Whenever we meet with a new client in regards to a possible divorce one of the threshold questions we ask is – What do you and your husband own? In many cases this questions is much harder to answer then many people think, for various reasons. Even when we do establish the “marital estate” the concept of transmutation (or lack thereof) can muddy the waters for us. The presumption in divorce proceedings that if you bought it during the marriage, then it is marital property. Therefore, it is front and center in the division of the estate during the court proceedings. According to the Illinois Marriage and Dissolution Act certain property is deemed non-marital by virtue of the manner in which the spouse acquired ownership or if they owned the property prior to the marriage (just to use a couple of examples). Transmutation is a legal premise used to establish that what was in fact non-marital property has become part of the marital assets due to the non-marital asset being mixed in (commingled in the parlance of attorney-speak) with marital assets. The Divorce Act provides for a two-pronged analysis to determine if transmutation has occurred: (1) the non-marital assets must be commingled with marital assets; (2) the commingling must result in a loss of identity between the marital and non-marital assets. Most of the analysis (i.e. most of the contentious fighting) relates to the second prong of the test. Once the non-marital property has been mixed in there is a rebuttable presumption that the property is marital. This means that the spouse whose property is now being claimed as marital property (and thus subject to division within the divorce) can attempt to make efforts to show that the transmutation did not in fact occur based on facts and circumstances. One of the most difficult areas where this comes into play is the matter of money that winds up in the couple’s joint account. At what point does this money become marital property? At the moment of deposit? When they use the money for a joint asset (like paying the mortgage)? Well the law here in Illinois has instituted the “Conduit Rule” for such funds transfers which states that where the marital account merely serves as a conduit through which the non-marital funds flow, then no loss of identity in fact occurs and thus transmutation is not a valid claim. A factor used to determine transmutation of funds under the Conduit Rule is how long the funds were on the account (Husband transfers $75,000 from his non-marital account established from life insurance proceeds after his father’s death into a joint account then wires the money two weeks later for the purchase of a condo – very strong argument that the condo is not a marital asset). Take the same scenario in the prior sentence and keep those funds there for 18 months pending finding a condo to buy then the husband has a problem making the argument against transmutation. Another factor is the proportion of non-marital funds as opposed to marital if the non-marital funds are kept on account for a long period of time, marital funds are deposit in the joint account and moneys are consistently disbursed from the account during the marriage. When non-marital funds are mixed with marital money then the passage of time tends to create a logistical nightmare in proving which funds paid for what costs (marital or non-marital). Did that check for $5000.00 two years ago pay for taxes on the alleged non-marital cabin in Wisconsin or were those funds of the married couple (which scenario provides a complication in terms of keeping the cabin non-marital – but enough headaches for one blog post). The moral of this post is that if you have non-marital assets the best thing you can ever do is keep them separate and apart from anything joint. If you have a $500,000 account from your deceased grandmother keep that money on an account in your name. Pay for your expenses. Pay for your spouses birthday gifts. Go on a trip. Just don’t put the money in a joint account and leave it there. Because money complicates things and money gets complicated in a divorce the minute too many pairs of hands have access to it.