September 2003 • Volume 91 • Number 9 • Page 460
The author argues that the wage-earning divorcing spouse should be awarded a disproportionate share of the marital assets in large marital estates that were generated through that spouse's extraordinary efforts.
Bill Gates, Michael Jordan, Warren Buffet, Madonna,
Often, one partner; whom we'll call the "prodigious spouse"; has made contributions to the marital estate that are extraordinary not only in size but in the time and effort required to produce them. The prodigious spouses' demanding schedules may cause them to sacrifice time with children and family, miss special events, even suffer health problems.
In a divorce, the nonwage-earning spouse can maintain the standard of living enjoyed during marriage with a disproportionately smaller fraction of the marital estate. As will be argued below, under equitable distribution principles the nonwage-earning spouse should thus be awarded a disproportionately smaller fraction of the marital estate. The prodigious spouse should receive the remainder, which was generated through his or her own talents and efforts.
The prodigious spouse situation came to light a few years ago in the
high-profile divorce of Gary and Lorna Wendt, whose marital estate was valued
from $52 million to just under $100 million.1
Mr. Wendt offered Mrs. Wendt $8 million in settlement and $250,000 a year in
alimony, which she refused. She sought one-half of the marital estate, and a
The Wendts were married on July 31, 1965, and separated in 1995.4 They met in high school and were married before Mr. Wendt entered Harvard Business School.SUP>5 Mrs. Wendt's last employment, as public school music teacher, stopped shortly after the birth of their first daughter in December 1968.6
After graduating from Harvard, Mr. Wendt held several positions with other companies before joining GE Capital in July 1975.7 He worked his way through the ranks, and in 1986 became the chairman, president, and CEO of GE Capital Services, Inc., the largest division of General Electric Corporation.8
During his 12-year reign at GE Capital, the company's earnings rose tenfold
from $271 million in to $2.8 billion.9
A former GE Capital executive testified that Mr. Wendt was a visionary CEO who
exceeded the ordinary bounds of leadership10
and was responsible for GE Capital's annual growth of 20 percent per year over
a consistent 10-year period with a 20 percent return on equity.11
In her attempt to get half of the estate, Mrs. Wendt presented evidence at trial of her work in the Wendt home, including taking care of the Wendts' two daughters, cooking, and being hospitable and social.13 She further argued that she contributed to Mr. Wendt's career by being the "corporate wife"14 and the "ultimate hostess;"15 throwing parties, hosting corporate guests, and traveling with Mr. Wendt on business trips.16 The court acknowledged Mrs. Wendt's contributions to the family and household,17 but found her characterizations of her contributions to Mr. Wendt's career an "exaggeration."18
The Wendts' divorce provides a perfect example of the prodigious spouse
concept in practice. Mr. Wendt argued that the
The first step in dividing property, governed by
Similarly, assets that are not commingled with marital assets remain nonmarital property. Wealthy people entering a marriage can also contract with their partners to define property as marital or nonmarital. In this way, they can protect their assets from distribution as part of marital property in the event of a divorce.
Second, the court equitably divides the marital property between the spouses by applying the factors set forth in 750 ILCS 5/503(d) to the evidence.22 Marital property is subject to equitable division between the parties, regardless of who holds title.23 Property acquired during marriage carries a rebuttable presumption of marital property.24 Courts must recognize the contribution of each spouse, both monetary and nonmonetary, when distributing marital property.25 Section 503(d), with a list of 12 factors, gives courts enormous discretion in dividing marital property. As a consequence, interpretations of the various factors can give rise to great differences of opinion and heated litigation.
Obviously, each divorce provides a unique set of circumstances, which section 503(d) is designed to weigh. Some marriages last more than 30 years, some fewer than 30 days. Some nonwage-earning spouses worked in the home throughout the marriage raising children, performing all household duties, and maintaining family finances. Others hired a team of servants to rear children, cook, and clean.
Despite the variety of circumstances, courts often succumb to the temptation to split the marital estate in half, especially in long-term marriages. While this solution may seem "equitable," it often is not. Courts should use a framework for evaluating contributions to the marital estate by prodigious spouses to ensure that their share on divorce reflects the time, energy, and effort they invested in building it. This is especially true where one spouse earns extraordinary wealth during the marriage.
Most marital estates do not have enough assets to adequately cover the needs
of both parties after divorce. According to the U.S. Census Bureau, out of
almost 107 million households in the
But in the less common situations where the marital estate is substantial,
the contributions of the parties to the marital wealth need to be carefully
considered. According to
A. The IMDMA Distribution Factors
In cases where the marital assets more than meet the needs of both spouses, section 503(d)31 directs that contribution become the key component in the distribution of the marital assets. With contribution as the key factor in the analysis to distribute marital property, prodigious spouses should be awarded the bulk of the estate that they acquired.
According to section 503(d), marital property is to be divided "without regard to marital misconduct." Thus, for example, adultery committed by one party is not considered for purposes of marital property distribution. Eight of section 503(d)'s 12 factors focus on the individual financial needs of each spouse after the marriage, with the goal of allocating the property equitably so that each can live independently.
For instance, 503(d)(3) considers the value of the marital property assigned to each spouse, while 503(d)(5) factors the relevant economic circumstances of each spouse at the time the division of property becomes effective. Section 503(d)(6) considers whether a party has any obligations or rights from a prior marriage, such as alimony or child support, that is being received or paid.
Section 503(d)(8), an important factor, weighs the needs of each party, his or her "age, health, station, occupation, amount and sources of income, vocational skills, employability, estate, liabilities and needs...." Section 503(d)(9) analyzes the financial needs of a party in light of whether he or she has custody of any children, while section 503(d)(10) analyzes the financial needs of a party in light of whether he or she has been awarded maintenance. Section 503(d)(11), similarly to section 503(d)(8), considers whether a party will be able to acquire capital assets and/or income in the future. Section 503(d)(12) considers the tax consequences for the parties of the division of the marital property.
The four remaining 503(d) factors do not directly consider the financial needs of the parties after the marriage, but focus more on the contributions of the parties to the marriage, including financial contribution. Section 503(d)(1), a key factor in distribution of marital property, considers "the contribution of each party to the acquisition, preservation, or increase or decrease in value of the marital or nonmarital property, including the contribution of a spouse as a homemaker or to the family unit." Other factors consider the dissipation of assets (503(d)(2)), the duration of the marriage (503(d)(4)), and any antenuptial agreement of the parties with respect to distribution of property (503(d)(7)).
Most of section 503(d)'s factors ensure that the parties' financial needs are satisfied after marriage. Where the marital estate is large enough to satisfy the financial needs of both parties with wealth left over, many factors in section 503(d) become irrelevant, so that the spouse whose extraordinary contributions produced most of the estate should receive most of the estate. As the size of the marital assets increase, the portion of the estate "needed" by the nonwage-earning spouse to maintain the lifestyle enjoyed prior to divorce becomes proportionally smaller.
B. The Value of Homemaking, the Cost of Stress
The common argument raised by the nonwage-earning spouse in divorce is that her work in the home is just as valuable as the prodigious spouse's work outside of the home and she therefore deserves one-half of the marital estate. While the Illinois statute considers the contributions of a homemaker under section 503(d)(1), and Illinois courts are directed to consider homemaker contributions as similar to economic contributions,32 homemakers should not automatically qualify for "half" of the marital estate.
Courts do not always give specific value to homemaker contributions but are to consider factors such as the "length of the marriage and the quality of services, [as well as] whether the homemaker has been frugal, rather than extravagant."33 Courts can also quantify certain homemaking services, such as cleaning, shopping, running errands, entertaining, decorating, and cooking, which can be purchased in the marketplace. Arguably, childrearing and nurturing are services that are not replaceable in the marketplace. Yet while courts readily acknowledge the work involved in raising children and taking care of a household, they too often fail to consider the sacrifices of the prodigious spouse in amassing the fortune: late nights at the office, weeks away from home, missed baseball games and dance recitals, missed family dinners.
Also, courts rarely consider the physical and mental stress of working in demanding jobs outside the home. In a 2000 Gallup Poll entitled "Attitudes In The American Workplace," 80 percent of workers reported feeling stress on the job, nearly half said they need help in learning how to manage stress, and 42 percent said their coworkers need such help.34 Other reports produce similar results.35
People in high-power positions who earn immense amounts of money are more
likely to work in stressful positions. After years of stress, the health
effects can accumulate. In a report published in the Monthly Vital
Statistics Report by the
A. Property-Distribution Cases
The husband was a physician whose practice generated most of the wealth of the marital estate. Other income came from investment properties the couple purchased during the course of their marriage. The wife worked during the marriage handling the finances of the husband's medical practice. The wife appealed the distribution of property and the appellate court affirmed the trial court's award, finding no abuse of discretion.39
The trial court quoted the often-cited maxim that "[a]n equitable award...does not require that the marital estate be divided equally."40 Note also that in this case, the husband was ordered to pay $800 a month child support for the minor child that lived with the wife and $6,000 a year for the other child's college tuition. The husband was also responsible for all extraordinary (over $100) medical, dental, and optical expenses for the children.41
In In re Marriage of McMahon,42 the trial court awarded 60 percent of the marital estate to the husband and 40 percent to the wife. The husband and wife started a business together, with the husband performing the bulk of the work in building it. The business was worth approximately $1 million at the time of the divorce. The total marital assets were $1.3 million. The judgment was affirmed on appeal.
This principle has even been applied in cases where the marital estate is
well below $1 million. In a case with a marital estate valued at approximately
$250,000, the husband and wage earner (a circuit court judge in
On appeal, the wife argued that her award was insufficient and that she deserved at least half of the marital estate, along with maintenance. The Illinois Appellate Court affirmed the trial court's decision stating that "[w]hile the award [to the wife] does not appear generous, the decision is justified under the statute in view of the husband's greater contribution to the marital estate, the wife's greater share of property immediately capable of producing income, and the substantial value of the property awarded to the wife."44 The court further noted that "[w]hile each case must rest on its facts there is no requirement that the property distribution be even, where one of the spouses contributes a greater amount to the marital assets."45 The appellate court also affirmed the trial court's denial of maintenance to the wife.
Similarly, in In re Marriage of Wright46 the court awarded the wife 35 percent of the marital estate, valued at approximately $157,000, and only one year of maintenance. On appeal, the wife argued that she deserved more than 35 percent of the estate because she introduced her ex-husband to people with money and she had a lesser ability to earn future income.47
The Illinois Appellate Court upheld the trial court's decision, noting that the trial court showed that it had taken the parties' contribution into consideration by stating as follows: "Here is a woman who hardly worked during the marriage. No children. But she did provide a contribution in the sense that she introduced Mr. Wright to people with money. I have tried to factor that into the equation. But it was Mr. Wright's abilities and skills that actually earned the money. He actually did the trading."48
In In re Marriage of Borg,49 the trial court awarded the wife 26 percent of the marital estate valued at approximately $700,000. The wife was also denied maintenance because the court found that the funds awarded to her would yield enough income for her needs if properly invested. On appeal, the award was affirmed.
B. Lessons from Child-Support Rulings
In high asset cases, one-half of the marital estate is not required to
maintain the current lifestyle and needs of the nonwage-earning spouse, and
would actually result in a windfall to him or her. Just as both parties have
the right in
Courts, however, should look to
For example, in the case In re Marriage of Singleteary,53 the Illinois Appellate Court found that a 20 percent child-support order for the one child of the marriage resulted in payment of $36,000 yearly; in excess of the needs of the child and therefore not appropriate.54 The court deviated from the statutory guidelines and found that an award of $2,000 per month, or $24,000 a year, was appropriate.55 In a similar case, In re Marriage of Scafuri,56 the Illinois Appellate Court reduced a child-support award for three children from $10,000 per month, or 32 percent of the father's statutory net income, to $6,000 per month.57 The court noted that as the net income of the parties increase, the statutory guidelines have less utility because they were created to deal with average incomes and average child-rearing expenses.58
Similarly, in In re Marriage of Bush, the court reversed a child-support award of 20 percent of the father's income or $30,000 per year for one child, stating that a four-year-old child could not possibly need "more than the average income of most Americans," and remanded the issue to the trial court for a reasonable monthly support amount.59
The Bush court further noted that "[d]espite the requirement that a court consider a child's station in life, the courts are not required to automatically open the door to a windfall for children where one or both parents have large incomes." The court stated that "[a] large income does not necessarily trigger an extravagant life-style."60 Subsequent cases such as Singleteary and In re Marriage of Lee61 have echoed the sentiment that "child support payments are not intended to be windfalls, but rather adequate support payments for the upbringing of the children."
The stereotype of the nonwage-earning spouse is a woman who does not work outside the home. However, increasing numbers of women are the heads of household and even more women work outside the home. In a gender-neutral world, the "prodigious spouse" principle does not discriminate. If a woman amassed the majority of assets constituting the marital estate, then she should receive the benefits of her hard work under equitable distribution principles.
In re Marriage of Woodward62 illustrates this principle. In that case, the wife in the marriage was awarded a larger percentage of the marital estate, including the marital home which was the largest portion of the estate, because she "contributed substantially more to the acquisition of the marital property than her husband since her earnings were nearly three times his during the marriage."
Similarly in Whispell v Whispell,63 the husband was awarded only 11.5 percent of the marital estate after a 14-year marriage. The court found that the wife's continuous employment, high salary, and good future earning prospects, her contribution of at least 80 percent of the marital estate, her payment of virtually all household expenses, and her $7,500 investment in capital improvements to the marital residence justified her large award. The court also found that the husband's "sporadic employment, indolence, immoderate drinking, and generally negative contribution to the marriage" could allow the trial court to conclude that he deserved little of the marital estate.
If maintenance is at issue, 750 ILCS 5/504(a) governs. A working spouse can receive maintenance if he or she cannot make enough money to maintain a standard of living enjoyed during marriage.66 The trial judge is to determine whether rehabilitative maintenance is appropriate; it is not mandatory that a spouse be forced to seek employment to achieve financial independence.67
Courts aren't typically faced with the dilemma presented in this article; a dissolution of marriage where the marital assets far exceed the needs of the parties. However, when the situation does arise, Illinois courts, guided by the Illinois Marriage and Dissolution of Marriage Act and existing case law, should carefully consider the contributions of the parties to the marital estate, including the talents of the wage-earning spouse and sacrifices he so she made to amass the estate, to determine an equitable distribution of the assets.
Generally, this should result in the wage-earning spouse receiving a disproportionate portion of the marital assets and the nonwage-earning spouse receiving only those assets needed to maintain his or her current lifestyle and take care of his or her needs after dissolution of the marriage.
1. At the time of trial, Mr. Wendt's attorneys valued the marital estate at $52 million. Mrs. Wendt's attorneys valued the estate at $98 million. This discrepancy is due to Mrs. Wendt's calculation, including stock options and other employer options, which could be earned if Mr. Wendt met certain conditions, including continuing to work for GE Capital. See Barett, Paul, Wendt Divorce Dissects Job of "Corporate Wife," Wall St J at B1, B17 (December 6, 1996).
In fixing the nature and value of the property, if any, to be assigned, the court, after hearing the witnesses, if any, of each party,...shall consider the length of the marriage, the causes for the annulment, dissolution of the marriage or legal separation, the age, health, station, occupation, amount and sources of income, vocational skills, employability, estate, liabilities and needs of each of the parties and the opportunity of each for future acquisition of capital assets and income. The court shall also consider the contribution of each of the parties in the acquisition, preservation or appreciation in value of their respective estates.
(a) For purposes of this Act, "marital property" means all property acquired by either spouse subsequent to the marriage, except the following, which is known as "non-marital property":
(1) property acquired by gift, legacy or descent;
(2) property acquired in exchange for property acquired before the marriage or in exchange for property acquired by gift, legacy or descent;
(3) property acquired by a spouse after a judgment of legal separation;
(4) property excluded by valid agreement of the parties;
(5) any judgment or property obtained by judgment awarded to a spouse from the other spouse;
(6) property acquired before the marriage;
(7) the increase in value of property acquired by a method listed in paragraphs (1) through (6) of this subsection, irrespective of whether the increase results from a contribution of marital property, non-marital property, the personal effort of a spouse, or otherwise, subject to the right of reimbursement provided in subsection (c) of this Section; and
(8) income from property acquired by a method listed in paragraphs (1) through (7) of this subsection if the income is not attributable to the personal effort of a spouse.
(d) In a proceeding for dissolution of marriage or declaration of invalidity of marriage, or in a proceeding for disposition of property following dissolution of marriage by a court which lacked personal jurisdiction over the absent spouse or lacked jurisdiction to dispose of the property, the court shall assign each spouse's non-marital property to that spouse. It also shall divide the marital property without regard to marital misconduct in just proportions considering all relevant factors, including:
(1) the contribution of each party to the acquisition, preservation, or
increase or decrease in value of the marital or non-marital property, including
the contribution of a spouse as a homemaker or to the family unit;
(2) the dissipation by each party of the marital or non-marital property;
(3) the value of the property assigned to each spouse;
(4) the duration of the marriage;
(5) the relevant economic circumstances of each spouse when the division of property is to become effective, including the desirability of awarding the family home, or the right to live therein for reasonable periods, to the spouse having custody of the children;
(6) any obligations and rights arising from a prior marriage of either party;
(7) any antenuptial agreement of the parties;
(8) the age, health, station, occupation, amount and sources of income, vocational skills, employability, estate, liabilities, and needs of each of the parties;
(9) the custodial provisions for any children;
(10) whether the apportionment is in lieu of or in addition to maintenance;
(11) the reasonable opportunity of each spouse for future acquisition of capital assets and income; and
(12) the tax consequences of the property division upon the respective economic circumstances of the parties.
24. 750 ILCS 5/503(b). The presumption involving marital property acquired after marriage can only be overcome by clear and convincing evidence. In re Marriage of Severns, 93 Ill App 3d 122, 416 NE2d 1235 (4th D 1981).
26. Profile of Selected Economic
32. See Smith, Diane Green, 'Til Success Do Us Part: How Illinois Promotes Inequities in Property Distribution Pursuant to Divorce By Excluding Professional Goodwill, 26 John Marshall L Rev 147, 161-62 (1992).
34. See <www.stress.org/job.htm>.
35. According to a survey conducted by Northwestern National Life, 40 percent of workers report that their job is "very or extremely stressful." National Institute for Occupational Safety and Health (NIOSH) Web site: <www.cdc.gov/niosh/stresswk.html>. The survey says that one-fourth of employees view their jobs as the number "[o]ne stressor in their lives." A study by the St. Paul Fire and Marine Insurance Company reports that "[p]roblems at work are more strongly associated with health complaints than are any other life stressor ; more so than even financial problems or family problems." See also, Kivimaki et al, Work Stress and Risk of Cardiovascular Mortality: prospective cohort study of industrial employees, BMJ 325 (7369): 857 (October 19, 2002).
36. See <www.youfirst.com/top_ten.asp>.
The report is by the
49. 421 NE2d 214.
51. Illinois statute 750 ILCS 5/505(a)(2) sets forth the factors courts should consider in awarding child support: (a) the financial resources 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 noncustodial parent. Section 505(a)(1) also sets forth minimum guidelines for the percent of the supporting party's net income that should be paid toward child support. For one child, the percent of net income is set at 20 percent, two children is 25 percent, three children is 32 percent, four children is 40 percent, five children is 45 percent and six or more children is 50 percent. 750 ILCS 5/505(a)(1).
64. In re Marriage of Malinowski, 211 Ill App 3d 536, 570 NE2d 479 (1st 1991). See also In re Marriage of Simmons, 87 Ill App 3d 651, 657, 409 NE2d 321, 326 (1st D 1980) ("maintenance is appropriate only if the income from petitioner's property (including marital property apportioned to her) is insufficient to provide for her reasonable needs and the petitioner is unable to support herself through appropriate employment or is otherwise without sufficient income").
Debra DiMaggio <email@example.com> is the principal partner of the Law Offices of Debra DiMaggio and has concentrated in the area of family law and domestic relations since 1983. She is a member of the ISBA Board of Governors.
Reprinted with permission of the Illinois Bar Journal, Vol. 91, #9, September, 2003.
Copyright by the Illinois State Bar Association www.isba.org.