A major issue of contention during most divorces is the division of assets and liabilities between the parties. These assets may include real property, business interests, bank accounts, retirement interests, and personal property, such as jewelry, household furnishings, and pets. Liabilities may include mortgages, home equity loans, other loans, such as student loans, and credit card debts. What assets and liabilities exist and need to be divided is, however, case specific as each individual couple will have obtained specific assets and incurred their own debts.
Before any assets or liabilities can be divided, however, first they must be determined to be marital or non-marital property. The rules regarding property designations are different from state to state. A few states follow what are known as “community property” rules; however, Illinois, is not a community property state.
In Illinois, marital property is defined as all property acquired by either spouse subsequent to the marriage. There are, however, several exceptions. Such exceptions include: specific gifts or inheritances to one party, property acquired directly in exchange for a gift or inheritance, property acquired before the marriage, and others. Those assets which fall into a designated exception are classified as non-marital property. The specific property distribution rules are designated in the Illinois Marriage and Dissolution of Marriage Act. If a party is claiming an asset to be his or her non-marital property, it is that spouse’s burden to clearly demonstrate how that asset qualifies as an exception.
Although most people believe that title is the determinative factor in classifying property, this is not always the case. How property is titled is only one factor that is considered when assessing whether or not the asset is marital or non-marital. For instance, if real estate was purchased during the marriage but title is only held in one spouse’s name, it may or may not qualify as a marital asset. A number of other issues must be considered before a final classification is made, such as why title is only in one party’s name, the source of the funds for the down payment on the real estate, the source of the funds for payment of the monthly mortgage and/or home equity loan, the source of the funds for payment of the real estate taxes, and the source of funds for payment of the household expenses, just to name a few. There is no bright line designation of something as marital or non-marital based on title alone.
Perhaps the most significant factor in assessing whether property is classified as marital versus non-marital is whether it was acquired prior to the marriage. With few exceptions, property acquired before the marriage is deemed a party’s non-marital property.
Where many individuals are surprised by Illinois law and its designation of property as marital or non-marital property is with respect to the concept of commingling of assets. While it is largely understood that when a non-marital asset is combined with or commingled into a marital asset, it becomes marital property, most persons do not realize that if a marital asset is combined with or commingled into a non-marital asset, it becomes non-marital property. For instance, if a bonus received by one spouse during the marriage is deposited into a bank account that spouse holds in his name alone, and which existed prior to the marriage, despite the fact the bonus would have constituted marital property, a court can deem it to be non-marital because it was commingled into non-marital property. This deposit, alone, would not re-characterize the spouse’s account as marital property, instead. However, the existence of additional relevant factors might yield different results.
Contesting Marital or Non-Marital Property
All persons involved in a divorce in the State of Illinois should know that the Illinois rules and decisions regarding commingling of property are numerous and complex. It is important for any party involved in a divorce where commingling of property is an issue to understand there is no simple test for the classification of property. Contesting this issue may require extensive review of documents and tracing of funds, and the results may or may not be worthwhile.
Ultimately, once property has been designated as marital or non-marital, it will be awarded and distributed between the parties. After being awarded his or her non-marital property, the remaining marital property will be “equitably distributed,” but not necessarily “equally distributed.” Please keep in mind that there are many nuances and exceptions to these general principles, and the classification of assets as either marital or non-marital property is often a hotly contested issue.
If you are contemplating divorce or are already in the middle of one, it is vital that you understand to what property and assets you may be entitled, as well as for what debts you may still be on the hook. Contact Kathryn L. Harry & Associates, P.C. at (877) 889-4515 for a free consultation. We have offices in Oak Brook, Naperville and other communities, and we can use our family law and divorce experience to help you understand the law and guide you through the process.