Overseas property in a divorce

Russell Knight

Russell D. Knight has been practicing family law as a Chicago divorce lawyer since 2006. Russell D. Knight amicably resolves tough cases while remaining a strong advocate for his client’s interests.

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  1. […] lieu of the term “community” Illinois uses the word “Marital.” Illinois divorce law divides property into “marital” and “non-marital” portions for the purposes of dividing assets in a […]

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What Happens To Foreign Property In A Divorce?

Overseas property in a divorce

A married couple may be from a foreign country, have a foreign vacation property or have diversified their investment portfolio by buying foreign property.  Property is still property no matter where it is located.  The question is “What happens to foreign property in divorce?” A property’s location outside of the United States may impact how the property is finally distributed to the parties in a divorce.

Foreign Property is still Marital Property

In Illinois, “’[M]arital property’ means all property, including debts and other obligations, acquired by either spouse subsequent to the marriage”750 ILCS 5/503(a). So, if the property abroad was purchased during the marriage with marital funds, that property can be allocated to either or both of the parties by the Illinois courts during a divorce.

Frequently, overseas properties will be purchased by a married couple in the United States but held by a relative in the foreign country.  “We own a house in Mexico but it is in my brother’s name,” is something I’ve heard many times.

In that case, the property is either a marital property or the money spent on the property can be considered a dissipation of assets on the part of the party who is related to the deed-holder.

To prove that the property is, in reality, a marital property despite the deed, the court only needs to see the money transfer (In these situations the properties are always bought with wire transfers).

If the other party objects and says “that money was a gift to my relatives” then the court can find that the money was not for the purposes of the marriage and the party who made the gift will have to reimburse the other party for half of the gift’s value.

In Illinois, there is a 5 year limit on these “dissipation” claims so it is best to act quickly. Even if the 5 years have passed Illinois courts will still divide the marital property “equitably” and, thus, will likely consider the so-called gift when making final orders.

Valuing Foreign Property During A Divorce

The real problem with foreign property in a divorce is “how do you value foreign property during a divorce?”

If the parties don’t agree on a property’s value the parties typically hire an appraiser to determine the value of the property.  If the parties don’t agree with the appraiser, the parties each hire their own appraiser and the appraisers provide competing testimony to a judge as to how they arrived at the property’s appraised value.

This process is complicated enough for a marital property located in the same county as the courthouse but imagine bringing in competing appraisers from a foreign country.  In reality, it just doesn’t happen.

Typically, both parties to the divorce testify as to what they believe the property is worth.  The judge will then assess each person’s credibility in determining the value of this foreign yet still marital property.

More commonly, the judge will simply say “I’m reserving the distribution of any foreign properties as I have no way to assess their value.”

If the foreign properties are reserved, the parties have the option of then registering the final Illinois divorce documents in the country the properties are located in and then using that country’s divorce laws to divide up the foreign property.

Furthermore, many foreign properties held by Americans are actually held in a timeshare.  Timeshares are a quasi-asset/liability whose value is impossible to determine in court.

This sounds like an enormous hassle so no one really does it.  The parties usually just negotiate amongst themselves as to how to divide up the foreign properties.

Enforcing Division Of Foreign Property During A Divorce

If an Illinois court actually does allocate foreign properties to the parties in divorce, how does that allocation get enforced?

Honestly, I have no idea as I am only licensed in Illinois and Florida and cannot comment on any other jurisdictions.

Presumably, the Illinois divorce judgment can be enrolled in the foreign country and the foreign court takes it from there.  This might be easy for foreign property located in Canada but I’m willing to bet it is a lot harder to do in Iraq.

The Illinois court may not have jurisdiction over the properties in the foreign country but the Illinois court still has jurisdiction over the parties to the divorce.  So, division of international property in divorce is usually handled as follows: An Illinois court can order one of the parties to sign whatever documents are necessary to divide the foreign property or else, the Illinois judge can threaten to jail the non-compliant party until they complete those documents.

If the party who is not cooperating with the division of the foreign properties lives in the foreign country, then you’re going to have to go to court in that foreign country.

In conclusions, I advise all of my clients that we will be reserving all of the foreign property or overseas assets in their divorce.  The effort to allocate the property through litigation is almost never worth it.  Like most other aspects of a divorce, it can simply be negotiated.

If you have international assets and are considering a divorce, please contact my Chicago, Illinois law firm today to speak with an experienced Chicago divorce lawyer.