Mar 17, 2011

Retaining Your Non Marital Property After Divorce

Most people contemplating or going through a divorce are looking to retain as much of their property as possible. That property is divided into two classifications: marital and non-marital property. Marital property in Illinois generally consists of property acquired during a marriage. Illinois divorce law requires the equitable sharing of all marital property. That means the court will examine a series of factors such as financial and domestic contributions, length of the marriage, and earning capacity, in determining how much marital property each party will retain.However, Illinois law requires upon divorce that a party retain 100% of their non marital assets. Non marital assets are defined as property acquired via gift, inheritance, before the marriage, or protected under the terms of a valid agreement between the parties such as a premarital agreement. Establishing the non marital character of an asset in the midst of a divorce case is not a simple process and requires time, planning, and thoroughness.One of the difficulties in establishing the non-marital character of an asset is the presumption under Illinois law which generally favors classifying assets as marital property. Thus, the party seeking to establish an asset as non marital has the burden of proving to a court that the property is non marital through the use of evidence, which typically will consist of testimony and documents, along with other demonstrative materials.Another difficulty that can surface in connection with establishing a non marital asset occurs when the parties have a mixed or commingled non marital and marital funds. Illinois law has a complex series of tracing requirements to adequately demonstrate that an asset has retained its non marital character throughout the marriage. Tracing is a procedure used to follow the flow of money from its original source to demonstrate that the monies at issue are still non marital. This requires proof that the original source of the funds came from a gift, an inheritance, or pre-marital ownership.For example, establishing the non marital character of an inheritance requires obtaining estate planning documents, such as wills, trusts, gift tax returns and other documents typically admitted in probate proceeding that establish an inventory and value for a decedent’s estate. Once these records establish and demonstrate the original point in time when the inheritance was received, it is then necessary through tracing, to follow the money or asset to its current form to prove it has not been commingled with marital money. If the commingling is significant, then the non-marital asset can become transmuted into marital property, in which both spouses share. Typically, a party’s uncorroborated testimony without some supporting documentation is insufficient to prove funds are non-marital.Often, it is necessary to enlist the help of an expert witness such as an accountant or other financial planner to trace non marital money. Illinois cases focus on maintaining a level of separation between the non marital and marital property to preserve are asset’s non marital status. Disputes frequently arise as to whether the use of certain non marital money has changed the character of the asset to marital property. Generally, the use of non marital money, even if for a marital purpose, such as payment of joint income taxes, will not alter the character of the asset. Only in instances where there is a commingling of the non marital money with marital money will the asset typically lose its identity; and should that occur, the property will be classified as marital.There are steps, however, one can take, even if a commingling has occurred, to try to preserve and protect what is one’s rightful non marital property. If there are adequate reasons for the commingling, such as estate planning or mere convenience, the funds may retain their original identify. Further, if non marital funds only traveled through marital accounts briefly, then the money may retain its character as non marital. Proper and detailed record keeping, the procurement of necessary written documentation, and in some instances, the assistance of financial experts, will give a much better chance to keep what is rightfully yours when a spouse challenges your non marital property claim. Your claims in this regard can be strengthened through sound legal advice and competent representation from a family law practitioner who can safeguard what was intended to be yours and not your spouse’s.

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