It is not unusual in this day and age that one or both parties entering a marriage have a significant amount of personal assets (“non-marital estate”). Thereafter, one of the parties may contribute a portion of such assets to the purchase of a marital residence or other significant marital property (“marital estate”). Should the parties later divorce, a question arises regarding whether the contributing party should be reimbursed for the personal assets used to acquire the marital property.
Section 503(c) of the Illinois Marriage and Dissolution of Marriage Act sets forth when a non-marital estate must be reimbursed by the marital estate. Essentially, Section 503(c) provides that once property is contributed from the non-marital estate to the marital estate, it becomes marital property. The contributing party can seek reimbursement from the marital estate if the contribution is retraceable by clear and convincing evidence and the contribution was not considered a gift. Obtaining a reimbursement from the marital estate, however, has proved more difficult than it would appear.
In In re Marriage of Marx, six months prior to his marriage, the husband borrowed $20,000 from his father for the down payment on a home which became the parties' marital residence. At the time of the purchase, the parties also jointly obtained a $24,000 mortgage. Later, when the parties divorced, the court ruled the residence was marital property, but the $20,000 loan was a non-marital debt, which the husband would be required to pay. When the husband asked that he be reimbursed for the $20,000 down payment, the court rejected the request.
In so ruling, the court stated as follows:
Why should (the husband) receive reimbursement in full for his $20,000, and why should the funds contributed during the marriage be viewed as somewhat subordinate to that? Why should (the husband) be entitled to his $20,000 off the top? The answer is that he is not. Section 503(c)(2) requires that (the husband) trace the effect of his $20,000 into the current value of the residence by clear and convincing evidence. The trial court was entitled to conclude that he has not done so.
In addressing the gift issue, the court stated:
There is no indication in the present case that (the husband) made it clear that he expected to receive the $20,000 back when the property was sold in any different fashion than he would receive back a marital contribution. . . The trial court was entitled to conclude that (the husband) made a gift of the $20,000 to the marriage.
A party can be assured their non-marital assets are not transmuted into marital property by directing his or her counsel to draft the appropriate documentation disclosing the funds advanced to the marital estate are not a gift and that the contributing party expects to be reimbursed from the marital estate in the event of a divorce. If you are interested in such documentation, please telephone a member of the firm.