Commingling Assets and Your Chicago Divorce

Commingling Assets and Your Chicago Divorce

By: M. Scott Gordon

While most people who get married in the Chicago area are not immediately thinking about the possibilities of divorce, it is important to consider the implications of commingling assets during the marriage and the impact on property division. To be sure, if you are your spouse commingle separate property while you are married, it will be much difficult to distinguish that property in the event of divorce, and property that was once separate may fall into the category of divisible marital property. Under Part V of the Illinois Marriage and Dissolution of Marriage Act (750 ILCS/5), or the IMDMA, when a couple files for divorce, the court will divide marital property—both debts and assets—under a theory of “equitable” distribution. This means that the judge will decide what is equitable, or fair to both parties. In some instances, equitable distribution may result in an equal distribution of property, but this is not always the case.

Since only marital property is divisible in Illinois, the issue of property division can become quite contentious when previously separate property—such as property acquired before the marriage, or an individual gift to a spouse during the marriage—has been commingled. Whereas such property may not be divisible as “separate property,” once it is commingled, the question of whether it is marital property (and thus divisible) likely arises.

Understanding Distinctions Between Separate Property and Marital Property

To better understand what we mean when we talk about property division and commingled assets, it is important to understand the distinction between marital property and non-marital property (or separate property). As 750 ILCS 5/503 explains, marital property is defined as “all property, including debts and other obligations, acquired by either spouse subsequent to the marriage,” with certain exceptions.

Those exceptions include, for instance, property acquired by one spouse as a gift or through an inheritance, property acquired by one spouse after there has already been a legal judgment of separation, and property that is designated as separate through a valid agreement between the spouses (such as a premarital or postnuptial agreement). But where does commingled property come in?

What is Commingled Property, and How Can it Impact Property Distribution in My Case?

When we say commingled property, we are referring to non-marital, or separate, property that has been mixed with marital property. Under 750 ILCS 5/503(c), to determine whether or not separate property that has been mixed with marital property is indeed commingled, the court will have to decide whether the separate property either “retains its identity” or “loses its identity.” These terms can seem vague, but in brief, the court will determine whether it is still possible to sort out—or identify—the separate property from the marital property.

If the separate property retains its identity, then it can be treated as separate property and not subject to distribution. However, if it loses its identity as a result of the commingling, then it can be treated as marital property.

What are some examples in which the issue of commingled property arises? For instance, Spouse A might have a bank account prior to marrying Spouse B, who also has a separate bank account. After the marriage, Spouse A and Spouse B decide to combine their bank accounts—previously non-marital property—into a single joint bank account. Over the years, both spouses withdraw funds and add funds, and the account accrues interest. When the spouses decide to divorce, it is very likely that the original bank accounts (and the funds transferred to the joint account) have “lost their identity” and, as a result of commingling, have become marital property.

Contact a Chicago Divorce Lawyer

Do you have questions about property distribution in your divorce? An experienced divorce lawyer in Chicago can assist you. Contact Gordon & Perlut, LLC today to discuss your case.