Identifying and Distributing Marital & Non-Marital Property in an Illinois Divorce
In an Illinois divorce, when and how property was acquired can make a difference. Knowing the difference between marital and non-marital property both before and during a divorce can keep you from making costly mistakes and unintended gifts to your spouse.
Are all assets in the marriage divided in the divorce?
No. For divorce purposes there are two types of property: marital and non-marital. Marital property is divided between the parties by the court in “just proportions.” Non-marital property is kept by the party owning the property.
In a divorce context what is the significance of the terms marital property and non-marital property?
These terms are vital to the division of assets in a divorce. Marital property is divided between the divorcing parties. Non-marital property remains the property of the person owning it.
What is non-marital property?
- property acquired by gift, legacy or descent or property acquired in exchange for such property
- property acquired in exchange for property acquired before the marriage;
- property acquired by a spouse after a judgment of legal separation;
- property excluded by valid agreement of the parties, including a premarital agreement or a postnuptial agreement;
- property acquired before the marriage, except as it relates to retirement plans that may have both marital and non-marital characteristics;
- certain other specified categories…
What is marital property?
All property acquired during the marriage, no matter how titled, except property acquired during the marriage by gift or inheritance.
What are the most significant assets divided in a divorce?
The house and the retirement plan. A retirement plan is sometimes overlooked as a significant asset, but often it is worth as much, or nearly as much, as the equity value in the house. When the retirement plan started before the marriage, only that part which accrued during the marriage is marital property.
My husband/wife had an committed adultery. Doesn’t that mean I get most of the assets?
No. The distribution of assets in a divorce is made “without regard to marital misconduct.” The law does not punish the “guilty” party.
Can my spouse and I make an enforceable agreement that a certain asset will be my non-marital property despite a divorce?
Yes. The property statute of the Illinois Marriage and Dissolution of Marriage Act, in addition to providing that gifts and inheritances are non-marital property, states that property may be made non-marital by a “valid agreement of the parties.” An agreement in reference to real estate, of course, must be in writing. The agreement can be made before the marriage (premarital agreement), during the marriage, or while a divorce proceeding is pending.
Can I keep the assets I had before the marriage, like furniture, a car, stock, real estate etc.?
Yes. Premarital property is another form of non-marital property. As long as a premarital asset remains in your own name, you may keep your premarital property.
During the marriage my husband bought an expensive motorcycle. He said he paid for it exclusively with overtime pay he earned. The title is registered in his name. Is it his non-marital property?
No. All property acquired during the marriage is presumed to be marital property, but the fact that he paid for it and that title is registered in his name does not matter. The wages he earned during the marriage are marital property whether they are overtime wages, commissions, bonuses, etc., so the motorcycle is marital property
Before the marriage I owned shares of stock. During the marriage I sold the stock, put the money into a checking account in my own name, where it remained for several weeks and then I purchased a piece of land in my own name with the money. Is the land my non-marital property?
Yes. An asset acquired in exchange for a non-marital asset is non-marital. If, however, the above scenario is changed slightly and the proceeds from the sale of stock are placed in a joint checking, or savings account for a long time before the land is purchased, then the probability is that the funds have lost their identity as non-marital and the land purchased with the funds, despite how title is taken, will be marital.
My husband and I are going through a divorce. He recently inherited an estate worth about $6,000,000. The assets my husband and I acquired during the marriage are worth about $200,000. Does the value of his inheritance play into the asset distribution in the divorce?
Yes. The property statute in the Illinois Divorce Act states that the judge should consider the value of non-marital property when dividing marital property. The inheritance is your husband’s non-marital property, but the court in this case, considering the large value of your husband’s non-marital property, could award the lion’s share of the marital assets to you.
Also, because your husband’s inheritance produces, or is capable of producing, a significant amount of income when it is invested, this income, or potential for income, should be considered by the court in making its child support award, and if you qualify for maintenance, the income from the estate should also be considered for the maintenance award.
Your husband’s windfall-inheritance would not, however, entitle you to maintenance which would allow you to live at a higher standard of living than you and your husband enjoyed during the marriage.
My husband works for a family owned business. He is president and CEO. He also owns 49 percent of the stock in the business. I determined he is substantially underpaid when compared to other people holding similar positions. In effect, what the corporation is saving on his salary it plows back into the business. Do these facts give me any interest in the value of the business?
No, but you should be compensated for the amounts by which your husband was underpaid during the marriage. Your husband’s earnings are marital property. By investing the amounts by which he has been underpaid back into the business, because wages are marital property, your husband was contributing marital funds into his non-marital interest in the business. The amounts by which he did so should be put back into the marital pot for division between you and your husband.
I am receiving stock options from my employer. Are stock options marital property?
Yes. Illinois recently adopted a statute stating that stock options are marital property if acquired during the marriage and before the divorce judgment, whether vested or non-vested, or whether their value is ascertainable. If, however, the stock options were acquired by gift, inheritance etc. then they will be non-marital. In dividing the value of the stock options between the parties the judge is to consider the circumstances underlying the grant of the stock option, such as whether the grant was for past, present or future efforts and the length of time from the grant of the option to the time the option is exercisable.
Isn’t marital property divided 50/50 in Illinois?
No, in the majority of cases property is not divided 50/50. In Community Property states, such as California and Wisconsin “community” property is required to be divided 50/50. Illinois, as most other states, requires that marital property be divided “in just proportions,” which means fairly or equitably.
My study of Illinois divorce cases where the appellate court affirmed the award of marital property shows the following statistics:
- Less than 50 percent to wife: 10 percent
- Equal division: 28 percent
- 51 to 60 percent to wife: 28 percent
- 61 to 70 percent to wife: 12 percent
- More than 70 percent to wife: 22 percent
Is there a presumption that marital property will be divided 50/50?
No. It will be divided in “just proportions.” In fact the Illinois appellate court opinions reveal that only 28% of the cases resulted in an equal division of marital property, 10% resulted in less than 50% to the wife and in the balance of the cases the wife received more than 50%.
You speak in terms of percentages for the distribution of property, but how will the property actually be divided?
On a sensible basis. If the husband, for example, operates a business and the wife does not know how to operate the business, the husband will receive the business. If the pension plan and the equity in the home are worth substantially the same, one asset can be traded for the other.
Is there one factor that is more significant than others in determining the percentage of property distribution?
Yes. In my opinion it is the “opportunity of each spouse for future acquisition of capital assets and income.” The Illinois Divorce Act lists the factors the court is to consider in distributing marital property. The future opportunity to acquire assets and income is one of these factors and is usually the most significant factor.
For example, if one of the spouses is highly educated and trained, experienced and has a large income, while the other spouse has not honed income producing skills because of being a homemaker, the distribution of assets will favor the stay-at-home homemaker.
Will the debts be divided 50/50?
Probably not. When property division is calculated on the basis of percentages, as I have done above, I am speaking of net (after debt) values, and thus the usual ratio of effective debt payment follows the percentages by which the property is distributed.
Why, in the majority of the cases, does the wife receive a larger percentage of the marital estate than the husband?
The statute which directs judges how to divide marital property lists twelve factors for judges to consider. One of these factors is “the reasonable opportunity of each spouse for future acquisition of capital assets and income.” It is usually the husband who has this advantage, and so the wife receives more than 50% of the marital assets.
If my wife gets more than 50 percent distribution of marital property, doesn’t that cut her off from maintenance (alimony)?
No. If a spouse receives more than 50 percent of the marital property, and otherwise qualifies for maintenance, the odds are, as shown in the appellate court cases, that there will also be a maintenance award, but “otherwise qualifies for maintenance” is the operative phrase.
Are there any income tax consequences to the transfer of property in a divorce?
No. The transfer of property in a divorce judgment is not a taxable event.