When two people marry, each usually brings some of their property into the marriage, such as living room furniture, a vintage guitar collection, a car, etc. As a married couple, you make purchasing decisions together. You buy a boat to take out on the lake. You buy a new home. For the most part during a marriage, there isn’t a lot of thought about what belongs to whom. It’s not usually a problem – until it is.
If a marriage begins to fail, questions arise about how the property will be divided. The property you brought into a marriage cannot be divided. It belongs solely to you, making it non-marital property. Only the assets acquired during the marriage are divided. Disagreements can become more intense when you and your spouse don’t agree on what is non-marital.
Assets can be non-marital, marital, and comingled. We’ll look at all three.
What Is Marital Property?
Marital property is acquired after the couple has married. That home you bought after you married is marital property, but the term goes far beyond real estate.
Other examples of marital property are:
- Retirement accounts (the amount earned during the marriage)
- Investment accounts (the amount earned during the marriage)
Marital property also includes debt that was acquired after the marriage, such as credit card debt, car loans, and mortgages.
What Is Non-Marital Property?
Property acquired by either spouse before the marriage is considered individual and separate property, belonging only to the spouse who originally acquired it.
Examples of non-marital property include:
- Real Estate
- Gifts and inheritance given specifically to one individual
- Value of retirement account before marriage
- Items excluded in a prenuptial agreement
You may have noticed that the examples of marital and non-marital assets are similar. That’s because the deciding factor in how most assets are categorized is when they were purchased and by whom.
Comingling of Assets
A judge typically has no authority to distribute a non-marital asset to the other spouse. That can change if property is comingled. Commingling marital property with non-marital property is called transmutation. Transmuted assets are treated the same as marital assets.
The Illinois Marriage and Dissolution of Act, which was updated in 2016, states that “when marital and non-marital property are commingled by contributing one estate of property into another resulting in a loss of identity of the contributed property, the classification of the contributed property is transmuted to the estate receiving the contribution.” In less legal-speak, transmutation occurs when (1) the non-marital assets are commingled with marital assets and (2) the commingling resulted in a loss of identity between the marital and non-marital assets.
For a more concrete example, let’s say you inherited $10,000 from your favorite aunt. If you were to put that inheritance into a separate account in only your name and use the proceeds to pay for your personal expenses or to buy gifts or a vacation for you and a spouse, a judge would most likely rule that it is non-marital property. If you were to take that same money and put it into your joint checking account and use the money to pay household expenses, the judge might rule that you have comingled your inheritance and it is now considered marital property.
Another scenario is that you owned a home before your marriage. After you and your spouse moved in together you kept the house. That home is separate, non-marital property. That would change if you and your spouse refinanced the home together. It could now be argued that the once-separate property is now a marital asset.
Prenuptial and postnuptial agreements are useful tools to designate assets as marital or non-marital.
In a prenuptial agreement, you can delineate each party’s interest in assets and debts and define which property is considered separate, non-marital. Alimony and other aspects can be a part of the agreement. This framework is helpful to avoid confusion about ownership should you choose to divorce.
You also can make these designations after marriage. A postnuptial agreement can specify the ownership of assets, payments of debts, or any other legal aspect of the marriage. A prenuptial does not presuppose divorce and neither does a postnuptial. Married couples often consider a postnuptial when one is about to receive a substantial inheritance or if a spouse is starting a business and wants to protect the other spouse from potential liabilities.
The Benefits of a Full-Service Law Firm
At the Law Offices of Jonathan Merel, P.C., we have a team of experienced attorneys who have handled many complex divorce cases. How assets are divided is foundational to the rest of your divorce agreement. We will work toward protecting your interests to reach a favorable outcome. We’ll fight for your right to both comingled and separate assets.