How Is Commingled Property Addressed in an Illinois Divorce?

 Posted on December 22, 2021 in Division of Property

When a couple chooses to end their marriage, they will need to address a variety of issues during the divorce process. Foremost among these is the division of marital property. All assets and debts that a couple owns together must be divided fairly and equitably. In addition to marital property, each spouse will likely have certain assets that are considered separate property, including items they owned before getting married, assets received through inheritances, and property excluded from the marital estate by a prenuptial or postnuptial agreement. Separate property will not be divided between spouses, and each party will be able to retain ownership of the assets they originally possessed. However, there are many situations where marital and separate property may become mixed together or “commingled.” By understanding how to identify marital and separate property and determine how ownership of commingled property will be handled, spouses can ensure that property division will be addressed correctly during their divorce.

Examples of Commingled Property

It is not always easy to determine which assets may be considered separate property vs. marital property, especially when a couple has combined their finances during the years that they were married. When assets become commingled, it may sometimes be possible to trace them back to their source, but if this is not possible, separate property may be “transmuted” into marital property, and it will need to be included during the property division process. Some cases where commingling of assets may occur include:

• Real estate property - A home or other property that one spouse owned before getting married will be considered separate property. However, some of this asset may be considered marital property if the other spouse made contributions toward its increase in value. For example, if payments on a home’s mortgage were made using income earned by both spouses, the increase in equity in the home may be considered to be a marital asset. Similarly, if a spouse helped make improvements to a home owned by the other spouse, such as by performing work or helping make payments to a contractor, they may be able to claim partial ownership of the home. To ensure that they can maintain full ownership of the property, the spouse who originally owned the home may reimburse the other spouse for the contributions they have made.

• Family businesses - If a spouse was a business owner before they got married, their business will usually be considered separate property. However, if the business increased in value while the couple was married, that increase may be considered a marital asset, especially if the other spouse made contributions to the business, such as investments of marital funds or work performed for the business. This may give the other spouse an ownership claim over certain business assets, and the other spouse may need to buy out their share of the business in order to retain sole ownership following their divorce.

• Inheritances - If a person inherits money or other property from a loved one, this will usually be considered a separate asset. However, combining these assets with other property owned by a couple may cause an inheritance to be transmuted into marital property. For example, if a person inherits money that they deposit into a joint bank account, it may be difficult to determine how much of the funds in the account should be considered separate property. In these cases, asset tracing may be used to look at the deposits and withdrawals from the account and determine the amount of funds that may remain from the original inheritance.

Contact Our St. Charles Asset Division Lawyers

At Goostree Law Group, we regularly work with spouses who own complex assets, helping them identify the forms of property that will be subject to division during divorce and ensure that their assets will be divided fairly. If you have questions about how you can make sure you will be able to maintain ownership of your separate property, we can advise you of your options and provide you with representation as you negotiate a property settlement. Contact our Kane County property division attorneys today at 630-584-4800 to schedule a complimentary consultation.

Sources:

https://www.ilga.gov/legislation/ilcs/documents/075000050k503.htm

https://www.kiplinger.com/personal-finance/603067/the-danger-with-commingled-assets-in-a-divorce