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What's mine is mine, and what's yours is mine, too (p. 2)

We've talked about the McCourt divorce before. The couple has been arguing over the ownership of the Dodgers baseball team that he, or they, acquired during their marriage. The case has involved conflicting contract language and months of court time. (The couple is in settlement talks at this writing.) When the ownership agreements between the husband and wife were thrown out, the court left the McCourts to figure out the division of property on their own.

In our last post, we talked about the difference between marital and non-marital (or separate) property. We also mentioned the importance of remembering that "property" doesn't just mean stuff. In Illinois and elsewhere, the term encompasses everything a spouse or the couple owns -- house, cars, investment portfolio, retirement funds and even professional licenses.

Chances are, of course, that the value of some non-marital property will increase (or decrease) during the course of the marriage. States differ on how to treat the appreciation of property.

For example, Wife received a pearl necklace for her college graduation. Several years later, she marries. The necklace is non-marital property. Two years into the marriage, pearls become scarce, and their value triples. A few weeks later, the couple decides to divorce. Is the difference between the original value of the necklace and the current value marital or non-marital property?

In Illinois, the court applies a set of factors to determine if the necklace falls into one category or in both (fractional divisions have happened). One factor is the contribution of each spouse with regard to acquisition, preservation, appreciation or depreciation in value of property. For the necklace, Husband had no role in the increase in value, and the court would likely say it was Wife's non-marital property. Contribution is just one factor, though.

An Illinois court, theoretically, would consider all the factors in its decision. Some states would consider the appreciation as marital property. Others would determine if the appreciation was active or passive and decide from there.

We'll wrap this up in our next post.

Source: Forbes.com, "Understanding How Assets Get Divided In Divorce," Jeff Landers, 04/12/11

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