Fundamentals Of Marital Property in Illinois Divorce Proceedings

Defining Marital Property 

The Illinois Marriage & Dissolution of Marriage Act defines marital property as being “All property, including debts and other obligations, acquired by either spouse subsequent to the marriage.” See 750 ILCS 5/503(a). Any property acquired after the parties are legally married is defined as marital property.

This includes both personal property and real property. Any property acquired prior to marriage but transferred into a form of co-ownership is considered marital property. Finally, non-marital property that is mixed with marital property and loses its identity due to said mixing of the property becomes marital property. 

Income as Marital Property

All income earned during the marriage is considered marital property, even if deposited into an individually titled bank account. This is due to the income (a form of personal property – money) being earned during the marriage, making said income marital in nature. Likewise, any financial account –whether individual or joint—opened during the marriage that includes funds earned during the marriage is marital property. 

Financial Accounts as Marital Property

Any account that contains funds earned during the marriage is considered marital. Likewise, this applies to accounts opened prior to marriage when marital income or marital money is deposited into said accounts. 

Retirement & Pension Accounts as Marital Property

In certain circumstances, individuals will have pensions or retirement plans prior to marriage. The marital portion of said accounts only includes the increases to the retirement or pension plan balance during the marriage. 

Real Estate and Fixtures as Marital Property

All real estate, land, and fixtures (e.g., chandeliers, fences, non-movable items attached to the home) acquired after marriage are considered marital property. Likewise, if real property is acquired prior to the marriage but transferred into a form of co-ownership (e.g., adding a spouse onto a mortgage obligation), the real property becomes marital in nature. 

Furnishings as Marital Property

Items purchased during the marriage (e.g., couches, televisions, decorations) that are not permanently attached to the home are considered marital property. 

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Vehicles as Marital Property

Any motorized vehicle or water-based vehicle acquired after marriage is considered marital property. Likewise, if the vehicle was acquired prior to marriage but transferred into a form of co-ownership during the marriage, it is considered marital property. 

A Warning on Property Acquired in Contemplation of Marriage

One of the most distinct changes to the Illinois Marriage and Dissolution of Marriage Act, enacted on January 1, 2016—when the Illinois Marriage and Dissolution of Marriage Act was overhauled—mandates that property contemplated in anticipation of marriage is not marital property.

Prior to 2016, property purchased by a party in contemplation of marriage was considered marital. Now, it is considered non-marital property unless it is transferred into a form of co-ownership between spouses.  

Non-Marital Property Becoming Marital Property 

 Property acquired prior to marriage (i.e., non-marital property) can also become marital property through a concept known as “transmutation.” Transmutation is when property acquired prior to marriage enters into a form of co-ownership between both spouses, which has the effect of making the property marital in nature. See 750 ILCS 5/503(b)(1).

The only circumstance where transmutation does not occur is when the transmutation was performed for tax or estate planning purposes, and it can be clearly shown that the transmutation was not intended as a gift to the marriage. 

Example A of Transmutation

Prior to marriage, the husband owns a home and is the only individual listed on the mortgage documents. During their marriage, the husband and wife add the wife to the mortgage obligation. The said home is now marital property, as the parties entered into a form of co-ownership by adding the wife to the mortgage. The same would be true if the husband added the wife to the title documents or refinanced the mortgage and placed the wife’s name on the refinanced mortgage. 

Example B of Transmutation

Prior to marriage, the wife owned an automobile and was the only individual listed on the title documents. The wife added the husband to the title documents for the vehicle. The vehicle is now marital property, as the addition of the husband to the title is a form of co-ownership between the parties. 

Commingled Property and Effect on Marital Property 

 Non-marital property that is comingled (i.e., mixed) with marital property and loses its identity in the process is considered marital property. See 750 ILCS 5/503(c). A loss of identity is when the non-marital property is mixed to such an extent that it can no longer be traced to its original form. If the non-marital property can be traced to its original form, then it is considered non-marital property. 

Example of Commingled Property Losing Its Identity

Prior to marriage, the wife has a stock-trading account through an online trading company, to which she actively trades stocks. During the marriage, the husband receives inheritance funds (i.e., non-marital funds). The husband deposits the inheritance funds into the stock trading account, from which the wife uses the funds for trading.

The stock trading account loses and gains value over time through buying and selling stocks. The parties thereafter filed for divorce. The inheritance funds deposited into the stock trading account, due to fluctuations in the stock portfolio and acquisition/sale of stocks, would most likely be considered marital in nature, as they no longer retain their original identity. 

Example of Commingled Property Retaining Its Identity

During the marriage, the husband and wife acquired a house. During the marriage, the husband receives inheritance funds (i.e., non-marital funds). Husband and wife decide to remodel their house and hire contractors to do so. 

The husband uses his inheritance funds to pay for the labor and materials to remodel the home. The husband has kept all of the receipts and invoices. The inheritance funds, due to their clear traceability despite being used on marital property, would be deemed non-marital property and are subject to reimbursement to the marital estate. 

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