In Re Marriage of Wolfe , 298 Ill. App. 3d 510 ( 1998 )

JUSTICE McLAREN

delivered the opinion of the court:

The respondent, Steve Wolfe, appeals from the February 24, 1997, and May 12, 1997, orders of the circuit court of Du Page County distributing the portion of a personal injury settlement that compensated Steve for lost future wages as marital property and child support. The trial court ordered that 10% of the lost future wages portion of the settlement proceeds be awarded as marital property to the petitioner, Janet Wolfe, and 20% of the lost future wages portion of the settlement proceeds be used to establish a trust fund for the support and benefit of Cassandra Wolfe, the parties’ only child. On appeal, Steve argues that (1) the trial court erred in finding that the settlement proceeds could be considered “income” for purposes of making a child support award; and (2) the trial court erred in determining and calculating the specific award of child support. We affirm in part, reverse in part, vacate in part, and remand the cause for further proceedings.

On July 21, 1993, Janet filed a petition for dissolution of marriage. The parties’ only child, Cassandra, was born on October 24, 1990. In her petition, Janet requested custody of Cassandra and an award of child support.

Approximately one year prior to the commencement of the dissolution proceedings, Steve was seriously injured in a work-related accident and, as a result, was no longer able to work. After his injury, Steve began to receive social security disability benefits in the amount of $1,710 per month.

On August 18, 1993, the trial court awarded Janet temporary custody of Cassandra and ordered Steve to pay temporary child support in the amount of $342 per month. This amount represented 20% of Steve’s then monthly income of $1,710. On December 20, 1993, Janet filed a petition for an increase in the amount of temporary child support. On February 7, 1994, following a hearing, the trial court entered an agreed order requiring (1) that Janet maintain medical insurance for Cassandra through her employer; (2) that Steve pay 60% of the monthly cost for such insurance; (3) that the parties would equally pay all of Cassandra’s medical expenses not covered or reimbursed by insurance; and (4) that the parties would pay equally for all of Cassandra’s outstanding medical expenses.

Also on February 7, 1994, the parties entered into an agreed permanent custody order. Pursuant to this order, Janet was granted permanent sole custody of Cassandra and Steve was granted supervised visitation.

On two separate occasions, Janet filed a motion for a rule to show cause against Steve to force his compliance with the trial court’s orders. On December 20, 1993, Janet filed a motion for a rule to show, cause complaining of Steve’s failure to participate in court-ordered “conciliation” sessions with a counselor. On September 15, 1995, Janet again filed a motion for a rule to show cause complaining of Steve’s failure to reimburse her for his share of Cassandra’s medical insurance and health care expenses.

The cause proceeded to trial on February 1, 1996. On March 16, 1996, the trial court entered a judgment of dissolution. As part of its dissolution order, the trial court ordered (1) that Steve pay Janet $1,717.16 as an arrearage on his support obligations; (2) that Steve pay the sum of $146 per month in child support (20% of his monthly income at that time); (3) that Steve reimburse Janet for 50% of all medical expenses and insurance premiums; (4) that Steve pay Janet 20% of his $58,526 workers’ compensation settlement; and (5) that the trial court would retain jurisdiction to allocate any proceeds received by Steve as a result of his then pending personal injury claim brought pursuant to the Structural Work Act (740 ILCS 150/0.01 et seq. (West 1992) (repealed by Pub. Act 89 — 2, § 5, eff. February 14, 1995)).

On October 4, 1996, Steve filed a petition for allocation of proceeds from the settlement of his Structural Work Act claim. In the petition, Steve stated that the net settlement proceeds payable to him after all liens, costs, and attorney fees was $375,337.33. The petition further alleged that 80% ($324,425.88) of the settlement proceeds represented Steve’s future wage loss; 6.66% represented future medical expenses; 6.66% represented past medical expenses; and 6.66% represented pain and suffering. On January 14, 1997, the trial court entered an order requesting both parties to submit briefs suggesting the appropriate allocation of the settlement proceeds for purposes of a property settlement and child support.

Pursuant to this order, on February 3, 1997, Steve filed a brief in which he presented his proposal as to the appropriate allocation of the settlement proceeds. In his brief, Steve relied on this court’s decision in Villanueva v. O’Gara, 282 Ill. App. 3d 147 (1996), and argued that a personal injury settlement could not be considered income for purposes of awarding child support. Steve argued that, because he was only 40 years old and physically unable to work, any lump-sum payment for child support was inappropriate and would result in hardship. Instead, Steve suggested that an annuity be purchased in the name of the minor.

Steve also noted that, prior to the dissolution proceeding, the parties had filed for bankruptcy protection in federal court. As part of that proceeding, the bankruptcy court apparently ordered that the parties deposit $50,000 with the bankruptcy trustee pending the payment of all administrative fees and unsecured claims. Steve argued that the parties should each pay $25,000 towards the satisfaction of this deposit amount.

On February 24, 1997, following a hearing, the trial court ordered Steve to pay the $50,000 bankruptcy deposit and other amounts from his settlement proceeds. Further, the trial court ordered the remaining sum of $324,425.88 to be allocated as follows: 10% ($32,442.50) to Janet as marital property; 20% ($64,885) to establish a trust for the support and benefit of Cassandra with Janet as trustee; and the remaining 70% ($227,098.38) to Steve as a distribution of marital property. Following the denial of his posttrial motion, Steve filed a timely notice of appeal.

Steve contends on appeal that the trial court erred in finding that the settlement proceeds could be considered “income” for purposes of making a child support award. Steve does not challenge the trial court’s decision to order the establishment of a trust or its decision to award Janet 10% of the remaining settlement proceeds. However, he argues that the trial court erred in determining and calculating the specific amount of child support. In support of this argument, Steve contends (1) that the trial court should have subtracted the 10% ($32,442.50) of the settlement proceeds awarded to Janet prior to calculating the 20% amount to be allocated to the section 503(g) trust (750 ILCS 5/503(g) (West 1996)) established on behalf of Cassandra; (2) that the trial court should have allocated only that portion of the settlement proceeds representing his lost earnings; and (3) that amount of the lump-sum payment to fund the trust was not proper in light of Cassandra’s age and Steve’s financial situation. Because these arguments are closely related, we will address them together.

When making an award of child support, the trial court must determine the statutory minimum amount by taking a certain percentage of the supporting party’s net income. 750 ILCS 5/505(a)(l) (West 1996); Villanueva, 282 Ill. App. 3d at 150. In applying this statute, the trial court must first make a threshold determination as to the party’s net income. 750 ILCS 5/505(a)(l) (West 1996); Villanueva, 282 Ill. App. 3d at 150. This court has noted that a personal injury settlement constitutes “net income” for purposes of section 505(a)(1) of the Illinois Marriage and Dissolution of Marriage Act (750 ILCS 5/505(a)(l) (West 1996)) (Marriage Act or the Act) only to the extent that it reimburses the injured party for lost earnings. See Villanueva, 282 Ill. App. 3d at 150-51.

In the case at bar, although the court properly deducted $50,000 for the bankruptcy deposit, the court failed to deduct the 10% awarded to Janet and the 20% of the settlement representing damages for medical expenses and pain and suffering. Thus, the trial court failed to correctly determine Steve’s net income prior to the allocation for child support.

In addition, even if the trial court had based its child support award on only the correctly determined net income, the award would have exceeded the statutory minimum contained in section 505(a)(1) of the Marriage Act. Section 505(a)(1) of the Marriage Act states that the court is to award 20% of the supporting party’s net income for the support of one minor child. 750 ILCS 5/505(a)(l) (West 1996). The section lists five factors which the trial court may consider when deciding whether to deviate from the statutory minimum:

“(a) the financial resources and needs of the child;

(b) the financial resources and needs of the custodial parent;

(c) the standard of living the child would have enjoyed had the marriage not been dissolved;

(d) the physical and emotional condition of the child, and his educational needs; and

(e) the financial resources and needs of the non-custodial parent.” 750 ILCS 5/505(a)(2) (West 1996).

If the trial court deviates from this minimum amount, it must state “the reason or reasons for the variance from the guidelines.” 750 ILCS 505(a)(2) (West 1996).

Since Steve is permanently disabled, the amount he was awarded for lost wages compensated him for the wages he would have earned throughout the remainder of his expected work life, which arguably could have been another 25 years (Steve was only 40 years old when he received the settlement award). However, Cassandra was six years old (12 years before reaching majority) at the time of the trial court’s decision. Thus, even if the trial court had awarded only 20% of Steve’s future net income, this amount would have, in essence, been tantamount to providing child support well past the time when Cassandra reached the age of majority. Put another way, the trial court, without comment or explanation, awarded child support for 25 years of future net income rather than the 12 years that would have taken Cassandra to majority. Because the trial court deviated from the statutory minimum for child support without stating its reasons for doing so, the trial court abused its discretion. See In re Marriage of Metz, 233 Ill. App. 3d 50, 56, (1992).

Janet argues that the issue of “net income” is not relevant because the trial court did not base its decision on section 505 of the Act (750 ILCS 5/505 (West 1996)). Rather, according to Janet, the trial court determined that Steve’s settlement proceeds constituted marital property and ordered the establishment of the trust based on section 503(g) of the Act (750 ILCS 503(g) (West 1996)). Janet, therefore, contends that the trial court need not consider the guidelines contained in section 505 of the Act. We disagree with Janet.

Section 503(g) of the Marriage Act provides:

“The court if necessary to protect and promote the best interests of the children may set aside a portion of the jointly or separately held estates of the parties in a separate fund or trust for the support, maintenance, education, and general welfare of any minor, dependent, or incompetent child of the parties.” 750 ILCS 5/503(g) (West 1996).

However, when a court orders a section 503(g) trust established for the benefit of a child, it must proceed under the guidelines of the relevant statutory provision. In re Marriage of Harsy, 193 Ill. App. 3d 415, 423 (1990). For example, in Harsy, the appellate court held that, in ordering the establishment of a section 503(g) trust for the college education of the parties’ children, the trial court properly considered the factors set forth in section 513 of the Marriage Act pertaining to the educational expenses of children. Harsy, 193 Ill. App. 3d at 423. Likewise, when a trial court orders the establishment of a trust for the purposes of child support, it must consider the factors set forth in section 505 of the Act. See Harsy, 193 Ill. App. 3d at 423.

The dissent’s argument that it is not aware of a “case in which the amount of a section 503(g) trust was determined by taking a percentage of the supporting parties’ net income” (298 Ill. App. 3d at 517) misses the point. While not addressing the precise issue in the case at bar, both Harsy (193 Ill. App. 3d 415) and In re Marriage of Hobson, 220 Ill. App. 3d 1006 (1991), stand for the proposition that, when establishing a section 503(g) trust, a trial court must make certain findings and provide some rationale for its decision regarding the funding of the trust. Here, the trial court provided no rationale for its funding decision, which ostensibly orders child support until the child reaches the age of 31.

Furthermore, when a court orders the creation of a section 503(g) trust for the benefit of a child, it must describe the terms of the trust with sufficient particularity. See Hobson, 220 Ill. App. 3d at 1014-15. The trial court must determine a dollar amount of child support and require the appointed trustee to make regular payments from the fund. Hobson, 220 Ill. App. 3d at 1015. Provisions may be made for the payment of the child’s other reasonable expenses, such as maintenance, education, and general welfare. 750 ILCS 5/503(g) (West 1996); Hobson, 220 Ill. App. 3d at 1015. In addition, the trial court must provide for the termination of the trust upon the emancipation of the child and for the payment of any residue to the party who funded the trust. Hobson, 220 Ill. App. 3d at 1015. However, the trial court may make reasonable provisions for the child’s college expenses. 750 ILCS 5/513 (West 1996); Harsy, 193 Ill. App. 3d at 422.

In the case at bar, we determine that the trial court failed to make the necessary findings regarding the creation of a trust under section 503(g) of the Act. Contrary to the dissent’s belief, we do not hold that the trial court abused its discretion in ordering the creation of a trust, which would result in a reversal. We merely require the trial court to describe the terms of the trust with sufficient particularity and to make express findings and provide a rationale that supports its determination and comports with the relevant guidelines. Accordingly, we vacate the trial court’s creation of a trust and remand the cause with directions that the trial court proceed in conformity with this opinion.

Finally, Steve argues that the trial court erred by failing to credit him for Janet’s portion of the $50,000 bankruptcy deposit, which was paid out of Steve’s settlement proceeds. Steve claims that half of the $50,000 bankruptcy deposit should have been subtracted from Janet’s property settlement because the debt was incurred by both parties. Thus, Steve urges this court to reduce Janet’s property settlement award by $25,000. The record reveals that Steve raised this issue in his posttrial motion. However, when specifically asked about this argument during the posttrial motion hearing, Steve expressly disavowed the argument. Accordingly, we determine that Steve abandoned this issue.

For the foregoing reasons, we affirm the portion of the judgment ordering the $50,000 bankruptcy deposit allocation and the 10% marital property allocation to Janet, reverse the portion of the judgment funding the trust and vacate the portion of the judgment creating the trust, and we remand the cause for further proceedings consistent with this opinion.

Affirmed in part, reversed in part, and vacated in part; cause remanded.

RATHJE, J., concurs.