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Understanding Marital Property and Non-Marital Property

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When people get married with positive hopes and expectations of building their lives together, they don’t dwell on the possibility of divorce. People may not think about the ownership of property is acquired during a marriage when times are good.  Married couples often own most of their property together in joint-tenancy, but spouses sometimes have bank accounts and vehicles in their own names. How is property handled in a divorce?

Most spouses don’t think about property ownership in the event of a divorce. Spouses might assume that all the property will simply be divided if there is a divorce. But that isn’t the case.  Only “marital property” will be divided between the spouses. Most people probably don’t realize there is a distinction between marital property and non-marital property.

The character of the property that’s acquired during the marriage doesn’t matter so much between spouses unless or until the marriage breaks down.  At that point, however, understanding marital property and non-marital property becomes important.

Marital Property

Defining marital property is a good starting point. Simply put, marital property is property “of the marriage”. Marital property is divided between the spouses in a divorce.  Non-marital property is property not “of the marriage”, and it will not be divided between the spouses when there is a divorce.  Non-marital property is considered the property of one spouse to the exclusion of the other spouse.

Marital property is established usually in one of two ways. Property acquired during the marriage through the efforts of either spouse is generally considered a product of the marriage. Non-marital property that is gifted to the marriage will also be considered marital property. Thus, if Barbara buys a car using money earned during the marriage, the car is considered marital property. The car is considered marital property even if the car is in Barbara’s name alone.  If Barbara brings a car into the marriage, on the other hand, it will be not be considered marital property unless she gifts it to the marital estate.

Non-Marital Property

Non-marital property is property that is not considered a product of the marriage. Non-marital fits into two primary categories.  The first category of property is considered non-marital is the property that was acquired by one spouse prior to the marriage.  As indicated above, if Barbara owns a car when she marries Jeff, the car is considered non-marital property after the marriage.

A second typical way that property is classified as non-marital is property that is inherited.  Thus, if Jeff inherits $100,000 from his father and buys a car with that money, the car is considered non-marital property.  The car was purchased not with money earned during the marriage; therefore, the car is not a product of the marriage.

Critically, a spouse who desires to preserve the character of non-marital property must maintain title to the property in that spouse’s name alone. Thus, if Barbara buys a condo while she is single, and then she gets married, Barbara must maintain the condo in her name alone after marriage for the condo to be considered Barbara’s non-marital property. Similarly, if Jeff inherits $100,000 from his father when his father dies, Jeff must maintain that $100,000 in a bank account in Jeff’s name alone for it to be considered non-marital property.

Any property that is placed in title to both spouses and/or commingled with marital property is presumed to be a gift from the non-marital estate to the marital estate. For instance, if Barbara refinances her condo after the marriage and, in order to get Jeff on the mortgage to gain a better interest rate, Barbara prepares and signs a Quit Claim Deed transferring title to Barbara and Jeff as joint-tenants, the condo will thereafter be presumed to be marital property.

Likewise, if Jeff puts the $100,000 he inherited from his father into a joint savings account with Barbara, the $100,000 will be considered marital property thereafter.  The transfer of the inheritance into a joint bank account is presumed to be a gift of the non-marital property to the marital estate.

Presumption and Proof

The presumption will control when there is no evidence of what was intended at the time of the transfer.  Although Jeff may argue that the $100,000 he inherited from his father should be considered non-marital property, if there was no indication of intent at the time of the transfer, the presumption applies, and a court would consider it to be marital property.  The idea of the presumption comes from the fact that marriage is a joint venture and spouses, more often than not, intend to own property together as part of the marriage.

The presumption of a gift, however, can be overcome. Evidence of contrary intent at the time the transfer was made overcomes the presumption. For example, maybe Barbara owned a condo when she married Jeff, but the interest rate was high. Maybe she and Jeff, together, might qualify for a lower interest rate. Barbara might agree to transfer title of her condo to both Barbara and Jeff so that they could refinance at a lower interest rate. If Barbara communicates to Jeff that she is only transferring title so that they could qualify for a lower interest rate, and she wants to preserve the character of the condo as her non-marital property so that her children from a previous marriage can inherit the condo, that communication would overcome the presumption of a gift to the marital estate.

The issues involving the marital and non-marital property can get much more confusing and convoluted. For instance, if Barbara brings the condo into the marriage, and continues making mortgage payments on it after marriage, the mortgage payments are considered a contribution from the marital estate to the non-marital property (the condo). If there is a divorce, the marital estate is entitled to be reimbursed the value of the payments made that enhanced the value of Barbara’s non-marital property.

The purpose of this article, however, is simply to highlight the fact that property owned by spouses will be classified either as marital property or as non-marital property. The characterization of the property is only important in the event of a divorce.  As long as the parties stay happily married, the difference between marital property and non-marital property will have no real effect.  Anyone who is contemplating a divorce, however, will want to pay attention to the distinction and understand that marital property will be divided between the spouses in a divorce, but non-marital property will remain the property of the spouse who owns it.

  • Kevin G. Drendel
  • Drendel & Jansons Law Group
  • 111 Flinn Street
  • Batavia, IL 60510
  • (630) 406-5440
  • www.ilfamilylaw.com

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