WHEN DOES COMMINGLING MARITAL AND NON-MARITAL ASSETS OCCUR?

house movingThere is a presumption that all property acquired during the marriage is marital.  For property acquired prior to the marriage, there is a presumption that said property is non-marital unless proven otherwise. That presumption can be rebutted if one party alleges that an asset that was originally non-marital has become marital through an act of the other party, i.e. commingling.  Section 503(c)(1) of the Illinois Marriage and Dissolution of Act provides, “when marital and non-marital property are commingled by contributing one estate of property into another resulting in a loss of identity of the contributed property, the classification of the contributed property is transmuted to the estate receiving the contribution.”  As a result of commingling or transmutation, what was once non-marital becomes marital.

To determine if an account was commingled with marital funds, courts will make a two-part analysis: 1) whether marital and non-marital assets were commingled; and 2) the commingling resulted in a loss of identity between the marital and non-marital property.  The first prong of the analysis is pretty clear since the assets were either mixed or not; if a party mixes non-marital funds with marital funds, the law presumes that the owner of the non-marital property intended to gift his non-marital with the marital funds, and the entire amount is considered marital.  The biggest issue, thus, is determining if the commingling resulted in a loss of identity.

To determine if there is a loss of identity, the courts will use the “Conduit Rule”, which states that where the marital account merely served as a conduit through which the non-marital funds flowed, then no loss of identity occurred, and, as such, transmutation has not occurred.  courts will look at the length of the marriage and the source of the non-marital funds to determine if the marital account was simply a conduit or if transmutation did in fact occur.

 

 

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