundly physically disabled, the evidence does not demonstrate that he totally lacks capacity to make decisions and communicate them effectively with regards to his care. At a minimum, in light of the improvements in the ward’s mental condition, the court should replace the plenary guardianship with a more limited guardianship tailored to the ward’s individual needs. How might this apply to you? This was an interesting and rare case where a disabled individual successfully undid a court’s finding that he was disabled and that a plenary (100%) guardian was necessary. A court may appoint the disabled person a guardian of his person if, because of his disability, he lacks sufficient understanding or capacity to make or communicate responsible decisions concerning the care of his person. However after a couple years the ward (disabled individual) improved to a degree that he asked the court to modify the guardianship. And the court did say that as long an individual can direct others to provide for his care a plenary guardianship is not appropriate. In this case a limited guardianship over parts of the ward’s life was appropriate but not a plenary guardian. In re Marriage of Holtaus, No. 2-07-0562, 2nd District (November 17, 2008). Because wife has failed to demonstrate that she had any good cause for serving response to request to admit two days late, and because lack of prejudice to husband in dissolution of marriage proceeding is not sufficient, trial court did not abuse its discretion when it struck her untimely response. Further, the trial court’s refusal to treat the payment of attorney’s fees as advances on the distribution of the marital estate, and skewing the property division in favor of the husband in order to adjust for the excess fees he incurred as the result of the wife’s behavior during the proceeding, fits within the dictates of Section 501(c-1)(2) of the IMDMA. However, the trial court erred when it selected the relevant date for the purpose of calculating the wife’s dissipation at the date that the husband moved out of the marital home; because it is clear that the marriage was in the process of breaking down long before then. How might this apply to you? The discussion of dissipation was particularly instructive in this case and is too often misunderstood. Dissipation is the use of marital property for the sole benefit of one of the spouses for a purpose unrelated to the marriage at a time that the marriage is undergoing an irreconcilable breakdown. This is important because one spouse often must reimburse the other spouse for this so-called “dissipation spending.” In a typical case while a dissolution of marriage is pending, each of the
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spouses continue to live and spend as they had previously and this sort of spending has no impact on the final dissolution of marriage judgment. However, in the case above one spouse was ordered to pay the other spouse some $118,000.00 because her spending was ruled to be dissipation. In re Marriage of Best, No. 2-05-0947 & 2-05-1001, 2nd District (January 9, 2009). Although provision of antenuptual (prenuptial) agreement prohibiting fee shifting applies to actions for collection of child support, it violates public policy; and trial court correctly refused to enforce it. How might this apply to you? The Illinois Marriage and Dissolution of Marriage Act under certain circumstances allow one party to recoup attorney’s fees from the opposing party. It’s common to set forth attorney fee provisions in a prenuptial agreement. However, the above case held that these limits cannot apply to matters involving children because a party must always be able to litigate in a child’s best interests. In re Marriage of Reimer, No. 3-07-0566, 3rd District (January 14, 2009). Trial court erred when it ordered Respondent, mother, to pay almost $60,000 in child support several years after her obligation to pay child support was abated and never subsequently modified. Trial court erred in relying on SCR 296(f) and limiting the abatement to six months after case was continued generally for over two years; because procedure laid out in SCR 296 was never approved for Will County. How might this apply to you? Too often a child support obligor (payor) runs into financial difficulty and then simply allows the weekly or monthly child support obligation to run against him without payment and suddenly he finds himself thousands of dollars behind in support payments. There are two alternatives: permanently modify child support or temporarily abate it. To permanently modify support the bar is set fairly high and the obligor must prove a good faith decrease in income (i.e. an involuntary job loss). But even if this can’t be done the court has more discretion to temporarily abate or pause support and this should be pursued to achieve at least some temporary relief and to save money.
**TAX NOTICE: To comply with certain U.S. Treasury regulations, we inform you that any tax advice contained in the text of this communication is not intended or written to be used, and cannot be used by any person for the purpose of avoiding any penalties that may be imposed under the Internal Revenue Code.
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