In Re Marriage of Holman

462 N.E.2d 30, 122 Ill. App. 3d 1001, 78 Ill. Dec. 314, 1984 Ill. App. LEXIS 1639
CourtAppellate Court of Illinois
DecidedMarch 29, 1984
Docket83-206
StatusPublished
Cited by17 cases

This text of 462 N.E.2d 30 (In Re Marriage of Holman) is published on Counsel Stack Legal Research, covering Appellate Court of Illinois primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In Re Marriage of Holman, 462 N.E.2d 30, 122 Ill. App. 3d 1001, 78 Ill. Dec. 314, 1984 Ill. App. LEXIS 1639 (Ill. Ct. App. 1984).

Opinion

JUSTICE LINDBERG

delivered the opinion of the court:

Respondent-appellant-cross-appellee John C. Holman appeals from an order of the circuit court of Du Page County which dissolved his 10-year marriage to petitioner-appellee-cross-appellant Dorothy J. Holman, distributed the parties’ marital and nonmarital property and awarded maintenance to Dorothy. John challenges the trial court’s award of maintenance and its characterization of certain assets as Dorothy’s nonmarital property. Dorothy cross-appeals, raising as error the trial court’s allocation of the parties’ marital property. We affirm.

Dorothy, age 56 at the time of trial, and John were married on July 4, 1970, in LaGrange, Illinois. Both parties had been married previously; Dorothy had five daughters from her first marriage and John's first marriage produced two sons. Upon the death of her first husband, Dorothy acquired by survivorship a home in LaGrange, Illinois. John and his two sons moved into this residence after the marriage. Dorothy also acquired the beneficial interest in a testamentary trust upon her first husband’s death. During their marriage, Dorothy paid the mortgage on the residence from income generated by the trust. The real estate taxes and insurance payments on the residence were paid directly by the trustee, LaGrange State Bank. Dorothy’s primary source of income during the years of the parties’ marriage was from the trust. John was employed throughout the marriage, owning a variety of businesses which provided his means of support.

On September 25, 1980, Dorothy filed her dissolution petition, and after John filed his answer, the trial court ordered John to pay temporary monthly maintenance of $950, which was later reduced to $700. After hearing testimony for three days, the trial court on November 18, 1982, issued a ruling by letter which divided the parties’ nonmarital and marital property and awarded Dorothy permanent maintenance. The letter was subsequently incorporated into a judgment of dissolution. On February 4, 1983, John filed a post-trial motion seeking modification or amendment of the judgment, which the court denied. Thereafter, John filed a timely notice of appeal and Dorothy filed a cross-appeal.

John raises as his first assignment of error that the trial court incorrectly characterized the trust and the LaGrange residence as non-marital property. While he asserts these designations are erroneous, he does not seek a different allocation of the property. Rather, he requests only that this court redesignate the trust and the house as marital property in the judgment of dissolution. In her cross-appeal, however, Dorothy does challenge the trial court’s allocation of the marital property. Since inclusion of the beneficial trust interest and the residence in the marital estate would affect this court’s review of the trial court’s marital property allocation, we proceed to determine if the court correctly characterized the trust and residence as non-marital property.

Section 503(a) of the Illinois Marriage and Dissolution of Marriage Act (Ill. Rev. Stat., 1982 Supp., ch. 40, par. 503(a)) (IMDMA) designates property acquired by certain means as nonmarital. The trial court in section 503 is directed to “assign each spouse’s non-marital property to that spouse.” (Ill. Rev. Stat., 1982 Supp., ch. 40, par. 503(d).) The statute then directs the court to apportion the marital property in just proportions considering as one factor the value of the nonmarital property set apart to each spouse. Ill. Rev. Stat., 1982 Supp., ch. 40, par. 503(d)(2).

The trust which is the subject of this appeal was established in 1966 by Dorothy’s first husband. The trust beneficiaries are Dorothy and her five daughters. The trust agreement established two funds: the marital fund (Trust A) and the residual fund (Trust B). Dorothy was entitled to all of the income and up to $5,000 in principal from Trust A and by 1977, the marital fund was exhausted. Dorothy is entitled to the income from Trust B and may receive distribution of the principal if the trustee, LaGrange State Bank, determines the sums are necessary for her reasonable support and comfort. Judith French, a trust administrator at the bank, testified that Dorothy is required to make an application for principal distribution and the decision whether to grant the application is within the discretion of the trustee bank. French stated preservation of the trust corpus for the remaindermen was one factor to be considered in deciding upon a request to distribute principal.

Neither party disputes that the trust was Dorothy’s nonmarital property at the beginning of the marriage. John contends, however, that the trust was transmuted into marital property based on two theories. First, John contends he enhanced the value of the trust by paying the State and Federal taxes due on the income produced from the trust. John argues that had the trust been required to pay the taxes, at least the interest and perhaps some of the principal from the trust would have been expended. Dorothy responds that she paid the taxes on the trust income in 1973 and 1975, and furthermore, that John’s payment of the parties’ State and Federal income tax liability did not increase the value of the trust corpus.

We conclude that John’s payment of the parties’ income tax liability is insufficient to effect a transmutation. John does not cite any decision which has addressed his transmutation theory. Supportive of Dorothy’s theory is In re Marriage of Jones (1982), 104 Ill. App. 3d 490, 432 N.E.2d 1113. There, the husband entered the marriage with a stock trust. During the marriage, he reinvested most of the dividends in additional stocks, kept the trust assets segregated from the parties’ marital property, and reported the income earned by the stock trust on their joint tax returns. In defense of the trial court’s characterization of the trust as nonmarital, the husband argued that “the payment of taxes does not constitute the preservation or enhancement of the stock trust.” (104 Ill. App. 3d 490, 497; 432 N.E.2d 1113, 1118.) On appeal, the court agreed that the trust was nonmarital. The court found significant that the husband segregated the trust from marital funds, reinvested most of the dividends, and did not commingle the trust income with marital property. As in Jones, the parties here reported the trust income on their joint income tax returns. The trust was always segregated from the parties marital property, and the trust income was used almost exclusively to make the mortgage, insurance and property tax payments on the La-Grange residence. We find Jones persuasive and conclude that John’s payment of the income tax liability on the income from the trust did not transmute the trust corpus into marital property. See also In re Marriage of Wojcicki (1982), 109 Ill. App. 3d 569, 440 N.E.2d 1028 (property retained its nonmarital character even though marital funds were used to pay real estate taxes on the property).

As his second transmutation theory, John contends the commingling of trust income with trust principal transformed the trust into marital property. John’s argument is unpersuasive.

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Bluebook (online)
462 N.E.2d 30, 122 Ill. App. 3d 1001, 78 Ill. Dec. 314, 1984 Ill. App. LEXIS 1639, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-marriage-of-holman-illappct-1984.