When a married couple divorces, the spouses divide their property and debt. When most people think about asset division during divorce, they think about dividing physical property such as furniture or vehicles. However, a business is an asset just like any other piece of property. If your business was purchased or established during your marriage, both spouses have a right to the business according to Illinois law. If you are a business owner who is considering divorce, it is crucial that you understand how businesses may be valued and divided in an Illinois divorce.

Does My Spouse Have a Right to My Business?

If you are solely responsible for managing your business, you may assume that you are entitled to keep the business upon divorce. However, this is not always the case. Illinois law considers any property acquired during the marriage to be part of the marital estate. Property that was acquired before the marriage is classified as “separate property” and assigned to the spouse who originally acquired the asset. However, even if you founded or acquired a business before you got married, an increase in the value of the business during your marriage may be considered marital property. This is especially true if your spouse contributed to the increased value of the business, and in these cases, you may be required to reimburse your spouse for their contributions.

The Business Must Be Valued Before it Can Be Divided

Having your business accurately valued is a crucial step when you are getting divorced. The most commonly used business valuation methods include an asset approach, earnings value approach, and a market value approach. An accountant or business valuation expert can work with you and your attorney to help you determine the best way to value your business. Once you have determined how much your business is worth, you must decide how to account for the business’s value during asset division. You may choose to “buy out” your spouse’s share of the business by assigning him or her marital assets of an equivalent value. You may also decide to sell the business and divide the proceeds between you and your spouse.  Your attorney can help you and your spouse negotiate a property division arrangement that takes the value of your business into account.

While we often think of marriage as a personal or romantic union, it is also a financial partnership. When two people get married, they combine their financial resources, either intentionally or unintentionally. Therefore, the end of the marriage comes with considerable financial implications. If you are planning to get divorced, you may have questions about how your property will be divided. You may specifically wonder if the spouse who earned the majority of the income during the marriage is entitled to more of the marital estate during divorce.

What Property Is Divided in an Illinois Divorce?

When you file for divorce in Illinois, there are several issues that you will need to resolve. One of these issues is the distribution of marital property. The marital estate consists of property that either spouse accumulated during the course of the marriage. It includes real estate, personal property, collectibles, investments, retirement accounts, and other assets that were obtained while the couple was married. Separate property includes property gained by inheritance or property that a spouse acquired before the marriage took place or after a legal separation. However, understanding what is included in the marital estate and what is separate property is not always easy. Issues like commingled or combined assets can complicate property division during divorce.

Reaching a Property Division Settlement

There is a misconception that the courts always divide property in a divorce. In reality, the vast majority of divorce cases are resolved through a settlement or mutual agreement. You and your spouse may decide how to divide your assets on your own, with help from your attorneys, during divorce mediation, or through another avenue. If you cannot reach an agreement, then the court will step in and divide marital property for you. Illinois courts follow a legal doctrine called equitable distribution in contested divorce cases. Property is divided equitably but not always evenly, and this division is based on factors such as:

Did you know that the average amount of personal debt for Americans aged 40-55 is over $135,000? Whether through a home mortgage, personal loans, credit cards, or student loans, most people have at least some debts. If you are planning to get a divorce, you may be wondering how debt will be handled. Typically, marital debt is handled similarly to marital property during an Illinois divorce, but each case is different.  

Illinois Laws Regarding Marital Debt

In many marriages, one spouse is more of a spendthrift than the other. Often, differences in spending habits and financial goals are one of the issues that lead to divorce. If your spouse has accumulated a considerable amount of debt, you may wonder if you will be expected to repay it after divorce. You may also wonder if your spouse will be on the hook for debts that you have acquired.

Illinois courts divide marital property according to a legal doctrine called equitable distribution. Property and debts are divided fairly but not always evenly. Marital property and debts, meaning property and debts obtained during the marriage, are divided between spouses. Non-marital property, which includes assets and debts acquired by a spouse before getting married, is assigned to the spouse who originally acquired it. However, in the majority of cases, the court does not decide the allocation of marital property and debts during divorce. The divorcing couple instead reaches an out-of-court settlement regarding property and debts through negotiation, mediation, or another dispute resolution method.

One of the most significant parts of the divorce process is the division of marital assets and debts. Some divorcing couples are able to reach an agreement about property distribution through attorney-assisted negotiations. Others reach property distribution settlements through an alternative dispute resolution method like mediation or collaborative law. When a property distribution agreement cannot be reached, the case may go to trial. Complex assets such as investments, small businesses, and professional practices are often especially difficult to quantify and divide during divorce. If you are a doctor, accountant, or other professional, and you own your own practice, you should understand how the decisions about this practice may impact your divorce.

Determining the Identity of a Professional Practice

If there is not a valid prenuptial or postnuptial agreement that addresses ownership of a professional practice, the practice may be subject to division during divorce. Illinois courts divide marital property using a legal theory called “equitable distribution.” Only marital assets, or assets that were accumulated during the marriage, are subject to division. If you opened your professional practice during your marriage, the practice is almost certainly considered marital property.

Non-marital property, meaning property that was acquired before the marriage, is typically not subject to division. According to these general rules, a professional practice that an individual opened before tying the knot would be classified as non-marital property and therefore not subject to division during divorce. However, your practice may still be classified as marital property even if you owned the practice before you got married. For example, if your spouse made significant contributions to the practice, or if marital funds were used to finance the practice, it is possible that the practice will be considered part of the marital estate, regardless of when it was established.

If you are like most working adults, you probably plan to enjoy your retirement to the fullest. This can make retirement funds a serious concern during divorce. Retirement accounts are typically treated the same as other types of marital assets. The portion of the retirement funds that were accumulated during the marriage are a marital asset subject to division, while the portion of the retirement funds that were accumulated before the marriage are not subject to division. However, accurately valuing retirement funds is not always as straightforward as it may seem. Pension plans are often especially difficult to accurately quantify and divide during divorce because the value of the pension relies on the future payout of the plan.  

Methods of Valuing Pensions

Three of the most common valuations methods used to determine the present value of a pension for the purpose of asset division during divorce include:

• Life Expectancy Method: This approach is based on the pension holder’s life expectancy and the expected pension benefits he or she will receive.

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