The Impact of Owning Multiple Properties in a Chicago Divorce Case

Owning multiple residential or commercial properties adds another layer of intricacy in divorce cases, especially in a city like Chicago. In Illinois, property division during divorce proceedings follows the principle of “equitable distribution,” which means dividing assets fairly—though not necessarily equally—between spouses.

The first step in determining how properties will be handled during a divorce is classifying them as either marital or non-marital assets:

• Marital Property: Assets acquired during the marriage, regardless of whose name is on the title, are typically considered marital property. For example, if you purchased a rental property or a second home after getting married, it is likely to be categorized as marital property.
• Non-Marital Property: Assets owned before the marriage or acquired through inheritance or as a gift specifically to one spouse are generally considered non-marital property. However, if a non-marital property appreciates in value during the marriage or is commingled with marital funds, it could complicate its classification.

For couples with multiple properties, careful tracing of ownership and financial records will be critical in determining the status of each asset.

In any divorce case involving multiple properties, accurately valuing the real estate is also essential. This typically involves hiring appraisers or acquiring agreed-upon market analysis reports to assess the fair market value of each property. For commercial properties, additional considerations like income potential, operating expenses, and lease agreements must also be factored into the valuation.

The court may consider the following:

• The current market value of each property.
• Outstanding mortgage balances or liens.
• Rental income (if applicable).
• Costs associated with maintenance, taxes, and other liabilities.

The combined value of these assets will play a significant role in determining how the property division aligns with Illinois’ equitable distribution principles.

After classifying and valuing the properties, the court will decide how to divide them between the spouses. Several outcomes are possible:

1. Selling the Properties: In some cases, selling the properties and splitting the proceeds may be the most practical solution. This is common when neither spouse can afford to maintain multiple properties independently.
2. Awarding Properties to One Spouse: If one spouse has a stronger financial standing or a greater attachment to certain properties, the court may award those properties to that spouse. The other spouse may receive other assets or financial compensation to offset the imbalance.
3. Co-Ownership Post-Divorce: In rare cases, the court might order the parties to maintain joint ownership of a property, especially if it’s a commercial property generating significant income. Clear agreements about management and profit-sharing would be necessary in these situations.

Dividing multiple properties in a divorce can have significant tax consequences.  For example, selling a property might trigger capital gains taxes, transferring property ownership may have gift tax implications, and rental income or depreciation deductions may shift if one party retains income-generating properties. Consulting with a tax professional during the divorce process can help you understand and plan for these implications.

Beyond the financial considerations, property division can carry emotional weight. A family home may have sentimental value, while commercial properties may represent years of effort and investment. Negotiations can become contentious, particularly if both parties are emotionally attached to certain properties.

To navigate these complexities effectively:

• Work with experienced divorce attorneys who understand Illinois law and the nuances of property division.
• Consider hiring financial experts to analyze assets and liabilities.
• Be open to negotiation and mediation to reach a fair resolution without prolonged litigation.

Owning multiple residential or commercial properties can significantly impact a Chicago divorce case. Properly classifying, valuing, and dividing these assets requires careful planning and the guidance of qualified professionals. By understanding the legal and financial implications, you can better prepare for the challenges and ensure a fair outcome.

If you’re facing a divorce in Chicago and need assistance with property division, consult with a knowledgeable family law attorney, Jennifer R. Ward of Ward Family Law, LLC to protect your interests.  You can schedule a consultation with her directly by reaching out via email at jward@wardfamilylawchicago.com