The difference between marital property and non-marital property can be nuanced, depending on the situation. For example, marital property usually includes assets and debts either spouse acquired during the marriage, regardless of whose name is on the title. Non-marital property can become marital through commingling, when non-marital assets such as inheritances get mixed with marital assets in Oakbrook Terrace, IL.
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Understanding the Difference Between Marital Property and Non-Marital Property in an Illinois Divorce
The law in Illinois distinguishes marital property from non-marital to ensure a fair distribution of assets during a divorce. The answer to, “Is it worth contesting a divorce?” may be yes if one spouse insists that marital property is non-marital or refuses to cooperate to distribute assets equitably.
Marital Property
Marital property usually includes assets or debts either spouse took on during the marriage. Common examples are income from work, properties purchased, mortgage debt, and credit card debt.
Marital property sometimes includes appreciation in the value of non-marital assets if the appreciation is at least partly due to direct or indirect contributions the other spouse made. One instance could be when a spouse’s domestic duties let his or her partner spend more time on a business started before marriage.
Non-Marital Property
Non-marital property belongs to one spouse, not both, and may include assets or debts a spouse took on before the marriage, gifts or inheritances, legal judgments or settlements, and assets a spouse obtained after separating legally. The acquiring spouse should have kept this non-marital property separate and not mixed with marital property.
Non-marital property can include appreciation in the value of non-marital assets, if the increase is not due to the other spouse’s contribution. The same goes for income that non-marital assets generate. Prenuptial or postnuptial agreements can also designate non-marital property.
Non-marital property can change into marital property through commingling. An example is when one spouse inherits money and deposits it into a joint bank account that both spouses use. In this case, all the money in the account may be marital property.
How Illinois Law Divides Marital and Non-Marital Property During Divorce
Under equitable distribution in Illinois, marital property undergoes fair, but not necessarily equal, division during a divorce. Non-marital property can stay with the spouse who owns it. Factors that matter for equitable distribution include:
- Length of marriage: Longer marriages may have more equal divisions of assets
- Prenuptial and postnuptial agreements: These agreements, if valid and enforceable, tend to take precedence over equitable distribution
- Financial circumstances: Each spouse’s income, debts, earning capabilities, and existing obligations such as alimony or child support from previous marriages
- Contributions to the marriage: Each spouse’s financial and nonfinancial contributions
- Needs of the couple’s minor children: This could matter, especially for an asset such as the family home
Courts do assess other factors, such as whether one spouse dissipated assets. This occurs when a spouse misuses, wastes, or purposefully uses marital funds or property for reasons unrelated to the marriage and perhaps while it is breaking down. Examples can include gifts spent on a new romantic partner, gambling issues, transferring marital property to other parties, and selling property for less than its value without the other spouse’s permission.
Commingling and Transmutation
Commingling and transmutation can transform marital property into non-marital. Commingling is when a spouse mixes his or her non-marital assets with marital assets and making it difficult to distinguish between the two, such as inheriting money and depositing it into a shared bank account
Transmutation is when a spouse decides to treat non-marital property as marital, such as using a joint bank account to make mortgage payments on a home he or she owned before the marriage, or titling a separately owned house or car jointly
To prevent unintentional commingling and transmutation, keep non-marital assets separate and use separate funds on their upkeep.
Why You Need a Divorce Lawyer to Protect Your Property Rights in Illinois
Dividing property in Oakbrook Terrace can get complicated, even in seemingly straightforward situations.
Explain Property Rights About Which You May Have Been Unaware
Many people are unaware of marital property laws in Illinois, for example, that they might have rights to part of a non-marital asset’s appreciation in value if their efforts contributed to the appreciation. This may occur if one spouse owned a house before the marriage, but the other spouse contributed to renovations or mortgage payments. The increase in value due to these efforts might be marital property.
Another example is if one spouse owned a business before getting married, and the other spouse contributed by working without a salary, helping manage operations, or giving money to the growth of the business. About 99.6% of Illinois businesses are small businesses. An increase in the value of a business during a marriage could be subject to equitable division.
Helping with investments, rental property, or debts one spouse had before the marriage could also give a spouse rights to the property. With rental properties, for example, the non-owner spouse might have managed tenants or made major repairs. If marital income was used to pay off non-marital mortgages or business loans, the non-owner spouse may be able to claim a right to the increased equity.
Distinguish Between Marital and Non-Marital
An attorney in Oakbrook Terrace can trace the source of funds, review financial records, evaluate nonfinancial contributions such as labor, and identify commingled assets. Attorneys can also determine if passive or active asset appreciation occurred. If market forces drove an asset’s appreciation, it remains non-marital. If one or both spouse’s efforts drove the appreciation, this active appreciation could be subject to equitable distribution in divorce.
Identify All Assets
Some people do not think about dividing assets such as retirement accounts, collectible cars, or artwork in a divorce. An attorney can work to identify all assets, including hidden ones, and determine fair division.
Offer Customized Solutions and Negotiate Settlements
There can be a lot of flexibility for Illinois divorce property division. A divorce or marital settlement agreements lawyer can offer customized solutions and negotiate settlements. For instance, one spouse may be able to keep the marital home instead of selling it and dividing the proceeds.
If alimony is an issue, a tailored solution might be a lump-sum property settlement or a larger share of assets instead of ongoing alimony payments every month. Meanwhile, if there are children from the marriage, a deferred sale of the marital home might be possible. The spouses could make a future-sale agreement that allows one spouse to stay in the home with the children until they reach a certain age. There are many possible solutions for just about any issue, including businesses and business interests.
An attorney can determine if contesting the divorce is necessary, perhaps if one spouse is claiming a marital asset as non-marital. Attorneys can represent you in court during divorce trials.
Save on Taxes
One way an attorney can help with tax savings is through Qualified Domestic Relations Orders (QDROs). They are a way to split retirement accounts without triggering taxes or penalties. This helps with fair asset division and financial security.
Prioritize Children and Their Future
Parents may agree to keep marital assets, such as rental properties or savings accounts, intact and earmark them for future child expenses such as college tuition. In addition, attorneys can help figure out solutions such as those relating to the marital home that help with the children’s stability and security.
Draft Clear Agreements
A clear agreement provides peace of mind and may prevent disputes later. It is easier to get a marital settlement agreement right the first time around, rather than figure out how to modify a marital settlement agreement later if you made mistakes.
Without the guidance of a divorce lawyer in Illinois, people may make common errors such as not identifying assets and debts, forgetting about tax consequences in asset division, incorrectly handling retirement accounts, and using vague instead of specific, enforceable language. Saying that one spouse will pay “some” of a child’s extracurricular expenses is vague and easily could lead to disagreements.
Enforce Prenuptial and Postnuptial Agreements
A lawyer can make sure spouses uphold prenuptial or postnuptial agreements or argue that they are invalid. For example, if one spouse did not disclose all financial assets for a prenuptial, the agreement could be void.
Identify Priorities
Lawyers can answer your questions, identify your priorities, and offer next steps forward. Divorce is an emotional time for many people, and it can be difficult to identify which assets you prioritize more than others. Questions such as, “What is the difference between marital settlement agreement vs. divorce decree?” may also occur. A marital settlement agreement is the agreement outlining property division, parenting responsibilities, and other issues, while the divorce decree finalizes the divorce.
Erlich Law can help you identify marital and non-marital property and assist with other issues in your divorce. Contact us today.
