In a few jurisdictions, such as Texas and California, it’s difficult to protect assets during a high-net-worth divorce. But like most jurisdictions, Illinois is an equitable distribution state. Furthermore, although there are some limitations, the parties themselves usually determine what the e-word means in their unique situation. As outlined below, this definition process usually begins before anyone says “I do.”
The equitable distribution rule is somewhat subjective, and so are the property classification and division rules in the Prairie State. The legal definition, everything is marital property except debts or assets acquired before the marriage or by gift, is not as straightforward as it seems. More on that below as well.
So, an Aurora high-net-worth divorce lawyer basically has two opportunities to protect assets during a divorce. Pre-filing planning requires forethought and detailed knowledge of this area of the law. Post-filing protection is available as well. The extent of this protection usually depends on an attorney’s negotiating skills. The bottom line is that a divorce does not automatically mean a 50-50 asset division. Both spouses, and their Aurora high-net-worth divorce lawyers, have considerable input in this area.
These agreements, which are increasingly common in Millenial marriage, are not just “divorce insurance.” Frequently, these pacts strengthen marriages. Money is by far the leading cause of marital strife. Couples with significant financial assets often argue about how to spend them. Fundamentally, some people are spenders and some people are savers. It’s not always easy to find a happy medium in these situations.
Additionally, divorce insurance is not such a bad thing. Most people have life insurance, although they do not want or expect to die early. Insurance simply means they are prepared for the unexpected. That’s what responsible people do.
Finally, premarital agreements are not limited to financial matters. People who have been married before often execute premarital agreements, even if they are not movie-star rich. In most cases, divorce is like death for inheritance purposes. That’s often not the result the spouses intend. Prenuptial agreements restore these rights in many cases. Many people draw up wills, trusts, and other executory documents to make their wishes crystal clear.
However, for the purposes of this blog, asset protection is the most important component of a premarital agreement. Illinois lawmakers have adopted the Uniform Premarital and Marital Agreements Act. The UPMAA greatly streamlines the laws and procedures in this area. So, the process and the results are much the same in different jurisdictions in the Prairie State. Furthermore, an Illinois premarital agreement is often enforceable in other UPMAA states.
Usually, as long as the prenup’s provisions stick to the above areas, its mandates are not grossly one-sided, and each spouse had an independent lawyer, most judges uphold most premarital agreements.
The saga of Frank and Jamie McCourt, the power couple who owned the Los Angeles Dodgers in the late 2000s and early 2010s, is a good example of how this process works.
Frank and Jamie had a controversial prenup that satisfied two of the above three requirements. It had no extraneous provisions and they both had their own lawyers. The gross inequity requirements, however, were a different matter.
The Dodgers were almost broke when the couple was divorcing. So, Jamie gave up half of the team in exchange for about $300 million in cash and other assets. A few years later, Frank sold the rejuvenated Dodgers for more than $1.3 billion (with a “b”). Jamie took Frank to court, claiming half of the sales proceeds.
A court ruled against her, largely because the agreement was fair at the time it was made. This same issue often comes up in corporate stock holding cases. Stock certificates are often virtually worthless at the time they are issued and virtually priceless a few years later.
Incidentally, spouses may strike a property agreement at any time during the marriage. It doesn’t have to be before the ceremony. However, some spouses are rather understandably reluctant to sign late-stage premarital agreements.
As mentioned, classifying property as marital or nonmarital is not always easy, especially when valuable assets are involved.
A rental house is a good example. Assume a husband bought a dilapidated rental house shortly before the marriage. After the marriage, a wife flipped the house. When the couple divorced, tenants were lining up to pay rent above market value. Based on those facts, the house may have transmuted from the husband’s nonmarital property to the wife’s nonmarital property.
Let’s change the facts a bit. Assume the rental house was not dilapidated, but it was vacant. The wife, who is a designer, made the house more appealing. The end result is the same. That would be a steady stream of tenants paying above market value. Since the wife’s contributions were less significant, she probably does not have a claim for complete transmutation. But she can probably claim some property interest in the house.
Incidentally, the house itself is not the only asset at issue. Past and future rental income is involved, as are past and future expenses.
Since the rules are somewhat unclear, an attorney’s advocacy skills could make a difference in this area.
So much for property classification. Now, let’s talk about property division. Illinois law sets forth a number of factors in this area, such as:
These principles do not just apply to assets. They apply to debts as well. Therefore, an Aurora high-net-worth divorce lawyer can often arrange a set-off. More on that below.
Just like most judges uphold most premarital agreements, most judges also uphold most divorce property settlements. These out-of-court settlements have a number of advantages over emotionally-charged trials which have uncertain outcomes.
A majority of couples do not sign premarital or post-marital property agreements. Furthermore, the spouses are not always able to resolve property division and other divorce issues on their own. But there is another section of this blog, which means an Aurora high-net-worth divorce lawyer has another opportunity to protect your assets.
Mediation usually provides this opportunity. Most DuPage County judges require parties in contested divorce cases to attend mediation before they can be added to the trial docket. So, although the parties often have little choice in the matter, they can still make the most of mediation and the benefits it offers.
Cost savings is the biggest one. The Department of Justice estimates that mediation and other forms of alternative dispute resolution, like arbitration, save litigants tens of millions of dollars every year. Time is money in a divorce case, and mediation ends cases earlier. Furthermore, preparing for a one-day mediation is much easier than preparing for a multi-day trial.
Additionally, mediation gives litigants more control over the outcome and creates a solid co-parenting foundation for families with children. The control aspect is especially important if either spouse has issues with authority. As for co-parenting, if the parties work out their differences once, they are empowered to work out the differences which inevitably arise later.
During mediation, there is no judge and no court reporter. So, the process is somewhat informal and completely private. After each attorney makes a brief opening statement, the parties retire to separate rooms. Then, they have individual sessions with a mediator, who conveys settlement offers and counter-offers back and forth.
We mentioned setoffs above. This vehicle is very common in mediation sessions. For example, the husband might agree to pay more spousal support if the wife relinquishes her claim to a large retirement account. Or, the wife could agree to take on more credit card debt if the husband surrenders his portion of a family business.
On a related note, assets often have emotional values, as well as financial values. Once again, a retirement account is a good illustration. Frequently, to the contributing spouse, this account is a reward for long-term sacrifice. But to the non-contributing spouse, the 401(k) or another retirement account might only figure on a spreadsheet. It’s usually easier to engineer set-off agreements in such an environment.
Divorce property division can be highly complex and usually depends on several factors. Working with a legal professional with knowledge of property division may assist you in getting the most favorable results possible after your divorce.
For a free consultation with an experienced high-net-worth divorce lawyer in Aurora, contact Keller Legal Services by going online or calling 630-505-1515. Convenient payment plans are available.