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Posted on November 8, 2020

Who Gets The House After An Illinois Divorce?

A house is a peculiar asset in an Illinois divorce. A house is usually the biggest asset and the biggest debt that two married people share. Moreover, a house’s mortgage is usually the biggest monthly expense the parties share. Furthermore, the house is where the parties and their children live. The house is the setting for all the memories, good and bad, of a marriage.

But, divorce happens…and the following must occur: assets and debts have to be divided while both parties have to find a place to live. So, who gets the house after an Illinois divorce?

Who Gets The House During An Illinois Divorce?

When a divorce is filed, marital assets are not distributed. Marital assets, such as the house, are not finally allocated until the Marital Settlement Agreement is entered with the Judgment of Dissolution of Marriage at the final prove up.

In the meantime, the spouses both have access to the house…while each spouse have each filed papers in court declaring that they don’t want to live with each other anymore.

Living with a person you are divorcing is an untenable situation. During a divorce, only bad things can happen while you’re under the same roof with your spouse. Especially if either of you drink or suffer from mental health issues.

People who live together while a divorce is pending must realize that, sooner or later, someone will say something, something will happen, and the police will be called.

An incident involving the police creates a parade of horrible consequences. A police report is issued at best. One of the parties is arrested at worst. If the parties have children, the department of children and family services will now open a case regarding your family.

Even if police don’t get called or don’t do any investigation beyond a well-being check, either party can immediately file an emergency motion or a petition for an order of protection based on the incident.

For all of these reasons, I tell prospective clients, “If it’s between paying my retainer and paying a deposit on a rental house or apartment…pay the deposit and move out. I’ll still be waiting here to resolve your problems when things have settled down and you’ve both gained some perspective after living apart.”

Should a divorcing party want (or need) to stay in the house for the sake of the children or the house’s maintenance, that party must file a Motion For Exclusive Possession Of The Marital Home.

“Allocation of use of marital residence. Where there is on file a verified complaint or verified petition seeking temporary eviction from the marital residence, the court may, during the pendency of the proceeding, only in cases where the physical or mental well-being of either spouse or his or her children is jeopardized by occupancy of the marital residence by both spouses, and only upon due notice and full hearing, unless waived by the court on good cause shown, enter orders granting the exclusive possession of the marital residence to either spouse, by eviction from, or restoration of, the marital residence, until the final determination” 750 ILCS 5/501(c-2)

If the parties cannot cooperate enough to determine who should live in the marital home pending a divorce, then there are probably several other temporary issues such as child support, maintenance, freezing assets and even pet issues that need to be addressed by temporary motions at the same time you are requesting temporary relief regarding the house.

Until a party has a court order granting them exclusive possession of the house, they cannot change the locks on the house.

Is The House Marital In An Illinois Divorce?

Sooner or later, the parties will get divorced and the house, its contents and its debts will be divided between by order of court.

The house shall only be divided if the house is deemed to be “marital property” by the court.

“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

Non-marital property is almost always property that was owned by one spouse before the marriage and never commingled with any property of the other spouse. If the house is non-marital property, then the house must stay with whoever’s name the house is in (the house can only be non-marital property if it’s in one party’s name exclusively).

“[T]he court shall assign each spouse’s non-marital property to that spouse.” 750 ILCS 5/503(d)

Marital property is ANY property that was acquired after the date of the marriage.

‘[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, it does not matter whose name is on the deed of the house if the house was purchased after the wedding date. The mere purchase post-marriage, makes the house marital property.

But there is one big exception to this rule: if the property purchased post-marriage was purchased with funds that would be deemed non-marital.

Property remains non-marital if it is “property acquired in exchange for property acquired before the marriage;” 750 ILCS 5/503

A house purchased before the marriage can become marital via “transmutation.”

“If marital and non-marital property are commingled into newly acquired property resulting in a loss of identity of the contributing estates, the commingled property shall be deemed transmuted to marital property.” 750 ILCS 5/503(c)(1)(b)

Transmutation of a non-marital house into a marital house is almost always done in two ways: 1) the parties put the non-marital property in both of their names or 2) the parties enter into a joint mortgage in regards to the non-marital house.

By putting a spouse’s name on a deed, the presumption is that house owner made a gift of the house to the marriage as a whole. Should the marriage dissolve, everything the marriage owned would be marital property.

“The principle of transmutation is based on the presumption that the owner of the nonmarital property intended to make a gift of the property to the marital estate.” In re Marriage of Olson, 451 NE 2d 825 – Ill: Supreme Court 1983

“It is well settled that instruments which purport to create joint tenancies presumably speak the whole truth and those who claim adversely thereto must, in order to prevail, prove by clear and convincing evidence that a gift was not intended.” Edwards v. Miller, 61 Ill. App. 3d 1023, 1028 (1978)

Futhermore, one party undertaking a legal obligation to a non-marital home creates a transmutative effect that turns that non-marital property into marital property in the event of a divorce.

If a “[party]assumed an obligation under the new mortgage…[t]he marital residence should [be] classified as marital property.” Zito v. Zito, 554 NE 2d 541 – Ill: Appellate Court, 1st Dist. 1990

What about a non-marital house’s mortgage payments along the way? A spouse could make hundreds of thousands of marital mortgage payments towards the equity of a non-marital house. Doesn’t this make the non-marital house marital? Not according to the Illinois Supreme Court:

“[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

Mortgage payments have zero effect on the marital character of a house. The theory is the spouse paying the mortgage had to live somewhere so that spouse was essentially just paying rent to the owner of the non-marital house.

“[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

However, mortgage payments on a presumably marital property may defeat any tracing arguments that the property should be non-marital. In re Marriage of Leon, 80 Ill. App. 3d 383, 385 (Ill. App. Ct. 1980)

While mortgage payments don’t count as a marital contribution, almost everything else a spouse puts into the house can create a marital component of the house.

“When a spouse contributes personal effort to non-marital property, it shall be deemed a contribution from the marital estate, which shall receive reimbursement for the efforts if the efforts are significant and result in substantial appreciation to the non-marital property” 750 ILCS 5/503(c)(2)(B)

Payments for improvements and repairs of the house, create a claim for reimbursement. If the spouse, themselves, did the maintenance, improvement and repairs that spouse could ask for reimbursement for those efforts or even for the house to be characterized as marital due to the extent of those improvements (this would have to be significant).

Once a house (and its mortgage) is deemed marital, Illinois divorce courts “shall divide the marital property” 750 ILCS 5/503(d)

Dividing A Marital House In An Illinois Divorce

Illinois divorce courts “shall divide the marital property without regard to marital misconduct in just proportions considering all relevant factors” 750 ILCS 5/503(d)

Many of the factors listed in the Illinois statute relate specifically to a house. If one party wants the house awarded to them, they must argue these factors to the court.

“(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)

A particularly impressive record of maintenance and improvement to the house will certainly sway the court to award the house to that spouse. I have never seen something like this happen but I could imagine an Illinois divorce court awarding a house built by hand to the actual builder.

An Illinois divorce court is not going to allow one spouse to be homeless. If the other spouse has income and economic resources, the other spouse is going to be awarded the marital home.

Illinois courts will consider “(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;

(8) the age, health, station, occupation, amount and sources of income, vocational skills, employability, estate, liabilities, and needs of each of the parties;

(11) the reasonable opportunity of each spouse for future acquisition of capital assets and income;” 750 ILCS 5/503(d)

More typically, a marital home will be awarded exclusively to one spouse after the court has considered, “the custodial provisions for any children” 750 ILCS 5/503(d)(9). In a divorce “[w]here children are involved, the primary objective of the court is to provide adequate support for the children” In re Marriage of Stone, 155 Ill. App. 3d 62, 75, 507 N.E.2d 900, 908 (1987)

If the house is in the children’s school district and the children are thriving in the house, the parent who exercises the majority of the parenting time will be awarded the marital home.

An exclusive award of a house always made under two contingencies: 1) Can the party awarded the house afford to keep the house? and 2) The party that doesn’t get the marital house must be compensated for some portion of the value of the marital property.

If the spouse who keeps the house cannot pay the mortgage, taxes and general upkeep through their current income, alimony and child support, an Illinois divorce court will not set that party up to fail. The house will be awarded to the spouse who can afford to keep the property and compensate the other party for their share of the equity of the house.

The party who doesn’t keep the house can be expected to receive some kind of offset or compensation for the equity in the marital house. This is usually done by awarding a greater share of the marital assets to the spouse that doesn’t keep the home. Failing that, the party who keeps the house will often get a home equity loan in order to pay the other spouse their portion of the marital equity.

Parties to a divorce should almost always offset the marital equity of the home via a home equity loan.

First, with a home equity loan the mortgage company will appraise the home in the process in order to determine the actual equity in the home.

Second, the money awarded will be cash in hand. Most other marital asset offsets significant enough to represent half of the value of a house will be in the form of tax-deferred retirement accounts. These retirement accounts are not worth what their balance statements say they are worth! The taxes still have to be paid on these accounts and they cannot be accessed without a penalty until the account holder turns 59 ½.

If it is impossible to buy the other spouse’s equity via a home equity loan and there is no possible offset with the remaining marital property, the house may be sold and the proceeds will be divided between the two spouses.

The most tax advantageous way to compensate a spouse for waiving their equity in a marital home during an Illinois divorce is to waive or reduce maintenance (formerly known as alimony) as part of the settlement. The receipt of the house’s value from a divorce is a non-taxable event. The payment of maintenance is taxable to the payor. By having one party receive more assets and the other party pay less maintenance, both parties (cumulatively) will have a lesser tax burden.

Finally, the equity in a house does not have to be divided 50/50 in an Illinois divorce. “The [Illinois Marriage and Dissolution of Marriage] 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

“Equitable” means “Just, fair, and right, in consideration of the facts and circumstances of the individual case.” Black’s Law Dictionary (10th ed. 2014)

50/50 is probably a just division of marital assets in most divorces. In other divorces, a just division of assets may be 60/40 or even 70/30. But, it would be very hard to argue that a just division of a house’s marital value would be nothing to one spouse.

What About The Prepaid Real Estate Taxes?

Real estate taxes are typically paid in advance and put into escrow by your mortgage company each month. At the end of six months, the mortgage company sends off those saved payments to pay the real estate taxes. Does that money need to be divided as well?

The saved real estate tax money could be divided according to the equitable division analysis outlined above. Or, the saved taxes could be deemed to be legally attached and obligated to the real estate awarded and, thus, any division of the saved real estate taxes would be moot.

“The husband’s further argument that the wife remained obligated for the taxes which accrued during her possession as her personal obligation or debt is not persuasive. Real estate taxes are not personal obligations but are liens against the real estate.” Chodl v. Chodl, 344 NE 2d 711 – Ill: Appellate Court, 2nd Dist. 1976

90% of divorces end up distributing property by agreement. But, you still need to know the law if you’re going to get the best agreement for you and your family. If you are considering divorce or are going through a divorce that involves a house, contact my Chicago, Illinois family law firm to schedule a free, no-obligation consultation with an experienced Chicago divorce attorney.

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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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