One of the most stressful aspects of divorce can be the division of property, and gifts and inheritances in equitable distributions states, such as Illinois, can make this division even more contentious. With this in mind, spouses should clearly establish what is separate versus what is marital property in order to protect their individual inheritances and gifts in case of a divorce.
Although what constitute separate property may vary from state to state, generally separate property includes the following: property owned by either spouse before the marriage or after the date of separation, property deemed as separate in either a pre or postnuptial agreement, payments for pain and suffering in a personal injury lawsuit, inheritances to either spouse or gifts to either spouse by a third party. Everything else is generally accepted as marital property, but how this marital property is divided depends upon state laws.
In an equitable distributions state, marital property is not divided equally between spouses, but rather the court determines what is ‘fair and equitable” for each spouse. This can complicate the division, especially when inheritances or gifts that were separate property became commingled assets. For example, if a spouse keeps an inheritance or gift in a separate, individual bank account, then the money is separate property, but if an inheritance or gift is deposited in a joint account or is used towards a joint purchase, that money is now a commingled asset that must be divided.
In cases of property division, accurate information is essential. Both spouses should keep clear and detailed documentation of separate property in order to protect themselves in the event of a divorce. With the help of an experienced divorce lawyer, this documentation can help facilitate a fair and equitable division of property.
Source: Forbes, “Divorcing Women: Here’s How to Protect Your Inheritances And Gifts“, Jeff Landers, August 19, 2014