Articles Posted in Property Division

Brad is a financial manager with Big Business USA. He earns an annual salary, and doesn’t have an employment contract. However, his employer does give him the opportunity to receive an annual bonus, based on the company’s performance in general, and Brad’s performance in particular. Whether or not Big Business USA actually pays Brad a bonus is a matter within the company’s sole discretion. If they do decide to pay him a bonus, his award for this calendar year will be paid next year, in February.

 

Brad is married to Angie. Except for one year in which he received no bonus at all, Brad has earned a large bonus every year that he’s been with Big Business USA. Eventually, the couple starts having marital trouble, and Angie files for divorce. They can’t agree on anything, and the case is set for trial in September. Brad has been working hard and the company has been making enormous profits, and both Brad and Angie expect Brad to get a big bonus next February. Because the divorce will be finalized in September, Angie argues that 9/12 of the bonus would have been earned during the marriage, and therefore considered “marital property.” Her argument is based upon the Illinois Marriage and Dissolution of Marriage Act, which creates a legal presumption that all property acquired by either spouse during the marriage is marital property, unless it was acquired in a way that makes it non-marital. 750 ILCS 5/503(a). A few examples of non-marital property would be property which was acquired by gift or inheritance, or property subject to a prenuptial agreement. Marital property is divided equitably among the parties in a divorce. Non-marital property is not.

 

Brad argues that when the bonus check arrives in February, he and Angie will already be divorced. Therefore, he claims, it is not property “acquired during the marriage,” and should not be considered marital.

 

Unfortunately, the statute says nothing about a situation such as the one that arose in Brad and Angie’s. Specifically, there is no mention as to how a court should classify a non-vested, discretionary bonus issued after the divorce but attributed to one party’s employment during the marriage. In 2013, the Illinois First District Appellate Court decided the issue in the case of In re Marriage of Wendt. In that case, the court ruled that because the husband’s receipt of a bonus was uncertain and not guaranteed by any employment contract, it was only an “expectancy interest” and not actual “property” acquired during the marriage. Therefore, the court decided that the bonus was not marital property, and the wife was not entitled to any of it.

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In my last post, I set forth the legal framework in which Illinois courts examine whether property is marital or non-marital.  In this post, I apply that analysis to a hypothetical fact pattern.

Let’s assume Greg and Sandy are married. During the marriage, they purchase a house and title it jointly. During the marriage, Greg gets himself into legal trouble, and fears that he is going to be sued for several hundred thousand dollars. He hires a lawyer to prepare a quitclaim deed, and transfers his interest in the house to Sandy. The lawyer records the deed, making Sandy’s ownership of the property public record. Fortunately, the lawsuit Greg feared never materializes. They continue living in the house together until Greg files for divorce 10 years later. In the divorce case, Sandy claims that the house is her non-marital property.

Legally, the fact that the house was purchased during the marriage sufficiently raises the presumption that it is marital property under 750 ILCS 5/503(a). The fact that the parties initially titled it jointly reinforces that presumption. If Sandra wishes to assert that the residence is non-marital, she bears the burden of presenting evidence at trial to show that it was acquired as non-marital property under 750 ILCS 5/503.

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A common misconception many people have at the start of the divorce process is that only jointly-titled assets are considered marital property, and that everything else is not. For a number of reasons, often times the asset in question is the marital residence. Perhaps the husband has bad credit, and can’t get approved for a mortgage loan, so the house was purchased solely in the wife’s name. Perhaps, the wife is self-employed, and titled the house in her husband’s name to protect it from potential creditors. Litigants are usually either shocked or relieved to learn that, under Illinois law, the determination of whether house is marital or non-marital depends upon when and how it was acquired, and not necessarily on how it is titled.

Before a court may dispose of property in a divorce case, it must classify the property as either marital or non-marital. After classification, each spouse’s non-marital property is given to that spouse, and the marital property is divided in just proportions. Marriage of Hagshenas, 234 Ill.App.3d 178, 186, 600 N.E.2d 437 (2d Dist. 1992).   Pursuant to 750 ILCS 5/503(a), “marital property” means all property acquired by either spouse subsequent to the marriage, except for property which falls within certain enumerated categories. In order for property acquired during the marriage to be deemed non-marital, the party claiming it to be non-marital must present evidence that it was acquired in one of the following ways:

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