Happy couples are not usually thinking about how to protect themselves in the event of a divorce, and often make critical mistakes such as commingling their non-marital property with marital property.
That’s what happened to one unhappy couple in a recent decision. In In re the Marriage of Vondra, No. 1-15-1793 (1st Dist. 2016), the wife committed just that mistake. During a time when she felt her marriage was stable, she inherited over $200,000 dollars. The Court properly found that said inheritance was in fact non-marital. However, she then deposited those funds in a joint account under both parties names, and used part of the funds to pay down the mortgage on her home. At the time of trial, the wife requested that the funds in the joint account be classified as non-marital by arguing that the joint account was merely a “conduit” for the funds which she then deposited into an account solely under her name. She further argued that the funds she used to pay down the mortgage were her non-marital contribution that should be reimbursed to her. The trial court disagreed with the wife, and the appellate court affirmed the trial court’s decision.
In Illinois, if you commingle your non-marital property with marital property, there is a presumption that the asset is marital. A party can rebut that presumption by clear and convincing evidence. Usually non-marital funds used to pay off a mortgage on a marital property is considered marital property unless a party can show that it was not intended as a gift and expected to be paid back. The evidence in this case did not convince the judge that the wife intended the funds as a loan and not a gift. In fact, the husband did not even know the wife had used the money to pay down the mortgage. As a result, the court found that the funds were a gift to the marriage and thus marital.
The law also allows an exception for commingled bank accounts if it finds that an account was merely a “conduit” and not meant as a gift to the marriage. In this case, however, the funds were put in a CD under both parties names and then placed in a joint account under both parties names. The court found that the fact that the CD was under both parties names indicated that the funds were meant for the marriage and not merely a passage way towards the wife’s individual bank account.
This case is a reminder to those happy couples who are not thinking of the possibility of divorce and commingle their funds with their marital funds. If you receive a large inheritance, it is important to consult an attorney to learn what you can do to protect these funds in the event of a divorce.