In re Marriage of Chanen, 2023 IL App (1st) 221060-U

- Case citation and parties
In re Marriage of Chanen, No. 1-22-1060, 2023 IL App (1st) 221060-U (Ill. App. Ct. 6/28/23, Rule 23 order). Plaintiff‑Appellant: Jill Chanen. Defendant‑Appellee: Bruce Chanen.

- Key legal issues
1) Whether the Marital Settlement Agreement (MSA) allocated tax liability for earnings in children’s accounts (Vanguard and Bright Start) and, if silent, whether the court could order reimbursement from those accounts for taxes a parent paid.
2) Whether Bruce’s motion was barred by res judicata or improperly modified the MSA.

- Holding / outcome
The appellate court affirmed the trial court: Bruce was permitted to reimburse himself from the children’s educational accounts for income taxes he had paid on Vanguard account earnings and to continue doing so for future tax liabilities. Res judicata did not bar the motion.

- Significant legal reasoning (concise)
- Contract interpretation is de novo. The MSA was silent regarding tax liability on earnings in the children’s accounts.
- The trial court found the accounts were set aside exclusively for the children’s post‑secondary education (Exhibit C and prove‑up testimony), and there was no evidence Bruce used the funds for personal gain.
- Equity principles (constructive trust/beneficiary rationale) supported allowing reimbursement from those funds rather than forcing Bruce to shoulder tax burdens that effectively diminished assets reserved for the children. The court concluded it would be inequitable for Bruce alone to bear tax liability tied to assets held for the children’s benefit.
- The order did not impose a new personal obligation on Jill; it simply authorized distribution from the children’s accounts to reimburse taxes already paid by Bruce. Thus the ruling was not an improper modification of the MSA.
- The 2019 order resolving “all financial issues” was read narrowly (child support context) and did not operate as res judicata to bar this equitable allocation.

- Practice implications for family attorneys
- Explicitly allocate tax reporting and payment responsibilities for custodial/education accounts (and tax consequences of earnings) in MSAs. State who will report income, who bears tax liability, and reimbursement mechanisms if one parent pays taxes.
- Identify ownership/beneficiary status and withdrawal authority for child accounts; include provisions addressing use, reimbursement, and consequences for improper use.
- Broad release language should be precise about scope (e.g., whether it covers tax claims or only support arrears) to avoid later equitable claims.
- If a client has been paying taxes on assets held for children, consider equitable claims (reimbursement/constructive trust) and preserve evidence of account purpose and use.

Note: This is a Rule 23 order (non‑precedential except in limited circumstances).