What is “marital property” and how does it come into play in estate planning?
This is a question that comes from a client in Palos Heights, Illinois.
The classification of property as “marital property” or “non-marital property” is important in a divorce setting and related property settlement. Marital property needs to be identified and valued in order to reach settlement and ultimately distribute all the property between the divorcing spouses. Some property may be considered “marital property” even though only one spouse is in title to the particular property.
When a person passes away, the classification as “marital property” or “non-marital property” becomes irrelevant. Precisely how property is titled determines how that property will be ultimately distributed. So, if property is titled in the name of only the deceased spouse, the ultimate distribution of the property will be determined by the deceased spouse’s Will, trust document, or (when there is no valid Will) the state rules on who inherits (technically called the “Law of Descent and Distribution”). The surviving spouse may have no rights to particular property that is titled solely it in the name of the deceased spouse if the Will leaves the property to someone else.
There are exceptions. First, a surviving spouse is entitled to a minimum distribution from the deceased spouse’s estate. This is called a “Surviving Spouse’s Award”. Under current Illinois law that amount is $20,000. (755 ILCS 5/-1) Secondly, a surviving spouse who has been cut out of a Will or left some minor amount may “renounce” the Will and instead be entitled to a percentage of the value of the probate estate. (755 ILCS 5/2-8)
Identifying how a client’s property is currently titled (e.g. jointly, separately or in trust) is one of the very first steps in the estate planning process. Title may need to be changed in order to accomplish a client’s goals of leaving the property to a particular person and/or avoiding the probate process entirely.