One of the most important parts of any divorce is property division. Whether it’s liquid assets like cash, or sentimental items like the family lawnmower, dividing property is often a major sticking point in the dissolution process. The starting point for any asset dispute is whether or not the asset is marital property. But that begs the question: “What is marital property?”

Section 503 of the Illinois Marriage and Dissolution of Marriage Act outlines the difference between marital and non-marital property. Broadly speaking, marital property is everything acquired from the date of marriage through the date of the entry of a Judgment for Dissolution of Marriage (or the finalization of a divorce). Conversely, non-marital property includes property acquired prior to the marriage and gifts, inheritance, and the like, received before the marriage or received during the marriage in certain circumstances.

Marital Property

Marital property includes all income and assets earned or acquired during the marriage. The statute defines marital property as all property, including debts and other obligations, acquired by either spouse after marriage.

Generally, all marital property is subject to allocation in the divorce based on an equitable division of the assets. Equitable does not always mean a 50/50 division of marital assets. One of the factors the courts look at is each party’s non-marital property.

Non-Marital Property

Non-marital property is defined by the statute with certain exceptions to the presumption that all property owned by the parties is marital. This effectively means that everything is marital until proven otherwise. The following exceptions, detailed by the statute, establish non-marital property: 1) inheritance, 2) property acquired prior to the marriage, 3) property acquired after the divorce, 4) property explicitly stated to be non-marital property in a valid pre-nuptial agreement, 5) property awarded to each party in a divorce, 6) non-marital portions of retirement plans (with certain exceptions), 7) appreciation of non-marital property (with certain exceptions), 8) income earned from non-marital property (with certain exceptions). Non-marital property can also be transformed into marital property in a variety of ways.

The following are examples of clearly non-marital property:

• Inheritance: Inheritance received prior to the marriage or after the divorce or inheritance received during the marriage but kept separate from any other marital assets.
• Property acquired prior to the marriage: A home purchased prior to the marriage.
• Property acquired after the divorce: A home purchased after the divorce.
• Property explicitly stated to be non-marital property in a valid pre-nuptial agreement: In Illinois, a valid pre-nuptial agreement must be in writing, signed by both parties voluntarily, and both parties must have fully disclosed their assets prior to the signing of the agreement. If the valid pre-nuptial agreement defines certain property as non-marital, it would fall into this category.
• Property awarded to each party in a divorce: If one party is awarded the marital home in the divorce, that is their non-marital property.
• Non-marital portions of retirement plans (with certain exceptions): Contributions to a retirement account prior to the marriage. The treatment of retirement accounts is further in the statute as retirement accounts commonly have marital and non-marital portions.
• Appreciation of non-marital property (with certain exceptions): If a home purchased prior of the marriage increases in value during the marriage (without contribution during the marriage), the increased value is also considered non-marital. For example, if a home is purchased prior to the marriage for $500,000.00, and no marital contributions are made in either assets or efforts, but the home is worth $750,000.00, at the time of the divorce, the $250,000.00, appreciation is also non-marital.
• Income earned from non-marital property (with certain exceptions): Stock owned prior to the marriage that pays dividends during the marriage, the dividends are non-marital property and/or income.

Non-Marital Property into Marital Property

One of the most common ways that non-marital property can become marital property is through co-mingling. Co-mingling is essentially mixing marital and non-marital property. For example, if a party receives liquid funds through inheritance during the marriage and deposits their inheritance into a joint account and then both parties use the money in that account, the inheritance would most likely lose its non-marital character due to co-mingling and it would be deemed a “gift to the marriage.” Conversely, if that same inheritance is deposited into a separate account, it would retain its non-marital character. If distributions are taken from that account during the marriage and transferred to the joint account, only the distributions would be considered co-mingled and marital, while the remaining balance of the inheritance account would retain its non-marital character.

This also applies to other assets, including property. For example, if one of the parties owns a home that was purchased prior to the marriage, that home would be their non-marital property. If the non-marital home is then sold during the marriage and the sale proceeds are deposited into a separate account, those proceeds would most likely be characterized as non-marital. Conversely, if the sale proceeds from the non-marital home are deposited into a joint account and then used by both parties, the non-marital sale proceeds could be transformed into marital assets through co-mingling.

Essentially, if there is one pot of money that is non-marital and one pot of money that is marital and the two are mixed, the court can’t pull a dollar out of the pot and call it marital or non-marital due to co-mingling.

Another way to transform non-marital property into marital is by contributions of marital assets or efforts to the non-marital property. If we look at the example of a non-marital home again, this non-marital home can be transformed into marital property if marital assets and/or efforts are contributed to the increase in the value of the property. For example, if marital assets are used to fund a remodel of the home, there could be a marital and non-marital portion of the home or an argument could be made that the entire home was now a marital asset due to the contributions of the marriage.

Conclusion

In order to keep non-marital property a non-marital asset in a divorce, we strongly recommend keeping it separate from any other marital property.

Your Path Forward

Divorce can be challenging, but understanding the process empowers you to navigate it with greater confidence.  While this guide provides a roadmap, remember, legal advice is crucial for your specific situation. At Merel Family Law, we’re committed to supporting you through every stage of your divorce. Reach out to us today for a consultation and let us help you take the first step toward a new beginning.