Recklessly spending money before a marriage is completely over could land a spouse in trouble in divorce proceedings. All spouses must obey the divorce order once the judge has entered it, but before a divorce is finalized, each spouse has the obligation to preserve marital assets to the fullest extent possible. If not, they could be considered to be dissipating marital assets and may face punishment from the court.

The Legal Definition of Dissipation in Illinois

Dissipation does not mean simply wasting marital assets. The Illinois Supreme Court had defined dissipation as the "use of marital property for the sole benefit of one of the spouses for a purpose unrelated to the marriage at a time that the marriage is undergoing an irretrievable breakdown."

While the classic example of dissipation is spending money on a new lover, the definition could also apply to situations that reach beyond that. For example, Illinois courts have even found dissipation when one spouse donated money to a church. If the spouse made a large purchase for themselves, or they failed to properly tend to marital assets, they could be found to be responsible for dissipation.

Professionals may receive stock options as part of their compensation package. These are considered marital assets that are subject to equitable division in an Illinois divorce. There are several challenges associated with valuing these assets. The divorcing spouses often disagree about the value of stock options.

There Are Pricing Formulas that Can Be Used

For many employee stock options, you simply cannot look to exchange-traded derivatives as a pricing guide. The options are too customized, and the time horizon is too far into the future, to get any guidance from the market. Most options are valued using the Black-Scholes formula. This is an established methodology for pricing options that has been in use for five decades. This is the formula that is used in most divorces, although how it is used will be up for debate.

There Are Different Inputs Into the Black-Scholes Model

The Black-Scholes model considers the following inputs:

 Divorce can be demanding and taxing, especially when there is suspicion of hidden assets. The main reason someone would consider hiding their assets and finances during a divorce would be to minimize any financial losses that a spouse may suffer due to the split. 

Having a divorce attorney by your side can help you uncover important documents and financial records so your divorce settlement is based on accurate financial information. While a spouse may be able to ask for these things alone, there is no guarantee that they will be given truthfully. An attorney can request these documents using discovery tools such as subpoenas and requests for production. If the spouse does not comply or hides anything, they can risk serious consequences. 

Common Ways Spouses Hide Assets

It is not always easy to spot when a spouse may be hiding assets. The following may be signs that a spouse is hiding assets or lying about income during divorce: 

Illinois is an “equitable division” state, meaning that marital property and debts divided by the court do not need to be divided equally, but rather the law requires that it be divided equitably. Property division may be negotiated and agreed upon by the spouses or decided in court. While the division of assets does not need to be equal, it should be fair, regardless of marital factors such as who was the household provider or who purchased what. 

Marital Property vs. Non-Marital Property 

When evaluating assets, divorcing spouses may be able to divide their assets into two categories: material property and non-marital property. Assets that are considered marital property are all things that were acquired during the marriage and before the couple was legally separated. Assets considered non-marital property are all things acquired before the couple was legally married. Assets appointed through inheritance or gifted during a marriage can also be considered non-marital property. 

Dividing Different Types of Property

Deciding on the division of properties is going to lead to difficult conversations. When deciding what is fair for both parties, it is important to go into these conversations with a level head and willingness to negotiate. Knowing the different types of property that will be discussed will make these conversations easier to settle. 

Many people who have friends in other states who have gone through a divorce can are surprised to learn that property division during divorce varies from state to state. Community property laws dictate a 50-50 split of all marital property. Illinois is among the majority of states using equitable division laws as opposed to community property laws. Equitable distribution involves a fair but not necessarily equal distribution of marital assets.

Illinois law can be rather complex when it comes to determining the distribution of marital property, and a number of factors can influence court decisions in these cases. The value of property, the spouses’ earning capacity, and each party’s contribution to the marital estate can all be factors that dictate how property will be distributed.

How Equitable Distribution Applies to Your Divorce

Courts only utilize equitable distribution when divorcing spouses cannot negotiate an agreement regarding their marital property settlement. Equitable distribution will only apply to marital property, or the property that was acquired during the marriage. It does not include property obtained during the marriage by gift or inheritance, which is considered separate property.