One-Time, Lump Sum Income Sometimes Counts

One-Time, Lump Sum Income

by Wes Cowell; updated 11 April 2017 -- suggest a correction

One-time, lump sum payments are supposed to be included as income, but they open the door to a deviation from guideline support. Need advice? Call, leave your info., or schedule a consult.

Illinois' child support guideline percentages are applied to "all income from all sources." But what if the source of "income" is a one-time-only occurrence? Does it still count? The Illinois Supreme Court says it does. The Second District Appellate Court says not necessarily. Go figure. The Fifth District seems to have gotten in right in IRMO Fortner (below)

Lump Sum Workmen's Comp Settlements ARE Income: This issue has been well settled for many years. See, e.g., In re Marriage of Dodds, 222 Ill.App.3d 99, 164 Ill.Dec. 692, 583 N.E.2d 608 (2d Dist., 1991), and In re Marriage of Schacht, 343 Ill.App.3d 348, 277 Ill.Dec. 889, 797 N.E.2d 236 (2d Dist., 2003), which held that lump-sum workers' compensation settlements were income for the Illinois Marriage and Dissolution of Marriage Act's child support provisions.

In re: Marriage of Mayfield, 2013 IL 114655, 989 N.E.2d 601, 371 Ill.Dec. 11 (Ill., 2013) comes from the Illinois Supreme Court and it nicely confirms the previous appellate cases. After eight years of marriage and two kids, Shannon and Howard Mayfield divorced in 2003. In 2007, Howard was injured at work and sought workmen's comp. benefits. In 2011, their eldest child emancipated, their youngest was 14, and they went back to court to modify support. It came out that Howard had received $240,000 on a lump sum workmen's comp. award and never told Shannon. He paid off his mortgage, remodeled his home, paid off some debt, took a nice vacation, paid off all three cars, bought some "jewelry and furs," parked $30,000 in a Money Market account and bought a $40,000 piece of hunting land and a nice motorcycle.

Shannon wanted 20% of the $240,000. Howard said that wouldn't be fair because the lump sum award constituted "the equivalent of monthly payments for the duration of [his] life expectancy of 34 years which comes out to $580.30 per month . . . . Where the child is a teenager, and where clearly the award is to compensate for limited monthly payments over the life expectancy of the workman's compensation, it would be manifestly unfair to award a 20% portion of the entire settlement, to the former spouse. Such an award would grant the former spouse child support . . . effectively, for 25 years after the child has reached her majority.”

The trial court awarded Shannon $48,000 (20% of $240,000). Ouch! Howard appealed, lost, and took it to the Illinois Supreme Court. He lost there, too. The Supremes said:

Recurring or not, the income must be included by the circuit court in the first instance when it computes a parent's ‘net income’ and applies the statutory guidelines for determining the minimum amount of support . . . . Thus, a one-time payment is income, but its nonrecurring nature may factor into the trial court's decision on how to allocate it — presumably, under section 505(a)(2)(e), which concerns “the financial resources and needs of the non-custodial parent.” 750 ILCS 5/505(a)(2)(e) (West 2010).

Like the gifts and loans in Rogers, the lump-sum workers' compensation settlement that Mayfield received was income. Indeed, he treated it as income, and apparently spent most of it. Although he alluded to the nonrecurring nature of the settlement, and proposed an order setting child support at 20% of the prorated monthly equivalent, he never specifically asked the trial court to depart from the guidelines.

In re: Marriage of Mayfield, 2013 IL 114655, 989 N.E.2d 601, 371 Ill.Dec. 11, (Ill., 2013) (emphasis added).

"Pain and Suffering" MAY be Income: Payments that compensate for "pain and suffering" might be argued to not be "income" in the classic sense. Such payments make the victim whole -- they are made to try to place the victim back where he was before suffering the injury. Depending on where you live in Illinois, personal injury awards that compensate for "pain and suffering" MAY be income . . . but maybe not. In Villenueva v. O'Gara, 282 Ill.App.3d 147, 218 Ill.Dec. 105, 668 N.E.2d 589 (2d Dist., 1996), which predates Mayfield (above) by nearly twenty years, the Second District Appellate Court held that awards that compensate for "pain and suffering" should not be considered "income" for child support calculations because they make the plaintiff whole, rather than increasing the plaintiff's wealth. Villenueva v. O'Gara, 282 Ill.App.3d 147, 218 Ill.Dec. 105, 668 N.E.2d 589 (2d Dist., 1996).

Wrongful Death Proceeds ARE Income: The Villenueve analysis was rejected by the Fifth District Appellate Court in IRMO Fortner, 2016 IL App (5th Dist., 2016) 150246. Robbie and Shelley Fortner divorced in 2006 after four years of wedded bliss. They had on daughter who lived mostly with Shelley and Rob paid about $300 / month in child support. Rob's dad died after the local E.R. botched a heart attack diagnosis ("it's just heartburn," they told him . . . so he went to his family doctor, where he died in the lobby). Rob opened an estate and settled a "wrongful death" cliam for $250,000. After paying the lawyers, his dad's medical bills and funeral expenses, Rob netted $146,000 and promptly spent it. That looked pretty sweet to Shelley, who wanted a 20% share of Rob's gain.

Rob contended that a wrongful death award was analogous to a personal injury award and hid behind Villenueva (above). After all, Rob wasn't financially dependent on his father, so what else could the money be for but to compensate him for his pain and suffering and losing his father's society?

Shelly argued that the wrongful death award was more like an inheritance, an inheritance is really a gift, and sizeable gifts are income for child support purposes.

The trial court held that "wrongful death proceeds are more akin to an 'asset' in that it represents the value of the life lost to the recipient and has no resemblance to lost wages." So the settlement wasn't "income," but it DID improve Rob's financial resources and his standard of living. Based on that, the court allowed a one-time, $15,000 bump to Shelley. Shelly's award was less than 20% of Rob's net, but the trial court said that a deviation from the guidelines was fair because it was a one-time-deal and $15,000 was plenty fair. Rob appealed, Shelley did not. Rob argued that if the wrongful death award was not income (remember, the trial court said it was not), then the one-time support award was out-of-bounds; Shelley argued that the court got it wrong in the first place when it concluded the award was not income.

The Fifth District Appellate Court said that Shelley was right -- the proceeds from Rob's wrongful death claim were, "income" for child support purposes. The Fifth District said:

We believe the Second District's decision in Villenueva is at odds with the principle that the broad and expansive statutory definition of child support includes all benefits and gains received by a supporting parent unless such gains are excluded by statute.

. . .

In light of the broad, inclusive definition of income in the Dissolution Act, we conclude that such damages are properly included as income within the meaining of the Dissolution Act. We therefore conclude the settlement proceeds were income for purposes of child support.

. . .

[W] believe [Rob's $146,000 net] is more properly characterized as nonrecurring income in the year is was received. . . . Therefore, the court could properly modify child support to order a one-time payment . . . .

IRMO Fortner, 2016 IL App (5th Dist., 2016) 150246. Emphasis added.

Note, however, that despite finding the wrongful death proceeds were "income for purposes of child support," the appellate court simply affirmed the trial court and did not remand the matter for further proceedings to justify the diviation from the 20% guideline.

Conclusion: So, there you have it: "all income from all sources" means just that. One-time, lump-sum income is still income. Income from awards for "pain and suffering" is also income . . . at least in the Fifth District but, for the time being, not in the Second District.