This blog article discusses the division of rental property in an Illinois divorce case. Property division is a major factor in a divorce case. Property division involves splitting assets and liabilities. Defining marital and non-marital property often involves an adversarial process and requires quality legal representation.
Rental Property and Marital Property
A divorce in Illinois is a difficult experience for most people. The division of rental property is a complex divorce case. Marital property is “all property, including debts and other obligations, acquired by either spouse subsequent to the marriage (with certain limitations). 750 ILCS 5/503(a).
Marital property is rental property that was acquired during the marriage. The key issue is whether the property interest was acquired during the marriage. Illinois law assumes that property acquired after the marriage is marital property. 750 ILCS 5/503(b)(1). The key issue is whether one of the spouses owns the rental property. For example, Sue and Bob are a married couple and Bob is an active real estate investor. Bob and Sue own rental real estate, which is only in Bob’s name. Bob and Sue acquired the rental property while they were married. The rental property is marital property because any property that is acquired or owned by either spouse is marital property (with certain exceptions).
In this instance, the rental properties were acquired during the marriage. The rental properties are marital property and Sue and Bob are presumed to both own the rental properties. The mortgages and debts are also considered a marital liability.
Property Division Factors
Generally, spouses equally split the marital assets and liabilities (but the courts and parties are not bound to this presumption). Illinois courts must distribute marital property in a fair and equitable manner. Illinois courts consider the following factors (750 ILCS 5/503(d)):
- Each party’s contribution to the acquisition, marital or non-marital property;
- The dissipation of each party, which simply means whether one party used the marital property for a non-marriage purposes such as an affair;
- The value of the property assigned to each spouse;
- The duration of the marriage;
- The relevant economic circumstances of each spouse;
- Any obligations and rights arising from a prior marriage of either party;
- Any prenuptial or postnuptial agreement of the parties;
- The age, health, station, occupation, amount and sources of income, vocational skills, employability, estate, liabilities, and needs of each of the parties;
- The custodial provision for any children;
- Whether the apportionment is in lieu of or in addition to maintenance
- The reasonable opportunity of each spouse for future acquisition of capital assets and income; and
- The tax consequences of the property division upon the respective economic circumstances of the parties.
Example of Property Division and Division of Rental Property
In many cases, a husband and wife will equally split the assets in a divorce. Unequal distribution of property typically occurs when one spouse has considerably more assets and income producing ability than the other spouse. In Bob and Sue’s example, Sue’s attorney would argue that an unequal distribution is fair because Sue lacks the skills of Bob and the income producing ability in the future. Therefore, an unequal distribution of marital assets may be fair in this case.
There are several practical considerations in a divorce with rental property. The first consideration is whether either party could refinance the properties and buy the other spouse out. Simply put, one spouse must be able to refinance the properties and buy the other spouse out. Often it is impractical for one spouse to buy out the other spouse. The buyout amount is typically the share of equity assigned to each spouse. The equity in the property is determined by an appraisal or by agreement of the parties.
The second strategy is the exchange of equivalent financial assets such as a waiver of a pension or retirement asset for the rental property. For instance, one spouse may waive their right to another spouse’s retirement assets or exchange other assets in consideration for receiving the rental property.
The third strategy is to sell the rental property and split the proceeds. Qualified legal representation is vital for couples with substantial rental property and investment income. Divorce and rental ownership are devised by negotiation or trial. Sean Robertson is an experienced real estate and divorce attorney with over 15 years of experience that represents real estate investors and their spouses in divorce cases.
Gateville Law Firm and Sean Robertson
Gateville Law Firm concentrates in divorce, child custody, child support, and real estate law. Sean Robertson is an experienced divorce and real estate attorney that represents real estate owners and property investors in their divorce and real estate matters. Whether you need assistance with the purchase or sale of a new home or determining what is the best course of action for you during your dissolution of marriage case, the team of Gateville Law Firm can assist you. Sean Robertson may be reached at 630-780-1034.