Determining whether an asset is marital or nonmarital can become complicated when spouses own property from before the marriage, receive inheritances, mix separate funds with marital funds, or hold substantial financial assets. A Northbrook divorce lawyer can help evaluate how Illinois law may apply to particular assets and what documentation may be needed to establish ownership.
Key Takeaways
- Most property acquired during the marriage is presumed to be marital property.
- Property can be marital even if only one spouse’s name appears on the account, deed, or title.
- Certain inheritances, gifts, and premarital assets may qualify as nonmarital property.
- Mixing marital and nonmarital assets can make classification more complicated.
- Retirement benefits earned during the marriage may be subject to division.
- Illinois follows equitable distribution, which does not necessarily mean an equal 50/50 split.
- Detailed financial records can be important when tracing or classifying assets.
If you have questions about marital property or how your assets may be treated in an Illinois divorce, contact Silberman Law Group at (312) 593-0075 to discuss your circumstances.
What Does Illinois Law Consider Marital Property?
Under Illinois law, property acquired by either spouse after the marriage and before a judgment of dissolution is generally presumed to be marital property unless it falls within a statutory exception.
The important point is that ownership is not determined solely by whose name appears on the property. A bank account opened by one spouse during the marriage, for example, may still contain marital funds. Likewise, a home purchased during the marriage may be marital even if the deed lists only one spouse.
Examples of assets that may be considered marital include:
- Wages and salary earned during the marriage
- Homes and other real estate purchased during the marriage
- Savings and checking accounts funded with marital income
- Investment and brokerage accounts
- Vehicles purchased during the marriage
- Business interests acquired or developed during the marriage
- Retirement benefits accumulated during the marriage
- Household furnishings and valuable personal property
The classification of each asset depends on the facts surrounding how and when it was acquired.
What Property Is Usually Considered Nonmarital?
Certain property may be classified as nonmarital and therefore excluded from the marital estate. Common examples can include property owned before the marriage, gifts made to one spouse, and qualifying inheritances.
Nonmarital property may also include assets acquired in exchange for property that was already nonmarital. For example, if one spouse owns a nonmarital investment and sells it to purchase another asset, the replacement asset may potentially retain its nonmarital character if the funds can be properly traced.
However, simply claiming that an asset is separate does not necessarily establish that it is nonmarital. Documentation can be critical.
Records that may help establish nonmarital ownership include:
- Bank statements
- Closing documents
- Account statements from before the marriage
- Probate or estate records
- Gift documentation
- Property deeds
- Purchase and sale records
If the source of the funds cannot be clearly traced, disputes about classification may arise.
Does It Matter Whose Name Is on the Property?
The name on a title, account, or deed does not automatically determine whether property is marital or nonmarital. Illinois courts generally look at when and how the property was acquired rather than relying only on legal title.
For example, one spouse may open an investment account solely in his or her name using income earned during the marriage. Even though the other spouse is not listed on the account, the funds may still be marital.
The same issue can arise with vehicles, real estate, and business assets.
This is one reason spouses should avoid assuming that an asset belongs exclusively to them simply because they have legal title. The source of the property and the timing of its acquisition often matter more.
What Happens When Marital and Nonmarital Property Are Mixed?
Mixing marital and nonmarital assets can make property classification more complicated. This commonly occurs when separate funds are deposited into a joint account or when marital funds are used to improve or pay expenses associated with nonmarital property.
For example, suppose one spouse owned a home before marriage but the couple later used marital income to pay the mortgage or fund improvements. The original property may have begun as nonmarital, but the marital estate may have a potential reimbursement claim depending on the circumstances.
Similarly, repeatedly moving inherited money through joint accounts may make tracing more difficult.
Keeping clear records and maintaining separation between marital and nonmarital assets can make it easier to determine how property should be classified.
Are Houses and Other Real Estate Marital Property?
Real estate purchased during the marriage is often marital property, even when only one spouse is listed on the deed. Homes, rental properties, vacation residences, and investment properties may all become part of the marital estate.
Real estate issues can become more complicated when one spouse owned property before marriage or when the couple owns multiple properties.
When dividing property, spouses may need to consider the property’s market value, mortgage balance, tax consequences, rental income, maintenance expenses, and any nonmarital contributions.
Approaches may include:
- Selling the property and dividing the proceeds
- One spouse buying out the other’s interest
- Awarding different properties to each spouse
- Offsetting real estate with other marital assets
The appropriate option depends on the value and structure of the marital estate.
Are Retirement Accounts Considered Marital Property?
Retirement benefits earned during a marriage may be marital property even if the account is held solely in one spouse’s name. This can include 401(k) accounts, pensions, IRAs, and other retirement benefits.
The marital portion is generally tied to contributions or benefits earned during the marriage. Contributions made before the marriage may potentially remain nonmarital if they can be identified and traced.
Dividing retirement accounts and pensions can require careful analysis because different types of retirement plans have different rules.
Some employer-sponsored retirement plans may require a Qualified Domestic Relations Order, commonly called a QDRO, before benefits can be transferred or divided.
Tax consequences should also be considered when comparing retirement assets with cash or other property. Two assets with the same current value may not provide the same after-tax benefit.
Are Business Interests Marital Property?
A business or ownership interest may be marital property if it was started or acquired during the marriage. Even when a business existed before the marriage, increases in value or marital contributions may create additional issues that require analysis.
Business ownership can be especially complex because the value of a company may depend on several factors, including:
- Revenue and profitability
- Business assets and liabilities
- Ownership percentages
- Market conditions
- Goodwill
- Compensation paid to the owner
- Future earning potential
A formal business valuation may be necessary in cases involving significant ownership interests.
Courts may also need to determine whether portions of the business are marital, nonmarital, or a combination of both.
Are Debts Treated as Marital Property?
Illinois divorce cases involve both assets and debts. Obligations incurred during the marriage may be treated as marital debts depending on the circumstances.
Examples can include:
- Mortgages
- Credit card balances
- Vehicle loans
- Personal loans
- Home equity loans
- Certain tax obligations
The person whose name appears on the debt does not always determine who will ultimately be responsible for it between the spouses.
It is also important to distinguish between responsibility under a divorce judgment and responsibility to a creditor. A divorce court can allocate a debt between spouses, but a creditor may still pursue anyone who remains legally obligated under the original loan or account agreement.
Can a Prenuptial Agreement Change What Happens to Property?
A valid prenuptial agreement can affect how assets are classified or divided if the marriage ends. A prenup may identify property that will remain separate, address rights to future income or assets, and establish terms that apply in the event of divorce. Whether a particular agreement is enforceable depends on Illinois law and the circumstances surrounding its execution.
Property classification can become particularly complicated in cases involving businesses, real estate portfolios, inheritances, trusts, retirement benefits, or substantial premarital assets. Getting legal guidance early can help you understand what documentation to preserve, what assets may require valuation, and what financial issues could affect settlement negotiations. For guidance regarding marital property and property division in an Illinois divorce, contact Silberman Law Group at (312) 593-0075 to discuss your circumstances and legal options.
