Unallocated Support

Child support awards can be “unallocated” in two senses: they can be combined with maintenance to obtain certain tax benefits or they can be combined with respect to multiple children. The latter situation, which has to do primarily with how the termination of support is handled as successive children become emancipated, is discussed more fully in §§4.50 and 4.77 below. Cf. Finley v. Finley, 81 Ill.2d 317, 410 N.E.2d 12, 43 Ill.Dec. 12 (1980) (payor parent’s unilateral pro rata reduction in child support as children became emancipated was impermissible, and he was liable for child support arrearages).

The allocation of support among the children, or a formula or principle for reductions or modifications, if any, based on the emancipation of fewer than all of the children, can also be relatively easily addressed in a carefully drafted settlement agreement that specifies the amount relatively easily addressed in a carefully drafted settlement agreement that specifies the amount (either dollar or percentage) by which the support is reduced as each child reaches majority or otherwise becomes emancipated. If the support award is made in a lump sum and not allocated among the children, then the payor parent will have to go to court to obtain a reduction each time a child reaches majority or otherwise becomes emancipated.

Combining child support and maintenance – “unallocated support” – is usually done for tax purposes so that the entire amount can be deducted from income by the payor parent when paying income tax. (Absent such an agreement to combine the two types of support, child support cannot be deducted by the payor parent but maintenance can be. Internal Revenue Code §§71, 215.) In case in which the maintenance and support are combined into a single payment designated “support,” the entire amount is then taxed as income to the custodial payee parent, the underlying theory being that this parent is in a lower tax bracket and that the family as a unit benefits from the shift in the tax burden.

Practitioners should be warned, however, that there are complex rules imposes by the IRS regarding such unallocated maintenance and support that must be taken into account when fashioning such a support award. It should be remembered too that child support is always modifiable. The use of tax gimmicks will not be allowed to avoid child support modification provisions. In re Gleason, 266 Ill.App.3d 467, 639 N.E.2d 982, 203 Ill.Dec. 423 (4th Dist. 1994) See also §4.64 below.

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