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What Is An Equitable Division Of Assets In An Illinois Divorce?
The point of a divorce is to unwind a couple’s affairs while establishing and memorializing the remaining obligations between the two parties.
The “unwind” part is simply the division of the party’s marital assets. The “ongoing obligations” is virtually everything else in a divorce: alimony, child support, parenting time. Even the division of marital debts is really memorializing an ongoing responsibility.
So, division of assets in an Illinois divorce is probably the easiest part of an Illinois divorce…except for one thing: The law doesn’t tell us exactly how to divide marital assets. Instead, Illinois case law points us to a concept called “the equitable division of marital assets” as the concept courts use for dividing assets in an Illinois divorce.
What does “equitable division of assets” mean in an Illinois divorce?
What Are Marital Assets vs. Non-Marital Assets In An Illinois Divorce?
Before any asset is divided in an Illinois divorce, it must be determined whether that asset has a “marital” or “non-marital” character.
“‘[M]arital property’ means all property, including debts and other obligations, acquired by either spouse subsequent to the marriage” 750 ILCS 5/503(a)
“For purposes of distribution of property, all property acquired by either spouse after the marriage and before a judgment of dissolution of marriage or declaration of invalidity of marriage is presumed marital property.” 750 ILCS 5/503(b)
So, marital property is any property which was acquired by one or both of the parties to a divorce after the wedding date and before the date of the final entry of the Judgment For Dissolution Of Marriage.
There are many ways property can be acquired during a marriage which does not automatically give that property the “marital” classification.
[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;
(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” 750 ILCS 5/503
If any property meets one of the above eight categories, that property shall be deemed “non-marital property”
If the parties disagree as to the classification of any piece of property, “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
The non-marital property MUST stay with the party in whose name that non-marital property remains.
“[T]he court shall assign each spouse’s non-marital property to that spouse.” 750 ILCS 5/503(d)
How Does Marital Property Get Divided In Illinois?
Now that the marital property has been identified, each individual piece of property or account must be allocated or divided amongst the couple.
“The Act does not require an equal division of marital property, but an equitable division” In re Marriage of Jones, 543 NE 2d 119 – Ill: Appellate Court, 1st Dist. 1989
This “equitable division” or “equitable distribution” is accomplished as follows:
Illinois divorce courts “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, including (i) any decrease attributable to an advance from the parties’ marital estate under subsection (c-1)(2) of Section 501; (ii) the contribution of a spouse as a homemaker or to the family unit; and (iii) whether the contribution is after the commencement of a proceeding for dissolution of marriage or declaration of invalidity of marriage;
(2) the dissipation by each party of the marital property, provided that a party’s claim of dissipation is subject to the following conditions:
(i) a notice of intent to claim dissipation shall be given no later than 60 days before trial or 30 days after discovery closes, whichever is later;
(ii) the notice of intent to claim dissipation shall contain, at a minimum, a date or period of time during which the marriage began undergoing an irretrievable breakdown, an identification of the property dissipated, and a date or period of time during which the dissipation occurred;
(iii) a certificate or service of the notice of intent to claim dissipation shall be filed with the clerk of the court and be served pursuant to applicable rules;
(iv) no dissipation shall be deemed to have occurred prior to 3 years after the party claiming dissipation knew or should have known of the dissipation, but in no event prior to 5 years before the filing of the petition for dissolution of marriage;
(3) the value of the property assigned to each spouse;
(4) the duration of the marriage;
(5) the relevant economic circumstances of each spouse when the division of property is to become effective, including the desirability of awarding the family home, or the right to live therein for reasonable periods, to the spouse having the primary residence of the children;
(6) any obligations and rights arising from a prior marriage of either party;
(7) any prenuptial or postnuptial agreement of the parties;
(8) the age, health, station, occupation, amount and sources of income, vocational skills, employability, estate, liabilities, and needs of each of the parties;
(9) the custodial provisions for any children;
(10) whether the apportionment is in lieu of or in addition to maintenance;
(11) the reasonable opportunity of each spouse for future acquisition of capital assets and income; and
(12) the tax consequences of the property division upon the respective economic circumstances of the parties.” 750 ILCS 5/503(d)
This multi-factor analysis for dividing marital assets is commonly referred to as an “equitable division” or an “equitable distribution”
“ Equitable” means “Just, fair, and right, in consideration of the facts and circumstances of the individual case.”Black’s Law Dictionary (10th ed. 2014)
“Just, fair and right” to whom? The divorce judge!
In theory, an Illinois divorce court is supposed to take each item and consider these 12 factors when deciding who the item should be awarded to.
This makes sense for some items. If someone is the primary residential parent, they should probably be awarded the marital home.
If someone can’t drive, they probably shouldn’t be awarded the car.
The person willing to pay any kind of debt associated with an asset will likely be awarded that asset.
In reality, the divorcing parties negotiate amongst themselves to determine who will keep what.
Divorcing people are getting divorced because they want different things in life. So, my philosophy is “give them different things. Who cares how it adds up (to an extent)?”
70/30, 60/40 or 55/45 splits of the actual value of marital property will occur when one spouse’s earning power dwarfs the other spouse’s earning power. Alimony and child support may equalize the earning power to an extent but the lesser earning spouse can still ask for a greater share of the marital estate under many of the 12 factors.
The worst a judge can say is “no” and divide the marital estate 50/50.
Trading Maintenance (Formerly Known As Alimony) For Assets
In my 15 years of practicing divorce I have noticed a strong trend in divorce: men think they will always make more money and women are more nervous about their long-term security.
Because of this difference in financial optimism, I have found that men will often trade current assets for reducing or eliminating future obligations. Women will do the same…in the other direction. Regardless of the genders of the parties, this can be an opportunity for both parties to get what they want.
When awarding maintenance, “The court shall first make a finding as to whether a maintenance award is appropriate, after consideration of all relevant factors, including:
all sources of public and private income
[and] any valid agreement of the parties” 750 ILCS 5/504(a)
The court may consider the asset division and calculate the income those assets will generate. In addition (and more importantly) it will be presumed that the parties entered into a rational and considered agreement in reducing or waiving maintenance for marital assets.
This will all need to be memorialized explicitly in the parties’ Marital Settlement Agreement. The two things that cannot be modified in an Illinois divorce are maintenance and the division of assets.