In re Marriage of Notestine, 2019 IL App (5th) 170332-U

Summary

Case Summary: In re Marriage of Notestine, 2019 IL App (5th) 170332-U - The article analyzes In re Marriage of Notestine, where an Illinois appellate court reversed a trial court's equitable ruling and enforced a marital settlement agreement's plain language requiring a 2010 tax refund to be split evenly between ex-spouses. A key legal point is that Illinois courts treat marital settlement agreements as contracts, meaning unambiguous contractual terms will be enforced as written—even when the outcome seems unfair—because "contract beats equity" when interpreting such agreements.

The opposing counsel is already on the back foot—because they drafted a settlement agreement that left tax provisions dangerously vague, and now their client is hemorrhaging money they thought was protected.

The Fifth District's decision in In re Marriage of Notestine is a masterclass in why precision matters when you're dividing assets in a high-net-worth divorce. One spouse paid audit liabilities. The other spouse demanded half the refund. The trial court tried to play Solomon with equity arguments. The appellate court said: read the contract.

If you're handling complex marital estates—particularly those involving pass-through entities, S-corporations, or multi-year tax exposure—this case should be tattooed on your drafting hand.

The Setup: Post-Dissolution Tax Chaos

The parties divorced. Their marital settlement agreement contained a tax provision addressing "the year 2010"—requiring the husband to pay taxes and directing that any refund "be split on an even basis."

Then the IRS got involved. Amended joint returns were filed covering multiple tax years. Refunds materialized. The wife moved to enforce the settlement agreement, demanding her half of the 2010 refund.

The trial court denied her motion, reasoning that the husband had paid net additional tax after audits and refunds—so keeping the refund seemed fair.

The appellate court reversed. Half of the 2010 refund belonged to the wife. Period.

The Legal Architecture: Contract Beats Equity

Illinois courts treat marital settlement agreements as contracts. Interpretation is a question of law, reviewed de novo. The primary objective: effectuate the parties' intent from the agreement's language.

The Notestine court applied these principles with surgical precision:


Clear temporal language controls. The settlement specified "year 2010." That limitation meant only the 2010 refund was subject to division—not refunds from other tax years, regardless of when they arrived.
Unambiguous terms override equitable arguments. The trial court's reasoning—that the husband paid more in audit liabilities than he received in refunds—was irrelevant. The contract said split the 2010 refund. Full stop.
Parties can contract around default rules. The general principle that tax refunds for income earned during marriage constitute marital property can be modified by agreement. The parties did exactly that—they allocated the 2010 refund specifically.


The husband conceded the wife was entitled to half the 2010 refund. The appellate court ordered judgment accordingly.

Why This Case Should Terrify Sloppy Drafters

The husband in Notestine paid audit liabilities. He absorbed risk. He dealt with the IRS. And he still lost half the refund because the settlement agreement said so.

This is what happens when tax provisions are drafted reactively instead of strategically. The agreement addressed "year 2010" but apparently failed to anticipate:


Multi-year audit exposure
Amended return procedures
Setoff mechanics for liabilities paid by one spouse
Indemnification for audit assessments
Contingency funds or escrow for tax uncertainty


The result: a spouse who bore the audit burden watched half the resulting refund walk out the door.

The Drafting Mandate: Anticipate Everything

High-net-worth divorces involving pass-through entities, S-corporations, partnerships, or complex investment structures demand tax provisions that address the full lifecycle of potential tax events—not just the year of dissolution.

Your settlement agreement tax provisions must specify:


Temporal scope: Which tax years are covered? All years of marriage? Only the dissolution year? Years with pending audits?
Refund allocation: How are refunds divided? Pro rata based on income contribution? Equally? Based on who paid estimated taxes?
Liability allocation: Who pays if an audit results in additional tax owed? How is that liability offset against refunds?
Audit procedures: Who controls audit response? Who selects representation? What are the notice requirements?
Setoff mechanics: If one spouse pays audit liabilities, can they offset that payment against refunds before division?
Indemnification: Who holds whom harmless for tax positions taken during marriage?
Escrow or reserves: Should funds be held in escrow pending resolution of known tax uncertainties?


The Tech-Law Intersection: Digital Records Are Your Weapon

Tax disputes in divorce increasingly turn on access to financial data. If your client's spouse controlled the family business accounting software, maintained the QuickBooks files, or managed the relationship with the CPA firm, you need those records.

Discovery in these cases should target:


All communications with tax preparers and accountants
Access credentials for accounting software and financial platforms
Backup files and cloud storage containing financial records
Email correspondence regarding tax positions, deductions, and audit notices


Cyber negligence—failure to preserve digital records, spoliation of financial data, unauthorized access to accounts post-separation—creates leverage. If the opposing party "lost" the records that would clarify tax exposure, that's a discovery fight worth having.

Strategic Implications: Use Tax Provisions as Leverage

Tax allocation isn't just a cleanup item at the end of settlement negotiations. It's a strategic chip.

The spouse with greater tax sophistication—typically the one who controlled the business or managed investments—often wants vague tax provisions. Ambiguity benefits the party with superior knowledge and ongoing relationships with tax professionals.

Your job is to eliminate that information asymmetry. Demand specificity. Require disclosure of all pending or potential audit exposure. Insist on representations about tax positions taken during the marriage.

If the other side resists detailed tax provisions, ask yourself why. What are they hiding? What exposure are they trying to avoid allocating?

The Takeaway: Precision Wins

Notestine confirms what experienced practitioners already know: courts will enforce unambiguous contractual terms even when the result seems inequitable after the fact.

The husband's equitable argument—"I paid more in audit liabilities than I received in refunds"—failed because the contract didn't say "split refunds net of audit payments." It said split the 2010 refund. The court enforced what the parties wrote, not what one party wished they had written.

This is the standard. Draft accordingly.

Protect Your Client's Position Now

If you're negotiating a high-net-worth divorce involving business interests, pass-through entities, or multi-year tax exposure, your settlement agreement needs tax provisions drafted by someone who understands both the legal architecture and the financial complexity.

Vague provisions create litigation. Precise provisions create finality.

The opposition is already making drafting mistakes. Make sure you're not making the same ones.

Book a consultation now. Your client's financial future depends on getting this right the first time.

Full Opinion (PDF): Download the full opinion

Written by Jonathan D. Steele

Chicago divorce attorney with cybersecurity certifications (Security+, CEH, ISC2). Illinois Super Lawyers Rising Star 2016-2025.

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