A court ruled that the stock that a Wife acquired in her father’s company was a non-marital asset. The Wife’s father started his company in 1967. At the time of the Wife’s divorce in 2014, the stock in her father’s company was worth $7,820,000.00.
The stock in the company became part of the father’s revocable living trust.The trust provided that upon the death of the father and mother, the stock would be divided equally between Cathy and her two brothers and the stock would be held in separate trust for each of the three children. When each child attained the age of 45 years of age, then each child could withdraw his/her share of the stock. The father also created a real estate trust that held the title to the company’s land.
The real estate trust named Cathy and her two brothers as beneficiaries. The property would be divided among the three children upon their father’s death. When the Wife’s father died in 1996, a dispute arose among the three children. The children entered into a settlement agreement in December 2005 where Cathy agreed to accept employment in the father’s company for life at a salary of $150,000 per year in exchange for waiving her interest in the revocable trust. As part of the settlement agreement, Cathy and her husband agreed to purchase all of the stock in the company and pay her two brothers the sum of $2,000,000.00. For more information, contact my firm.
- The Wife ( i.e.,Cathy) argued that the stock was non-marital because it was acquired via inheritance from her father.
- The Husband (i.e., James) argued that the Wife did not prove that she received the stock via inheritance and thus the stock is a marital asset since the Wife acquired the stock during the marriage in 2005.
The court ruled that the stock that Cathy acquired in her father’s company was a non-marital asset.
- There is a rebuttable presumption that all property acquired during marriage is marital property, unless a party can overcome this presumption by clear and convincing evidence.
- 750 ILCS 5/503(a) lists exceptions to the presumption of marital property. Section 503(a)(1) provides that non-marital property included “property acquired by gift, legacy, ordescent”. Section 503(a)(1) may apply where a spouse receives property as his or her share of a trust. In Re Marriage of Tathem 173 Ill. App. 3d 1072, 1080 (1988).
- Cathy signed a settlement agreement whereby she became 100% owner of the stock in her father’s company in exchange for paying $2,000,000.00 to her brothers.
- Courts favor settlement agreements where there is a reasonable basis to believe that expensive litigation may result that depletes the assets of the estate and tears families apart.
- Cathy acquired the stock when she was 46 years old and the trust allowed her to withdraw her share of the stock when she attained the age of 45.
- The property that Cathy used as collateral to acquire the cash to pay her brothers for the stock were titled in Cathy’s name individually and not jointly with her husband.