Addressing Inheritance in Divorce Proceedings in Illinois

 Posted on June 12, 2014 in Divorce

The general rule in Illinois is that an inheritance is not considered marital property. [See 750 ILCS 5/503(c)(1).] Illinois courts recognize that a deceased gift maker (called the "testator," if a will is involved) usually intended to give an inheritance to the recipient (the "beneficiary") so that the inheritance can be used primarily for the care and benefit of the recipient. Presumably the inheritance would have been given to the recipient regardless of who the recipient chose to marry. Illinois law takes the testator's intent seriously and it would be unfaithful to the testator's intent if Illinois courts were to grant partial control of an inheritance to the family of a recipient. In time, such a practice could lead to the unfavorable policy outcome of discouraging people from devising inheritances to married relatives or friends in fear that the funds would be misused by the spouse.

Inheritance, Commingling, and Transmutation

In practice, the Illinois rule assigning inheritance as marital property is not absolute. Inheritances can be commonly converted to marital property when the inheritance money is commingled with joint funds or used to purchase jointly held property. This process of converting personal property to marital property or vice versa is called "transmutation." For example, if an Illinois husband inherited 2,000 dollars and he deposited the sum into the family's joint bank account, then the money may be converted to marital property. Similarly, if the husband used the inherited money to pay for car payments toward a car owned by both the husband and wife, the husband commingled his funds, thereby transmuting it to marital property under Illinois law.

Readers may be concerned that this rule does not seem fair, as it does not adequately take into account the realities of sharing funds in good faith during married life. After all, how was the husband supposed to know that he would be filing for divorce 10 years after commingling the inheritance?

The Not-So-Safe Net of Reimbursement

Illinois statutes [750 ILCS 5/503(c)(2)] provide a safety net for divorcing spouses who once commingled their inheritance. The statute states that if a spouse contributed individual funds during a marriage, and then the parties divorced, that contributing spouse may be entitled to reimbursement of the value of his contribution after divorce.

However, there is a far-reaching exception to this safety net that makes it less forgiving to the inheriting spouse than it initially appears. The law specifies that reimbursement is not available if the contribution was a gift to the marital estate (or vice versa).

To determine whether contribution of an inheritance to joint property was a gift to the marital estate, Illinois law looks to the contributor's intent at the time the inheritance funds were commingled. Illinois law presumes that a contribution to a marital estate is a gift unless the giver can produce clear and convincing evidence to show otherwise. Practically speaking this means that if the husband above intended to give his inheritance to the marital unit so that he and his wife could use and enjoy it together, the court may consider the inheritance to be a gift to the marital estate. Consequently, the husband cannot be reimbursed for the value of the inheritance upon divorce. On the other hand, if the husband can produce clear and convincing evidence to show that he did not intend to give his inheritance to the marital estate, he may be entitled to reimbursement.

Contact an Attorney for More Information

The law concerning division of assets such as inheritance and other forms of property can be complex and fact specific. It is essential to work with a trusted divorce attorney to have your economic interests protected. The experienced legal team at Kathryn L. Harry & Associates, P.C. is available to work with you in preserving your finances during and after divorce. Contact us today at 630-472-9700 to schedule a free consultation.