Too often, when the parties to a divorce begin to divide the assets between themselves, they find that they are not in agreement about how to treat certain assets. Marital assets are assets which are acquired sometime during the marriage, and they are divided by the parties in some fashion by the court. Let’s say that the Court starts with a 50/50 division of marital assets. Nonmarital assets can either be assets that are acquired by a party prior to a marriage, or during the marriage. Nonmarital assets remain the property of the party who originally owned them. If a party to a divorce says that a certain asset, let’s say a house, is nonmarital, then certain things have to be proven-e.g., 1) that it has not been maintained by marital money (but only by nonmarital money), and 2) that it has been kept in one person’s name and not in joint names.
In a nutshell, in the recent case of In Re The Marriage of Vondra, 2016 Il.App. (1st) 150793, the wife had inherited certain monies from her family. She placed these monies ($253,000.00) into an account in her own name, and then into a joint account. Afterwards, the monies were used to pay down the mortgage on the marital residence that both parties and the children lived in (and which was titled in both parties’ names).
At trial, wife made a claim for the reimbursement of $253,000.00 representing the amount of nonmarital funds she used to pay down the mortgage. The trial court determined that the funds were nonmarital property, but denied her claim for her to be paid back that amount into her own name. The court determined that she transmuted (changed) those funds into marital property by depositing the funds into the joint checking account and paying down the mortgage balance on the house which was titled to both parties.
As part of the court’s reasoning, it reviewed the meaning of transmutation. Transmutation is the legal concept for an asset changing its legal identity, say from nonmarital to marital. The Court said that, “Transmutation is based on the presumption (the Court will take something to be true) that the owner of the nonmarital property intended to make a gift of it to the marital estate.” “The placement of nonmarital property in joint tenancy or other form of joint ownership with a spouse “will raise a presumption that a gift was made to the marital estate, and the property will become marital property.”
The court went on to state that the spouse who donated the monies may overturn this presumption with clear and convincing evidence. If the wife could clearly prove to the court that she had not intended to make a gift, by her words and actions, then she could possibly convince the court that the monies should be reimbursed to her before the marital estate was divided up.
The court stated that wife had intended to make a gift to the marital estate because she had paid down the mortgage on the parties’ house that was in both names. That created a rebuttable presumption of her having made a gift to the marriage. The question then became whether wife presented sufficient evidence to rebut and overturn this presumption.
The only evidence wife presented to rebut the presumption of transmutation is that she said that did not intend for the payments to be gifts. However, although respondent testified that she told husband of her payments, she did not state that she informed him at the time that she did not intend for the payments to be gifts to the marital estate. Husband stated that he did not know that she had paid down the mortgage with monies she had inherited.
Wife also argues that she sufficiently rebutted the presumption because the nonmarital funds she used could be traced back to her inheritance and she placed the funds in a joint account temporarily as a means to make the mortgage payments. Wife argued to the Court that other cases had similar fact patterns and those other Courts did reimburse the monies to the party who had paid them. In one such other case, IRMO Heroy, 385 Ill. App. 3d 640, 673 (2008), one party had taken their own nonmarital money and put it into the parties’ joint account briefly. The monies were then used for the original party to purchase nonmarital property I that original party’s sole name. The money was not used to pay down the mortgage on property owned by both parties (as in the Vondra case). The Vondra Court said that wife did not rebut the presumption with clear and convincing evidence.
The house, with a mortgage lowered by wife’s originally-non marital contributions, was divided by the Court as marital property. That could mean, for example, that each party received 50% of the value of the house (lowered by the mortgage). If the wife had proven her case to the court, she would have received a reimbursement in the amount of her payments, after which the property would have been divided as marital property.
More than likely, parties do not keep their inheritances separate from the other party and the family. The monies are often used to pay down mortgages, fix things around the house, buy a replacement car, pay bills, pay for the kid’s schooling, etc. A person who receives an inheritance may not think of putting the monies into a separate account, just so that they can make an argument during a possible divorce someday that the monies are theirs alone. It could be very troubling to a marriage if a party, or both parties, kept anything possibly nonmarital separate, just in case that a divorce may ever happen. That could, of course, lead to a divorce in itself. But, it is important to be aware.
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