IL Legal- Fall 2011

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Illinois Legal Updates

Fall 2011
• Basics of Divorce Law in Illinois
• SBA Loans Can Help Small Businesses
• Don't Lose Your Charitable Deduction
• Chalk One Up for the Little Guy

Summer 2011
• Child Labor Laws in Illinois
• Different Ways to Hold Investment Property
• Parents Not Liable for Teen Drinking
• Franchising Your Business
• Bike Riders Must Know the Rules of the Road

Summer 2011
• Child Labor Laws in Illinois
• Different Ways to Hold Investment Property
• Parents Not Liable for Teen Drinking
• Franchising Your Business
• Bike Riders Must Know the Rules of the Road

Spring 2011
• State Law Claim for Defective Artificial Hip
• New Federal Tax Law
• Workers' Compensation in Illinois
• The Importance of Estate Planni
• Homeowners Insurance Basics
• What is Marital Property?

Winter 2011
• Are you Legally Liable for Serving Alcohol to Guests?
• Bank Accounts Are A-Changing
• Cybersquatters, Beware!
• What is an S Corporation?
• What is the Real Property Disclosure Act?
• Defective Insulin Pumps

Fall 2010
• The Basics of Automobile Insurance
• Debit Versus Credit Cards
• Owning Property as Joint Tenants
• Social Security Disability Benefits
• Unnecessary Surgery Leads to Large Verdict

Summer 2010
• Choosing an Executor for Your Will
• Tax Credits for Historic Preservation
• Workers' Comp Update
• Purchasing a Car in Illinois
• Preparing for a Disaster
• Suspended Driver's License

Spring 2010
• Title Insurance Basics
• Nursing Home Assaults
• Prevent Burglary
• "Obvious" May be in the Eye of the Beholder
• Insurance Coverage Can be Limited
• Credit Card Act

Winter 2010
• Tax Breaks for College Costs
• Wallyball in the Workplace
• Auto Accidents and Auto Insurance
• Statutes and Limitations and Statutes of Repose
• Snow and Ice Removal in Illinois

Summer 2009
• Traffic Court in Illinois
• New Identity Theft Rules affect Businesses
• Duties of Guardians
• Federal Laws Trump State Laws
• Estate Planning for Vacation Homes

Spring 2009

• Faqs about Mortgage Foreclosures
• Two Deaths are Two Occurrences
• The Value of Pets
• Work-Related Injuries in Illinois
• So You're Married: Now What
• Generation-skipping Trusts

ILLINOIS LEGAL UPDATE
FALL 2011 ISSUE

Basics of Divorce Law in Illinois

Every year, thousands of Illinois residents file for and receive a divorce. Legally, a divorce (which Illinois law calls a “dissolution”) is the legal process by which a marriage is ended by a court. This article presents an overview of some of the issues and considerations associated with divorce in Illinois.

Who Can File?

Anyone who resides in Illinois or who is stationed in Illinois as a member of the military may file for divorce in Illinois. However, before the court will grant a divorce, the person asking for the divorce must have lived in Illinois for at least 90 days.

When Is a Divorce Available?

Illinois law permits what is commonly called a “no fault divorce,” which means that the court will grant a divorce if it can be shown that there are “irreconcilable differences” and that these differences have caused an “irretrievable breakdown in the marriage” that are unlikely to be reconciled. If the court or the parties believe that there is some chance of reconciliation, the court may order the parties to mediate their differences.

Illinois also permits divorce where one of the parties to the marriage is guilty of some fault, such as adultery, desertion, or habitual drunkenness or drug addiction. If the parties ask for a no fault divorce, they must have been separated for at least two years, although this period may be reduced to six months in some cases.

Temporary Orders

Because a divorce can be a long process, an Illinois court has the right to enter an order granting the parties temporary relief. These orders can require the payment of child support or maintenance (which most people call “alimony”) and can govern the control and use of the property of the parties while the divorce is pending. If the circumstances change, the court also has the right to change the terms of any temporary order it has entered.

Marital Property

As part of a divorce, the court will enter an order dividing the property of the parties between them. Although the nature of a divorce often means that there will be a dispute about how this property is to be divided, in many cases, the parties actually will agree on the division of their property, and the court’s order will merely reflect their agreement.

If the parties are unable to agree on how the property is to be divided, the court must determine which property is “marital property” (property acquired during the marriage) and which property is “nonmarital property” (property acquired before the marriage or otherwise excluded from the definition of marital property).

Generally, the court awards the nonmarital property to its owner and divides the marital property between the parties. Depending on the circumstances, the court has considerable discretion in deciding how to divide the marital property, and the court is not required to divide it equally.

Child Custody

Another important part of many divorce cases is the question of who is given custody of the parties’ children. In making this decision, the court must determine what is in the best interests of the children. Based on this determination, the court must decide who is to be given custody of the children and how much visitation the noncustodial parent may have. Because divorce is often difficult for children, the court may also order that the parties attend classes on the effects of divorce on their children. These classes are intended to help the parents make the divorce as easy as possible for their children.

Child Support and Maintenance

In addition to dividing the parties’ property, the court may also order the payment of child support and maintenance, and it may also order that one of the parties provide health insurance for the children. The court has considerable discretion in setting such payments and almost always requires the payment of child support if there are minor children. The court may award maintenance if the evidence shows that one spouse has much greater earning power than the other.

Other Remedies

It sometimes happens that one spouse abuses the other, and, if this is the case, the court may enter an order of protection to prevent such abuse, whether a divorce is sought or not. In a divorce suit, the court may also order one party to pay some, or even all, of the other party’s attorney’s fees.

Although a divorce is usually not a pleasant experience, hiring the right lawyer to help you through the process can make it as painless as possible.

SBA Loans Can Help Small Businesses

It is no secret that businesses generally, and small businesses in particular, have been through rough times, and those are not over yet. Still, there is some assistance to be had as a small business owner if you know where to look. One prominent example is the Small Business Administration (SBA) and its Guaranteed Loan Programs.

Contrary to a common misconception, the SBA does not make direct loans to small businesses. Instead, the SBA establishes the guidelines for loans, which are then made by its “partners,” meaning lenders, community development organizations, and microlending institutions. To eliminate some of the risk to the lending partners, the SBA guarantees that these loans will be repaid. In short, a business applicant is actually applying for a commercial loan, structured according to SBA requirements, with an SBA guaranty.

SBA guaranteed loans may not be made to a small business if the borrower has access to other financing on reasonable terms. Because SBA loan guaranty requirements and practices can be changed by the government, it is important for potential applicants to obtain current and accurate information.

7(a) Loan Program

This program, the most basic and most used of the SBA loan programs, is for eligible borrowers who want to start, acquire, or expand a small business. The loan is obtained from a participating lender institution, and it provides long term, fixed rate financing for major fixed assets, e.g., land and buildings. The loan proceeds can also be used to acquire equipment, supplies, and materials, or for long or short term capital needs. Loan terms range from up to 10 years for working capital to up to 25 years for fixed assets. There are a few prohibited purposes for which a 7(a) loan cannot be used, such as for the financing of nonprofits, real estate investments, and monopolies.

CDC/504 Loan Program

The CDC/504 Loan Program is a long term financing tool designed to encourage economic development within a community. It accomplishes this goal by providing small businesses with long term, fixed rate financing to acquire major fixed assets for expansion or modernization.

A Certified Development Company (CDC) is a private, nonprofit corporation that is created to contribute to economic development within its community. CDCs work with the SBA and private sector lenders to provide the financing to small businesses.

Typically, a project of this kind includes (1) a loan secured from a private sector lender, with a senior lien covering up to 50% of the project cost; (2) a loan secured from a CDC (backed by a 100% SBA guaranteed debenture), with a junior lien covering up to 40% of the project cost; and (3) a contribution from the borrower of at least 10% of the project cost (equity). This arrangement means that 100% of the project cost is covered either by the contribution of equity from the borrower or from the senior or junior lien.

Proceeds from 504 loans must be used for fixed asset projects, such as the purchase of land, including existing buildings; the purchase of improvements, including grading, street improvements, utilities, parking lots, and landscaping; the construction of new facilities or the modernizing, renovating, or converting of existing facilities; and the purchase of long term machinery and equipment. The CDC/504 Loan Program cannot be used for working capital or inventory, consolidating or repaying debt, or refinancing.

Microloan Program

The Microloan Program gives small, short term loans to small business concerns and certain types of not for profit child care centers. The SBA makes funds available to specially designated intermediary lenders. These are nonprofit community based organizations with experience in lending as well as in management and technical assistance. These intermediaries make the loans to eligible borrowers. The maximum loan amount is $50,000, but the average microloan is about $13,000.

Microloans may be used for working capital, the purchase of inventory or supplies, the purchase of furniture or fixtures, or the purchase of machinery or equipment. Microloan proceeds cannot be used to pay existing debts or to purchase real estate.

If you are a potential borrower, the SBA recommends four steps to take to get the ball rolling in its loan programs. First, estimate your business startup costs or the funds that you need to grow the business. Second, contact a local bank or lender to review the available loan programs for small businesses. Third, prepare a draft loan proposal. Finally, discuss all of the above with someone having solid knowledge of SBA loans, such as a representative of the SBA itself.

Don't Lose Your Charitable Deduction

For you to claim a federal income tax deduction for a charitable donation valued at $250 or more, you must obtain from the recipient of the donation a “contemporaneous written acknowledgment” letter. Failure to obtain such a letter can result in a disallowance of the deduction by the IRS.

The acknowledgment letter, which may be in the form of a thank you letter to you as the donor, should include the following information:

• the name and address of the recipient of the donation;

• the amount of a cash gift or, if not in cash, a description of the donation sufficient to identify the nature of the gift; and, if applicable,

• a statement that no goods or services were provided by the recipient in return for the donation, or a description and good faith estimate of the value of any goods and services that were provided by the recipient in return for the donation.

As some donor taxpayers have discovered to their consternation, including some who have made very large donations, the timing of the receipt of the letter can be as important as its contents. The rule to bear in mind is that you must obtain the acknowledgment letter by the date of the filing of the tax return for the year in which the charitable contribution was made. You run the risk of being denied the deduction in assuming that it will suffice if the letter has been promised or will be received after the return has been filed but before you would ever hear from the IRS.

Recently, the Chief Counsel for the IRS underscored the need for having the donation acknowledgment letter in hand (or in your e mail inbox) when you file your return in order to qualify for the deduction. The federal Tax Code actually has a provision that states that the donor is not required to obtain an acknowledgment letter if the recipient organization itself files a return that meets applicable requirements and includes the required information about the gift. Nonetheless, because no implementing regulations on this law have yet been issued, the Chief Counsel determined in a memorandum that a donor cannot take this route to claim the deduction.

The takeaway lesson for donor taxpayers is to be sure that you receive your acknowledgment letters before you file, and don’t make the mistake of assuming that the IRS will cut you some slack if, for whatever reason, that deadline is missed.

Chalk One Up for the Little Guy

Nate Thoma is not a lawyer, but he is a small investor in Washington Mutual, the big bank that was seized by the federal government in 2008 and ended up in bankruptcy. As for so many other investors, Nate’s stake in the bank was wiped out. Nate became something of a folk hero during that tumultuous period when big banking institutions were failing and the little people always seemed to get the short end of the stick as the messes were being cleaned up.

Nate’s big moment came when, after he had spent untold hours analyzing the Washington Mutual case, the federal bankruptcy judge let him have his say—and at some length—in a hearing that culminated in an investigation of trading by some very large hedge funds and in the rejection of a bankruptcy plan for the bank.

The issues made for a real legal thicket, especially for a novice to sort out. Essentially, Nate’s complaint, on behalf of the many small investors in the bank, was that the hedge funds were buying up the bank’s trust preferred securities that go to the front of the line for any money distributed from the bank’s estate.

The hedge funds also owned the bank’s bonds, so their dominant ownership of both classes of securities would help them control the course of the bankruptcy, to their benefit and to the corresponding detriment of the little guys. Nate’s legal work played a role in an eventual favorable settlement between small investors like himself and the hedge funds.