Is an IRA Withdraw “Income” for Child Support Purposes?

It is well understood that a child support payor may be required to pay a percentage of any additional income above and beyond a base percentage of his/her income for child support purposes. This additional income may include any or all of the following: bonuses, commissions, or side jobs (paid in cash).

Illinois courts define income as “something that comes in as an increment or addition… a gain… that is usually measured in money.” They have maintained that income can include a lump-sum worker’s compensation award, military allowance, deferred compensation, and the proceeds from a pension. Additionally, a few Illinois courts have also included disbursements from an IRA as income for child support purposes. In such cases, if the child support payor’s judgment requires him or her to pay 20% of any additional income earned as child support, and he or she withdraws $10,000 from an IRA, the child support payee would be entitled to $2,000 in child support.

The First and Second Appellate Districts have held that an IRA disbursement is income, while the Fourth District disagrees. For the record, Cook County is located in the First District.

The Illinois Supreme Court is yet to rule on this issue. However, a potentially helpful precedent was set when the Illinois Supreme Court opined on the Marriage of McGrath. In this case, the Court held that money that a person withdraws from a savings account does not constitute income for support purposes. It reasoned that the money in the account already belongs to the account’s owner, and that withdrawing it does not represent a “gain” or benefit to the owner. The same argument and reasoning would apply for one who takes a distribution from an IRA. It is already money belonging to the account’s owner, and the owner is not gaining anything he or she did not already have by withdrawing the funds. Because McGrath only addresses the narrow issue of a savings account, however, it does not overrule cases in over districts regarding IRAs.

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