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5 ways separate property can become marital property

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According to the U.S. Census, over 30,000 Illinois couples divorced in 2009. Each of those couples were required by state law to divide up all of their property. An Illinois divorce lawyer understands that for many couples, the process of determining who owns what can be one of the most contentious areas of a divorce. There are often significant financial ramifications that result from the division of assets, which may lead one or both parties to fight for what they believe belongs to them.

In Illinois, the courts follow equitable distribution laws that are designed to promote a fair split of all shared assets when a couple chooses to divorce. While the division is not always completely equal, judges attempt to give each spouse what is considered rightfully theirs. In many cases, spouses enter into marriage with property that each already owns. Careful consideration must be given to this separate property if one does not want it to be divided upon divorce.

When separate property is commingled with property obtained by a couple while they are married, it becomes part of the marital estate and is required by law to be split between each spouse, either by the spouses if they can agree, or by a judge if necessary.

  1. Re-titling property

 Illinois state law designates ownership of property based on which spouse has his or her name on the title, as long as the property was not purchased using marital funds or used to benefit both spouses. Occasionally, a spouse may choose to re-title a piece of separate property, adding the other spouse’s name. If the other party becomes co-owner on the title document, it automatically becomes part of the marital estate and subject to division during a divorce.

  1. Combining bank accounts under both names

Many couples combine their bank accounts once they are married. This effectively combines all separately held money into the marital estate. A joint bank account that is held under the names of both spouses is meant to be used by each, regardless of which spouse earns the money that is deposited on a regular basis. An Illinois divorce lawyer knows that it can be practically impossible to differentiate separate funds from marital funds once they have been commingled in a bank account.

Many financial experts agree that the best way to ensure that separate income remains under the control of one spouse is by maintaining a general ledger that tracks all of the accounts held by each spouse and by the couple together.

  1. Appreciation on non-marital property

Separate property may increase in value throughout a duration of a marriage. Depending on the type of appreciation that occurs, the increase may be considered marital property by the court. Active appreciation happens when the growth is assisted with the help of other spouse. For example, if one spouse owns a company and the other gave advice, provided child care or entertained clients, resulting in a boost in business, the contributing spouse may have rights to the appreciation.

On the other hand, passive appreciation occurs more naturally due to outside forces, such as inflation or supply and demand. A piece of land or real estate may increase in value over time without help from either party, and the resulting appreciation would likely still belong to the owning spouse.

  1. Purchasing marital property using separate funds

Some larger purchases can be difficult to make on one income, leaving some couples no other option than to pool their separate resources in order to afford a home, vehicle or other investment. For those who want to keep their separate money under their ownership in case of divorce, buying marital property using non-marital funds should be avoided.

The state of Illinois considers property used for the benefit of both spouses to be marital, even if only one spouse paid for the property using his or her own money. In addition, any repairs to items such as jointly-owned homes or vehicles paid for with separate income can transform the separate property into marital. Spouses who have separate property often choose to create accounts for the specific use of each piece of property in order to avoid the commingling between marital and non-marital accounts.

  1. Refinancing separate property

In order to reduce monthly payments or take advantage of a lower interest rate, many people choose to refinance their loans. For a separately held loan, it is important to be careful about where a borrower’s income stream comes from. Lenders may rely on income or credit that is part of the marital estate, resulting in the proceeds of a loan becoming marital property as well.

Payments on any refinanced loan need to be paid for using money from a separate account, or a refinance could cause commingling of separate and marital property. Generally speaking, paying off any marital debt, including credit cards, home or auto loans, using separate funds may result in the loss of non-marital character for those funds.

When working through divorce negotiations, issues regarding separate and marital property can become convoluted rather quickly. Some couples choose to work with an Illinois divorce attorney who may be able to provide guidance as to how to handle the more complex problems that may arise. Along with a financial advisor, legal aid may provide a quicker solution that allows for greater financial stability for each spouse.

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