Property Division in A High Net Worth Divorce in Illinois

Property division is one of the more complex areas of divorce, especially in a high net worth divorce. In the event of divorce, the court seeks to divide marital assets fairly, and this can be complicated as there are many factors and assets to review. Disputes over ownership with such a variety of valuable assets and properties are sometimes settled outside of court, but these settlements can be worth millions depending on the total net value at hand.

Here's what you need to know about property division in a high net worth divorce in Illinois. 

Types of Property

During the divorce process, the court will categorize each spouse’s property as either marital or nonmarital. Based on this determination, property will be either divided or retained by one or both spouses. 

Marital Property. Marital property is property acquired between the date of marriage and the date of dissolution of the parties. Marital property may also include property which was acquired prior to the marriage, but through the intentional, or perhaps unintentional, act of the spouse owning such previously acquired property, comingles non-marital property with marital property. An example of how this might happen includes when a husband contributes funds from an inherited investment account to the remodeling of a marital home. Husband may believe he will eventually be able to reimburse his investment account when the house sells, but if proper records are not maintained, the contribution will be considered marital property. Many high net worth divorces have numerous types of marital and ‘previously acquired’ property to review, including real estate, stock and stock options, heirloom personal property and artwork, a family business interest, cash, savings, investment, and checking accounts, and even debt. 

Nonmarital Property. Nonmarital property is property acquired by one spouse by gift, legacy, or descent; property acquired by one spouse in exchange for property that spouse acquired before the marriage or by gift, legacy, or descent; or property acquired by a spouse after a judgment of legal separation. In many high net worth divorces, at least one of the spouses will have personal assets which were acquired before the marriage or by family gift or trust. 

How Are Assets Divided?

In Illinois, courts will endeavor to divide marital property between spouses in just proportions, without regard to marital misconduct. That means it will not consider how often a spouse cheated, was a jerk, or failed to provide companionship when needed the most. The court will, however, consider the extent of either parties’ non-marital assets. So when the court seeks to divide marital assets fairly, it may award wife with little to no non-marital assets a greater portion of a marital investment account or retirement plan if husband has a vast non-marital estate. High net worth divorces can be fairly complex when considering the volume and extensive value of the assets. When discussing properties in a high net worth divorce, the liquidity of residences and cars are compared to investment portfolios, fine jewelry and art, retirement plans and business interests. Before they can be divided between the spouses, all assets must be valued and immediate vs. long term need for cash is considered. 

How Are Assets Valuated?

Illinois is an equitable division state, meaning that in most cases property is not split 50/50, even where a non-marital estate does not exist. To determine the value and who gets what, a number of factors are considered, including but not limited to:

• How much each side has contributed (income, debt, as a homemaker, etc.)
• Value of property
• Length of the marriage
• Economic circumstances of each spouse, and where children are
• Financial contributions from previous marriages
• Any prenuptial or postnuptial agreements
• The status of each spouse, including age, health, occupation, employability and other
• similar factors
• Child-rearing costs and expenditures
• Consequences of tax reallocation from a property division

Legal Agreements Before and During the Marriage

In Illinois, a prenuptial or postnuptial agreement is enforceable during a divorce. These agreements provide what happens to property in the event of a divorce. Many couples choose to enter into these arrangements to protect certain businesses or estates from being included in marital property. 

Any agreements created and finalized before the divorce usually take precedence and will become an important factor during a divorce. This means that, if the agreement included terms for property division, those terms in the agreement will most likely be followed. Full and fair disclosure of assets, liabilities, and incomes are required for a valid agreement.

Assumed Debt

In Illinois, any debt incurred before the marriage is not considered as part of the marriage. An example is student debt obtained before the wedding date. However, any debt incurred after the marriage such as a mortgage or credit card debts is assumed to belong to both spouses – even if it is only in one party’s name. Marital debt is divided equitably which means the court will consider many of the same factors noted above. Further, a court will often award an asset and its attendant financing debt to one party rather than divide it between parties. 

Tax Consequences

Typically, transfers of assets can trigger tax liability, but some special rules apply to transfers between spouses incident to a divorce which allow a couple to avoid hefty taxes. It is important to understand what is a taxable event in a divorce situation and in particular, know the difference between a sale, distribution, or transfer of asset incident to divorce. 

How We Can Help

The uncertainties that come with any divorce can be stressful but educating yourself and leaning on the expertise of an experienced divorce attorney can make a world of difference. At Griffin McCarthy & Rice LLP, we have the expertise to evaluate, litigate, and resolve complex property distribution issues. Contact us to schedule a consultation and learn more about how we can help guide you through the complexities of the divorce process.