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.
Alternatively, appraisers will have to be hired who can testify to their expert opinion of the foreign property’s values via Zoom from the foreign country. Let’s hope the appraisers speak English, otherwise you will have the expense of a translator as well.
Typically, an Illinois divorce judge will simply say “I’m reserving the distribution of any foreign properties as I have no way to assess their value. You can sort out the property over there.”
Illinois divorce judges are not allowed to reserve these unknowable property values unless the parties agree or one of the parties asks for the court to reserve judgment.
“Judgment shall not be entered unless, to the extent it has jurisdiction to do so, the court has considered, approved, reserved or made provision for the allocation of parental responsibilities, the support of any child of the marriage entitled to support, the maintenance of either spouse and the disposition of property. The court shall enter a judgment for dissolution that reserves any of these issues either upon (i) agreement of the parties, or (ii) motion of either party and a finding by the court that appropriate circumstances exist.” 750 ILCS 5/401
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 personal 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. Failure to follow the Illinois judgment regarding the foreign properties will result in the Illinois judge jailing 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, the aggrieved party will to have to go to a court in that foreign country in order to enforce the Illinois divorce judgment.
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.