Division of Assets
To get answers to frequent questions about division of assets in Illinois divorce proceedings, please select one of the links below:
How are assets divided in a divorce?
Each party is assigned his or her non-marital property. The marital estate and marital debt are equitably distributed between the parties, without regard to marital misconduct. In determining what qualifies as an equitable distribution, the court considers the following factors:
- The contribution of each party to the acquisition, preservation, increase or decrease in value of the marital or non-marital property, including the contribution of a spouse as a homemaker or to the family unit;
- The dissipation by each party of the marital or non-marital property;
- The value of the property assigned to each spouse;
- The duration of the marriage;
- The relevant economic circumstances of each spouse when the division of property is to become effective, including the desirability of awarding the family home, or the right to live therein for reasonable periods, to the spouse having custody of the children;
- Any obligations and rights arising from a prior marriage of either party;
- Any premarital agreement of the parties;
- The age, health, station, occupation, amount and sources of income, vocational skills, employability, estate, liabilities, and needs of each of the parties;
- The custodial provisions for any children;
- Whether the apportionment is in lieu of or in addition to maintenance;
- The reasonable opportunity of each spouse for future acquisition of capital assets and income; and
- The tax consequences of the property division upon the respective economic circumstances of the parties.
What does the term dissipation mean?
Dissipation is the use of marital property or funds for the benefit of one spouse for a purpose unrelated to the marriage at a time when the marriage is undergoing an irreconcilable breakdown. Generally, the spouse who is charged with dissipation has to prove how he or she spent the funds and that the funds were spent for a marital purpose.
A key limitation to the claim of dissipation is that dissipation can only be reimbursed to the marital estate if it occurred at a time when the marriage was undergoing an irreconcilable breakdown. This time frame does not necessarily coincide with the time when one party files for a divorce or the parties separate. Whether the marriage has been irreconcilably broken is a factual issue for the court to decide.
Examples of dissipation may be: gambling, excessive spending on your personal “needs”, funds spent on an paramour, excessive travel, excessive borrowing or excessive use of credit cards. Generally, it is normally not considered dissipation to incur the costs associated with residing separate and apart from a spouse while a divorce case is pending.
Should I be concerned that everything which was purchased during our marriage was placed in my spouse’s name?
Generally, no. If property was acquired during the marriage, there is a presumption that the property is marital. The exceptions to this rule are:
- Property acquired by gift, legacy or descent;
- Property acquired in exchange for property acquired before the marriage or in exchange for property acquired by gift, legacy or descent;
- Property acquired by a spouse after a judgment of legal separation;
- Property excluded by valid agreement of the parties;
- Any judgment or property obtained by judgment awarded to a spouse from the other spouse;
- Property acquired before the marriage;
- The increase in value of property acquired by a method listed in paragraphs (1) through (6), irrespective of whether the increase results from a contribution of marital property, non-marital property, the personal effort of a spouse, or otherwise, subject to the right of reimbursement; and
- Income from property acquired by a method listed in paragraphs (1) through (7) if the income is not attributable to the personal effort of a spouse.
If an inheritance is received during the marriage, how can you be assured that the property remains non-marital property?
The best way to ensure that gifts and inheritances remain non-marital is to be certain not to place the property into any form of joint ownership since doing so raises a presumption that the property is marital. Also be certain not to co-mingle the gift or inheritance with marital property including income earned during the marriage.
Is all property acquired before the marriage non-marital?
Usually yes, however there is and exception for property acquired in anticipation of marriage. Under this legal theory, property which is usually a home purchased by a couple shortly before a marriage and lived in by the parties during the marriage, will be considered marital property.
Do I have to pay income taxes on property that I receive in a divorce?
Generally, the transfer of property incident to a divorce is not a taxable event. However, when the property is ultimately sold, there may be tax consequences.
What happens if non-marital property is commingled with marital assets?
Spouses frequently commingle their marital and non-marital estates. Unless otherwise agreed by the spouses, commingled property is treated as follows:
When marital and non-marital property are commingled by a spouse by contributing non-marital property to the marital estate, or by the parties contributing marital property to a spouse's non-marital estate which results in a loss of the identity of the contributed property, the contributed property is transmuted to the estate receiving the contribution.
- When one estate of property makes a contribution to another estate of property, the contributing estate shall be reimbursed from the estate receiving the contribution notwithstanding any transmutation. However, reimbursement can only occur with respect to a contribution which is traceable by clear and convincing evidence. The personal labor or efforts of a spouse is considered to be a contribution by the marital estate. Consequently, when a spouse contributes his or her personal labor or effort to non-marital property, the marital estate is entitled to reimbursement if the labor or effort is significant and results in substantial appreciation of the non-marital property.
Especially in this area, Illinois law is complex and as with any legal issue a lawyer must be consulted for specific advice that apply to the facts and circumstances of a case.
Are stock options are they considered marital assets – even where they are unvested?
Unvested stock options that are granted during the marriage are presumed to be marital property. How stock options are divided or allocated in divorce proceedings is a particularly complex issue in divorce proceedings.
I started to accrue pension benefits before my marriage. Will my spouse be entitled to a portion of my pension plan.
Yes. However, your spouse is only entitled to a share of the portion of the benefits that accrued during the marriage, not those which accrued prior to the marriage.
Normally, a Qualified Domestic Relations Order (QDRO) will be entered by the court to divide the pension rights between you and your spouse. Another option is for the court to award other (offsetting) assets to the other spouse.
What is a QDRO?
A QDRO is a court order that directs the administrator of a pension plan to give a certain amount of an employee's pension to his or her ex-spouse after the divorce is final. The non-employee (ex-spouse) is known as an alternate payee.
Probably the most common form of retirement benefits is a 401(k) plan – which is a type of defined contribution plan. Usually, an alternate payee may take a tax free rollover of 401(k) benefits into an individual retirement account or other qualified account, thus creating a retirement account in his or her individual name.
What is the Illinois law in terms of how a business is valued or divided in divorce proceedings?
The critical difference among the states is the treatment of what is called “goodwill.” Goodwill has been variously defined but a definition from the International Glossary of Business Valuation Terms defines goodwill as, “the that intangible asset arising as a result of name, reputation, customer loyalty, location, products, and similar factors not separately identified.”
Some states do not differentiate what is referred to as personal goodwill and enterprise goodwill. Illinois courts do consider such a difference. Personal goodwill is generally goodwill that is dependent upon the personal efforts of the business owning spouse.
In Illinois divorce cases personal goodwill is not considered in the division of marital property but goodwill that is independent of the personal efforts of the business owning spouse is called enterprise goodwill. Enterprise goodwill is considered in the division of marital property.
The purpose of this frequently asked questions (FAQs) are to provide a general overview of certain Illinois family law issues. These FAQs are not intended to provide legal advice that applies to any specific case. The nature of family law proceedings is that the facts and circumstances of each case are critical when a lawyer provides legal advice. Further, these FAQs are not intended to be inclusive or to deal with every situation that may arise in matrimonial disputes. You should discuss with your attorney how the particulars of these Questions and Answers may apply to your case.
Hopefully these FAQs will serve at least two purposes for you. It can give you a working familiarity with some basic concepts in Illinois family law so that when you meet with your attorney you will be in a better position to discuss various issues and to use your time efficiently. Because you will likely be receiving a tremendous amount of information in your initial consultation with your attorney, these FAQs might also help you retain critical information and refresh your recollection of what your attorney told you.
The statements contained in these FAQs do not necessarily reflect the positions of the Illinois Chapter of the American Academy of Matrimonial Lawyers.
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