“Marital” & “Non-Marital” Property and Debt
by Wes Cowell; updated 5 June 2016 -- suggest a correction
All property is characterized as "marital" or "non-marital." Property includes assets as well as debts and liabilities. Non-marital property (and debt) always goes to its owner. Marital property (and debt) is divided between spouses. Need advice? Call, leave your info, or schedule a consult.
Characterization: All property owned by you or your spouse, or in which you have any interest, is marital or non-marital "in character." 750 ILCS 5/503. That's the term lawyers and judges use -- they speak of "the character" of property. Some property can be "characterized" as part marital and part non-marital. Pensions are a good example. If you were investing in a pension prior to your marriage, the value of the pension on the date of the marriage is non-marital but the contributions made during the marriage are marital in character.
There are several ways to determine the marital and non-marital portions of an asset with mixed contributions. One is to have evidence of the value of the pension on the date of the marriage. That amount, plus any growth (interest and reinvestment of dividends) of that amount would remain non-marital property while any subsequent contributions and the growth attributable to those contributions would be marital property.
Another way to resolve such valuing problems is to compare the fraction of time of the marriage to the overall life of the pension. If you had a pension for six years before you married, and were then married for twelve years, your non-marital share of the pensions would be 33% – the other 67% would be marital property and would be divided according to some ratio (maybe 50 / 50; maybe something else) determined in settlement or by the court.
Debts and Liabilities: Illinois law views debts and liabilities as negative assets. The law treats them as it treats assets. Debts and liabilities incurred prior to the marriage are non-marital in character and are the responsibility of the individual debt holder. Liabilities incurred during the marriage are marital and are the responsibility of the marriage.
Marital Property and the Marital Estate: A "marital estate" is created upon marriage. From that moment all property acquired by you or your spouse is presumed to be "marital." Marital property is everything else that you or your spouse (or both of you together) acquire after you say "I do." If you buy a winning lottery ticket on your way to the wedding ceremony, the prize money is your non-marital property. If you buy the lottery ticket on your way from the chapel to the reception, it is presumed to be marital property. It's that simple.
The presumption continues until a Judgment for Dissolution is entered; that is, until your divorce is finally concluded. Many people make the mistake of thinking that property is non-marital if it is acquired after filing a divorce case, or after the parties separate. That's wrong. Property acquired after your case has been filed is presumed to be marital property. If you move out of the home, file for divorce, buy a condo, and fill it with furniture and artwork, the condo and all its contents are presumed to be marital property. If you buy a winning lottery ticket on your way out of court after your divorce, the winnings are yours and yours alone.
Presumptions Only: The law [750 ILCS 5/503(b)(1)] says only that the court is to presume that property acquired after the marriage is marital. A presumption that an asset or liability is marital may be overcome with clear and convincing evidence that the property was acquired by one of the ways in 750 ILCS 5/503(a). See, Non-Marital Property, below.
Transfers Into Co-Ownership = Gift to the Marriage: The presumption of marital property includes "non-marital property transferred [during the marriage] into some form of co-ownership between the spouses." 750 ILCS 5/503(b)(1). This happens when a spouse is added to title of real estate, bank accounts, or other assets.
The marital presumption of property transferred into co-ownership can be overcome by showing through "clear and convincing evidence" that the transfer "was done for estate or tax planning purposes or for other reasons that establish that the transfer was not intended to be a gift." 750 ILCS 5/503(b)(1)
Property Acquired in Contemplation of the Marriage: Property purchased prior to the marriage is non-marital in character even if it was purchased in contemplation of the marriage. 750 ILCS 5/503(a) says: "Property acquired prior to a marriage that would otherwise be non-marital property shall not be deemed to be marital property solely because the property was acquired in contemplation of marriage." See my article Purchases Anticipating Marriage.
Non-Marital Property: All property acquired by either spouse after marriage is presumed to be marital property. The presumption may be overcome, however, by "clear and convincingi evidence" that property is non-marital in character. Non-marital property falls into one of 10 is:
premarital property (including debts, which you can think of as negative assets) owned free and clear prior to the marriage, but contributions made to retirement plans during the marriage are marital property 750 ILCS 5/503(a)(6); and property acquired shortly before the marriage does not become marital property just becuase it was acquired "in contemplation of the marriage" 750 ILCS 5/503(a);
property received as a gift 750 ILCS 5/503(a)(1);
inherited property 750 ILCS 5/503(a)(1);
property acquired in exchange for non-marital property 750 ILCS 5/503(a)(2);
property acquired after a judgment of legal separation 750 ILCS 5/503(a)(3);
property excluded by a valid agreement 750 ILCS 5/503(a)(4);
property acquired by one spouse by a valid judgement against the other spouse, unless the suit is required to obtain insurance coverage or recover from a third party then any portion of the judgment directly related to amounts advanced by the marital estate is marital property 750 ILCS 5/503(a)(5);
property acquired through a loan collateralized by non-marital property; except that to the extent the marital estate repays the loan those payments will be treated as contribution from the marital estate to the non-marital estate subject to reimbursement 750 ILCS 5/503(a)(6.5);
the increase in value of non-marital property except the marital estate will be entitled to a right of reimbursement for any contribution of marital property or personal effort of a spouse 750 ILCS 5/503(a)(7);
income from non-marital property remains non-marital if it is not attributable to the effort of the other spouse 750 ILCS 5/503(a)(8).
Exchanging non-marital property begets Non-marital property: Non-marital property can change form and still retain its non-marital character if ownership of the property isn't put into co-ownership with the other spouse. 750 ILCS 5/503(a)(2) For example: assume you own a car before the marriage. That makes it non-marital property. When you sell the car, the money you receive in the sale is still your non-marital property. If you take the proceeds from the sale and buy a computer, the computer is your non-marital property. If you sell the computer and put the proceeds from that sale into a joint (marital) checking account, you've probably converted the cash into marital property. There are a few cases where non-marital property can be transferred into a form of joint ownership, yet still retain its non-marital character. See my article on Commingling Property & Transmutation.
Title: A spouse may own marital property in his or her name alone. A spouse may, without the consent of the other spouse, dispose of his or her solely-owned, marital property without consequence. In some situations, however, what would otherwise be a valid transfer, may be undone by a divorce court (even years later) as a fraudulent transfer.
Agreements: A couple may, at any time – before or after the marriage – agree as to how certain property should be divided. Prenuptial and post-nuptial agreements can be very flexible, very detailed, and very enforceable. The agreements must, however, follow certain formalities. A poorly crafted or executed pre-or post-nuptial agreement will face very close scrutiny and probably a strong challenge in any divorce. If you're considering a pre- or post-nuptial agreement, work with an experienced family law attorney to make certain that the agreement is effective, enforceable, and not susceptible to an attack.
50/50 Division: There is no presumption in Illinois that property is to be divided 50 / 50. Most Illinois divorces see some ration of property division other than 50 / 50.
Trusts: Technically, one does not "own" property that is held in trust for one’s benefit. A revocable expectancy interest in a trust is not property recognized by the Illinois Marriage and Dissolution of Marriage Act because it is not a present property interest. In re: Marriage of Centioli, 335 Ill.App.3d 650, 781 N.E.2d 611.
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> Marital Property Division Factors
> "Marital" & "Non-Marital" Property
> Purchases Anticipating Marriage
> Dissipation — Stolen & Wasted Assets
> Commingling Property & Transmutation
> 401(k)s and Retirement Investments
> Military Pensions and Divorce
> Saving the House – Injunctions
> Dividing S-Corp Retained Earnings
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