It is no secret that dividing assets can be among the most challenging parts of a separation. Illinois residents experiencing divorce will attest to the fact that seeking equitable division of money and property can be time-consuming and stressful. Understanding how asset division works in one’s home state, as well as understanding how taxation of those assets functions, can go a long way towards smoothing the road towards a new life for each spouse.
Illinois is what is considered an “equitable distribution” state, which means that division of assets is not determined by pre-marital and post-marital ownership. Instead, it is governed by a decree of “fairness” at the discretion of the divorce court. While this can be valuable for couples who have already agreed to asset division before filing for divorce, it can be more difficult to navigate for those in contested situations.
As a general rule, marital assets fall under a clause called the “tax-free transfer rule,” which basically means the government is not allowed to tax the transfer of assets from one spouse to another in a divorce situation. Notably, however, retirement plans and IRAs do not fall under that protective umbrella unless certain conditions are met. Ultimately it is state law that reigns supreme in any contested asset scenario.
With this in mind, it may be beneficial for Illinois residents planning a divorce to have a full knowledge of this state’s laws and procedures regarding division of assets. Divorce is challenging enough without having to worry about being unfairly treated in asset division. Thankfully, many support networks are available throughout the state to help both spouses attain a full understanding of their rights and responsibilities.
Source: marketwatch.com, What’s even worse than divorce? The taxes, Bill Bischoff, Dec. 3, 2013