Property that is deemed non-marital in an Illinois divorce cannot be divided. But, what if that property has increased in value during the marriage? Does the increase in value during the marriage make the property marital? Is the increase in value, itself, marital property because it came into existence during the marriage?
Under 750 ILCS 5/503(a)(7), the increase in value of non-marital property remains non-marital, regardless of what caused the increase. However, the marital estate may be entitled to reimbursement under 750 ILCS 5/503(c)(1)(A)(ii) if marital funds or a spouse’s personal effort contributed to that non-marital asset’s appreciation. This reimbursement must be proven with clear and convincing evidence.
Is The Property Marital Or Not?
When dividing assets in an Illinois divorce, the court’s first step is to determine what property is marital and what property is non-marital.
“The court shall make specific factual findings as to its classification of assets as marital or non-marital property, values, and other factual findings supporting its property award.” 750 ILCS 5/503(a)
Non-marital property is not divisible under Illinois law and will always remain with the owner after the divorce.
“[T]he court shall assign each spouse’s non-marital property to that spouse.” 750 ILCS 5/503(d)
Marital property, in contrast, must be allocated by an Illinois divorce court. An Illinois divorce court “shall divide the marital property without regard to marital misconduct in just proportions” 750 ILCS 5/503(d)
A party who owns an asset will quickly argue that the asset is non-marital and, therefore, not divisible by an Illinois divorce court.
“[T]he following…which is known as “non-marital property”:
(1) property acquired by gift, legacy or descent or property acquired in exchange for such property;
(2) property acquired in exchange for property acquired before the marriage;
(3) property acquired by a spouse after a judgment of legal separation;
(4) property excluded by valid agreement of the parties, including a premarital agreement or a postnuptial agreement;
(5) any judgment or property obtained by judgment awarded to a spouse from the other spouse except, however, when a spouse is required to sue the other spouse in order to obtain insurance coverage or otherwise recover from a third party and the recovery is directly related to amounts advanced by the marital estate, the judgment shall be considered marital property;
(6) property acquired before the marriage, except as it relates to retirement plans that may have both marital and non-marital characteristics;
(6.5) all property acquired by a spouse by the sole use of non-marital property as collateral for a loan that then is used to acquire property during the marriage; to the extent that the marital estate repays any portion of the loan, it shall be considered a contribution from the marital estate to the non-marital estate subject to reimbursement;
(7) the increase in value of non-marital property, irrespective of whether the increase results from a contribution of marital property, non-marital property, the personal effort of a spouse, or otherwise, subject to the right of reimbursement provided in subsection (c) of this Section; 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.” 750 ILCS 5/503(a)
The last two types of non-marital property, the increase in value and the income from non-marital property are where non-marital property starts to look possibly marital. Realistically, increases in value and income rarely happen in a perfectly non-marital bubble. One can imagine, a repaired house or a carefully managed brokerage account having a slightly marital quality. However, slightly marital turns into all marital very quickly under Illinois law.
“Any doubt as to the nature of the property must be resolved in favor of the finding that it is marital” In re Marriage of Steel, 2011 IL App (2d) 080974
Arguing That An Increase In Value Is Non-Marital In An Illinois Divorce
The statute, 750 ILCS 5/503(a)(7) is clear, any asset that was acquired before the marriage or via gift or inheritance is non-marital. The price of everything changes over time. The non-marital character of the property does not.
“The increase during the marriage in the value of the property, regardless of its source, was also [the owner’s] non-marital property, subject, according to Section 503(a)(7)” In re Marriage of Leisner, 579 NE 2d 1091 – Ill: Appellate Court, 1st Dist., 2nd Div. 1991
There are, however, numerous exceptions to the rule “non-marital property stays non-marital.”
Retirement Funds Are Partially Marital In An Illinois Divorce
For most assets, being a little bit marital is like being a little bit pregnant. An asset in an Illinois divorce is either completely marital or completely non-marital.
Retirement accounts can have a marital and non-marital portion.
“For purposes of distribution of property pursuant to this Section, all pension benefits (including pension benefits under the Illinois Pension Code, defined benefit plans, defined contribution plans and accounts, individual retirement accounts, and non-qualified plans) acquired by or participated in by either spouse after the marriage and before a judgment of dissolution of marriage…are presumed to be marital property.” 750 ILCS 5/503(b)(2)
Most retirement accounts are governed by ERISA, the Employee Retirement Income Security Act of 1974. These accounts are divided pursuant to Qualified Domestic Relations Orders that allow the divisible marital portion of a retirement account to be identified down to the penny.
Other retirement accounts not governed by ERISA, like an IRA, are going to be separated by court order into marital and non-marital portions, including the increase in value of each portion. An Illinois divorce court must “determine the increase in value attributed to the marital property and the increase in value attributed to the nonmarital property.” In re Marriage of Raad, 301 Ill. App. 3d 683, 686- 87 (1998)
“Any increase in the value of [a party’s] premarital contributions would be nonmarital, as well.” IN RE MARRIAGE OF McLEAN AND McLEAN, 2025 IL App (5th) 250094 – Ill: Appellate Court, 5th Dist. 2025
Non-Marital Accounts With An Increase In Value In An Illinois Divorce
The admonition that any doubt as to the non-marital nature of an asset renders it marital does mean that there is no accounting for the non-marital portion that once existed in the account.
The statute reiterates that a property can only be marital or non-marital. Non-marital assets contributed into a marital account become marital property.
“That formerly non-marital portion can be traced If marital and non-marital property are commingled by by one estate being contributed into the other, the following shall apply:
(i)If the contributed property loses its identity, the contributed property transmutes to the estate receiving the property, subject to the provisions of paragraph (2) of this subsection (c).” 750 ILCS 5/503(c)(1)(A)(i)
But the analysis does not stop there. Illinois law allows allows for a clawback of that non-marital value that has since been deemed marital.
“When one estate of property makes a contribution to another estate of property, the contributing estate shall be reimbursed from the estate receiving the contribution notwithstanding any transmutation.” 750 ILCS 5/503(c)(1)(A)(ii)
The statute goes on to require that any reimbursement of non-marital value must require that the non-marital value be proven explicitly.
“No such reimbursement shall be made with respect to a contribution that is not traceable by clear and convincing evidence or that was a gift. The court may provide for reimbursement out of the marital property to be divided or by imposing a lien against the non-marital property that received the contribution.” 750 ILCS 5/503(c)(1)(A)(ii)(emphasis mine)
You are going to need account statements from the last date before the parties married or you are going to need account statements on the last date before non-marital assets were mixed with marital assets. Then you must prove the increase in value of that non-marital portion. It must be crystal clear.
“The law is well settled that clear and convincing evidence requires a high level of certainty. Clear and convincing evidence is considered to be more than a preponderance while not quite approaching the degree of proof necessary to convict a person of a criminal offense.” In re Marriage of Wechselberger, 115 Ill. App. 3d 779, 786 (1983)
“The burden of proof to establish that reimbursement is appropriate is on the party seeking reimbursement.” In re Marriage of Dhillon, 20 NE 3d 1272 – Ill: Appellate Court, 3rd Dist. 2014
“[I]n order to correctly evaluate marital assets, the trial court must have before it competent evidence of value, and its determination of value must be supported by that evidence.” In re Marriage of Malters, 133 Ill. App. 3d 168, 180 (1985)
Testimony alone as to non-marital value and the increase in that value will be deemed, “a self-serving statement uncorroborated by any other evidence” that does “not amount to clear and convincing evidence” In re Marriage of Budorick, 2020 IL App (1st) 190994, ¶¶ 46-47
Yet despite these warnings, an increase in value in a property that has been deemed marital, can be reimbursed to the party who originally owned the non-marital asset. The increase in value must be appropriately traced to the originally non-marital asset.
An Illinois divorce court must “make findings regarding the source of the increase in the value” and the “right of reimbursement depends upon the source of the increase in value “ In re Marriage of Di Angelo, 512 NE 2d 783 – Ill: Appellate Court, 2nd Dist. 1987
Marital Contributions Which Increased The Value of a Non-Marital Asset
Value doesn’t exist in a vacuum. Money has to be managed and property has to be maintained. That management and maintenance may be responsible for some of the increase in value in a marital property OR non-marital property and should be compensated for.
An Illinois divorce court “shall divide the marital property without regard to marital misconduct in just proportions considering all relevant factors, including:
(1) each party’s contribution to the acquisition, preservation, or increase or decrease in value of the marital or non-marital property” 750 ILCS 5/503(d)(1)(emphasis mine)
The logic of 750 ILCS 5/503(d)(1) is in sync with the “reimbursement to the marital estate” logic of 503(c)(2)
“The correct procedure to be applied under section 503(c)(2) is to determine whether either spouse, in this case Norman, contributed significant personal effort toward the nonmarital business asset which resulted in substantial appreciation of that business. The parties do not generally dispute either that [one party] contributed significant personal effort toward [the business] or that that effort contributed to a substantial appreciation of the business. Thus, initially at least, it would seem that reimbursement to the marital estate is warranted.In re Marriage of Perlmutter, 587 NE 2d 609 – Ill: Appellate Court, 2nd Dist. 1992 (citations omitted)
As with all reimbursement claims, explicit proof is required. “The party claiming reimbursement must prove that the property has substantially appreciated through the significant personal efforts of the spouse.” In re Marriage of Eddy, 569 NE 2d 174 at 180 – Ill: Appellate Court, 1st Dist., 2nd Div. 1991
There is an exception to the reimbursement to the marital state because of marital efforts. That is if the marital estate has already been compensated for those marital efforts. That is, was the person who made this contribution adequately compensated for their work. That compensation would have been put in a marital account and subsequently spent on the marriage.
If the contributing spouse’s “salary is found to be reasonable compensation for his efforts, the nonmarital business need not reimburse the marital estate because [the contributing spouse’s] salary during the marriage is marital property, and, thus, the marital estate has already been compensated.” In re Marriage of Perlmutter, 587 NE 2d 609 at 615 – Ill: Appellate Court, 2nd Dist. 1992
This exact same principle clarifies why a spouse who makes the contribution to the equity in a non-marital house via mortgage payments.
“[A] marital estate is not entitled to reimbursement for mortgage payments toward nonmarital property when the marital estate has already been compensated for its contributions by use of the property during marriage.” In re Marriage of Crook, 813 NE 2d 198 – Ill: Supreme Court 2004
“[T]he parties benefited from living in the house for a substantial period of time, [so] the court could reasonably have found that the marital estate had already been compensated for its contributions.” In re Marriage of Snow, 660 NE 2d 1347 – Ill: Appellate Court, 4th Dist. 1996
Same goes for repairing a house that increases in value, the repairer gets none of the house’s increased value.
“[M]ere maintenance of an asset during a marriage, standing alone, does not constitute a significant contribution requiring reimbursement to the marital estate.” In re Marriage of Siddens, 588 NE 2d 321 – Ill: Appellate Court, 5th Dist. 1992
Of course, natural increase in value or inflationary increase in value cannot be considered to be part of the contributions of a spouse.
“An increase in value which results from inflation or other factors which are external to the marriage is not synonymous with appreciation arising from the personal effort contemplated by the statute.” In re Marriage of Eddy, 569 NE 2d 174 at 180 – Ill: Appellate Court, 1st Dist., 2nd Div. 1991
The reimbursement and the compensation portions of Illinois’ division of assets statute provide the courts a path where they can maintain the distinction between marital and non-marital assets while still providing a mechanism for compensate a spouse who devoted time and energy (or supported the other spouse while they did) to a non-marital asset.
If you’d like to learn more about your or your spouse’s appreciated asset and how to preserve it or divide it in an Illinois divorce contact my Chicago, Illinois family law firm to speak with an experienced Illinois divorce attorney.
