Gary R. Garretson
James M. Durkee
Attorneys at Law
1802 N. Division St., Suite 201, Morris, Illinois
(815) 941-2825
Fax: (815) 941-2840
E-Mail: ggarrets@hotmail.com.
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Gary R. Garretson James M. Durkee Attorneys at Law 1802 N. Division St., Suite 201, Morris, Illinois (815) 941-2825 Fax: (815) 941-2840 E-Mail: ggarrets@hotmail.com.
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DIVORCE DISPOSITION OF PROPERTY An important objective in all dissolution actions is to place the parties in such financial positions that they may begin their new and separate lives. This may be accomplished largely through property distribution. Under Illinois law, the court is required to divide marital property in a just and proportionate manner without consideration of marital misconduct. The Illinois Marriage and Dissolution of Marriage Act ("IMDMA") does not require that the court divide the property equally, but rather only requires that the property is divided in an equitable fashion without consideration of marital misconduct. Classifying Property -- Marital or Non-Marital Under Illinois law, all property, owned by a divorcing couple (or either of them individually), must be identified as either "marital property" or "non-marital property"; it is impossible for a piece of property to be characterized as part marital and part non-marital. The marital property must be divided between the parties, while the non-marital property must be assigned to the owner-spouse. Illinois law (750 ILCS 5/503(a)) creates a presumption that all property acquired during the marriage and before the entry of a dissolution judgment or a declaration of invalidity is "marital property" and therefore, such marital property is subject to equitable division by the court during or at the conclusion of, the divorce case. When property is divided, no regard to marital misconduct is taken into account. Each party’s contribution to or dissipation from the marital estate. Contribution When the court divides the parties’ assets, each party should be compensated for his/her contribution to the marital estate. The court however, should not limit is consideration only to only consider monetary or capital contributions when determining the parties’ respective contribution to the marital pool. The Supreme Court of Illinois has warned against placing too much emphasis on monetary contributions and instead declared that the objective should be an equitable distribution of the marital property. Therefore, equal weight should given to a spouse who remained at home, took care of household duties, and otherwise assisted and benefited a wage-earning spouse. Dissipation Dissipation of marital assets is also considered by the court when dividing marital property. Dissipation occurs when one spouse uses marital property for his or her sole benefit for a purpose unrelated to the marriage when the marriage is breaking down. According to the Illinois Marriage and Dissolution Act the court should consider such conduct and compensate the disadvantaged spouse when dividing the marital property. If, however, the complaining party knew of the other spouse’s improper expenditures and did not object to them at the time or when first known, then a court should not find that a dissipation has occurred. Non-Marital Property The court is to award to each spouse his/her nonmarital property. According to the IMDMA, there are eight categories of nonmarital property: (1) property acquired by gift, legacy, or descent; (2) property acquired in exchange for property acquired before the marriage or in exchange for property acquired by gift, legacy or descent; (3) property acquired by a spouse after a judgment of legal separation; (4) property excluded by valid agreement of the parties; (5) any judgment or property obtained by judgment awarded to a spouse from the other spouse; (6) property acquired before the marriage; (7) the increase in value of property acquired by a method listed in paragraphs (1) through (6) of this subsection irrespective of whether the increase results from a contribution of marital property, nonmarital property, the personal effort of a spouse, or otherwise, subject to the right of reimbursement; and (8) income from property acquired by a method listed in paragraphs (1) through (7) of this subsection if the income is not attributable to the personal effort of a spouse. Transmutation of Property According to Section 503(b) of IMDMA, when nonmarital property is transferred into some form of co-ownership between the spouses, such property is presumed to be marital property. By the placing of title in some form of co-ownership, there is a presumption that a gift was made to the marital estate and therefore, the property become marital. However, Section 503(c) limits the circumstances when commingled nonmarital property and marital property will be regarded as transmuted into marital property. According to Section 503(c)(1), only when nonmarital property and marital property are commingled so that there is a loss of identity of the contributing property, will there be a transmutation of nonmarital property marital property. Contribution and Reimbursement Section 503(c)(2) of IMDMA deals with contribution and reimbursement. When one estate of property (i.e. marital property) makes a contribution to another estate (i.e. nonmarital property), or when one spouse contributes personal effort to nonmarital property, the contributing estate must be reimburse from the estate that received the contribution. There are some qualifications, however. For example, the contribution must be traceable by clear and convincing evidence. Also, in the case of a contribution of personal effort of a spouse to nonmarital property, the contribution must be significant and must also result in a substantial appreciation of the nonmarital property. A contribution is not regarded as being significant if it merely maintains the nonmarital property. Furthermore, there will be no reimbursements for contributions that constitute gifts. According to Section 503(c)(1), when funds from a marital estate are contributed to a nonmarital estate, the nonmarital property retains its classification as nonmarital property and the marital funds are transmuted to nonmarital property. However, in order to compensate for these transmuted contributions, the estate making the contribution should be reimbursed from the estate that received the contribution. Also, the reimbursement is made to the contributing estate (i.e. marital property) and not to the contributing spouse. Division of Marital Residence One of the most important and most common assets that courts must dispose of between the parties is the marital home. Some of the factors that the court will consider are the assets available for distribution, the need to provide a family home for the parent retaining custody of the children, and the contributions of the parties in obtaining of the marital home. Often, when one spouse is awarded the marital home, there is usually an offset of other assets, such as a retirement plan, to the other spouse. Pension Plans In Illinois, pension plans of many varieties are treated as marital property. However, pension plans that are established before the marriage, as well as any appreciation in value are treated as nonmarital property. But, if the marital estate makes contributions to a pension, or if a spouse makes significant personal contributions to a pension resulting in substantial appreciation, then the marital estate may be entitled to reimbursement. There are two basic ways to divide pensions: the total offset method and the reserved jurisdiction method. When using the total offset method, the court may reduce the pension plan to present value and then award an offsetting amount of money or property to the non-employee spouse. This method requires actuarial evidence in the form of expert testimony to arrive at the present value. The best time to use this method is when the employee spouse is close to retirement and there is sufficient marital property to allow an offset to the nonemployee spouse. When using the reserved jurisdiction method, the court may award the nonemployee spouse a proportionate share of the pension fund if and when they are received. Illinois courts have used this method when there is uncertainty as to whether the pension will be paid or if there are insufficient assets to use in an offsetting award. Military Pensions The basic statute that covers the division of military pensions is the Uniformed Services Former Spouses’ Protection Act (USFSPA). Not all military pensions are divisible. According to USFSPA, the type of pension that are divisible are those involving nondisability longevity retirement under 10 U.S.C. Section 1401-12 (1996), not retirement pensions for disability under 10 U.S.C. Section 1201-21 (1996). In Illinois, military pensions may be treated as marital property and are subject to the division provisions of IMDMA. However, the courts have declared that the amount of exemption of military disability retirement pay, from marital property, was limited was limited to the retired person’s percentage of disability on the date of his or her retirement. Furthermore, all benefits paid as compensation for disability are the separate property of the spouse retiring, while any amount paid in excess of disability compensation are regarded as "disposable retired or retainer pay" which is subject to division as marital property. As with regular pensions, there are two ways to divide military pensions; the present value offset method and the deferred division method. The present value offset method represents the present value of many money payments over the course of the service member's life. The money payments are the military spouses retired pay. When using this method, the present value of the spouse’s retired pay is the amount that can be used for a trade or setoff so that the military spouse can keep her pension. Factors that should be considered are: the life expectancy of the military spouse; the inflation rate and; a discount factor which represents the rate at which money can be invested. The second method, the deferred division method, is often called the "‘if, as and when payments’ because the payments do not begin until the military spouse receives her pension. This method postpones the payments to the nonmilitary spouse until the actual retirement of the military spouse. Id. This method is used only in limited circumstances, such as when a setoff or trade is unavailable. Disability and Worker's Compensation Workers’ compensation benefits have been regarded as marital property because they fall within the marital property presumption of Section 503(b) of IMDMA. When disability payments are paid as partial consideration for services rendered, they are marital property. However, when disability payments are not treated as deferred compensation, those payments regarded as belonging to the recipient. Personal Injury Awards Personal injury awards or settlements have been regarded as marital property. Even if the payments are to be made over many years, a present value of the payments may be determined and the value of this is regarded as marital property, even though the part of the settlement amount is for future pain and suffering. Education Illinois courts have decided that an education, degree, or license are not regarded as marital property. A degree or license is at most a speculation of some future income or earnings and therefore has no assignable value. However, a degree or license earned while the couple was married and through the financial support of the other spouse is an important factor when distributing the couple’s marital assets and liabilities.
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Disclaimer: The information provided here is to be used as general information only and is not intended to suffice as legal advice upon which you can rely for your particular situation. In the event you have specific questions, please call us or another qualified attorney.
Author: Gary R. Garretson.
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