Untangling the Knot: When Assets Are Commingled

 Posted on October 10, 2017 in Division of Assets

One of the most complex and time-consuming parts of any divorce proceeding is the division of marital property. It can get even worse when marital and non-marital property are considered to be mixed. In order to reach a fair and equitable distribution of assets, a court must determine whether property has been commingled or not, and if so, to what extent.

Commingling Assets in Illinois

Commingling is defined as the act of mixing funds belonging to one person with funds belonging to another, especially when there is a responsibility to keep them separate. Sometimes, commingling funds is actually illegal or unethical, though spouses commingling marital and non-marital property is not. Marital property is any property acquired by either spouse during the marriage, while non-marital property is anything owned before the marriage by either spouse, or a gift or inheritance received by one spouse at any time (before or during the marriage). When the two meet, the status of the resulting property depends on which is the prime mover, so to speak.

For example, if one spouse has a car loan he or she took out before the marriage, and the other spouse contributes a paycheck to make a payment, the marital property that was the paycheck is becoming non-marital property in the value of the car. But, if non-marital property is contributed to marital property, may lose its character as non-marital property and become part of the marital estate.

Either way, commingling could create what courts refer to as a right of reimbursement, which is a guarantee that the marital estate (or the non-marital party, depending) will be properly repaid. However, these rights are not guaranteed in court. Securing repayment, in some cases, is not possible.

Claiming Your Property

Commingling of assets can hinder the equitable division of property in a divorce proceeding. This is primarily because of two factors: (1) Illinois courts always attempt an equitable (fair) division of marital property, and potential unfairness is at issue if property is not appropriately identified, and (2) Illinois law allows each spouse keep 100 percent of his or her non-marital property. If the non-marital property cannot be identified, the divorce proceeding runs the risk of becoming invalid. This is further complicated by the fact that if the nature of property cannot be determined, Illinois law has a presumption which classifies it as marital.

To establish property as non-marital, Illinois has set up a complex procedure known as tracing, in which the money or value of a piece of property is carefully traced back to its origination. This can require considerable time and effort, using documentation, as well as legal and personal records to ensure that each piece of property was indeed received as a gift or inheritance, or was received by a spouse before the marriage. For example, if you received stock certificates as a gift from a relative, documentation would be required which showed the transfer of ownership from that relative to you, as well as the initial starting value, the date on which transfer was completed, and so on. From that beginning point, the property can be traced into its present form.

It is important to remember that merely “touching” upon marital property does not necessarily change the character of non-marital property. If you, for example, receive an inheritance, and deposit it briefly into your joint checking account before moving it to a private account, the inheritance is still non-marital property. Its character does not change, because commingling assets requires time and a lack of clear intent to move the asset out of the commingling situation.

A Property Division Attorney Can Help

If you have questions about the character of your property for the purposes of divorce, contact an experienced Naperville family law attorney. Call 630-352-2240 for a confidential consultation at Pesce Law Group, P.C. today.

Source:

http://www.ilga.gov/legislation/ilcs/ilcs5.asp?ActID=2086&ChapterID=59