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Interspousal Transfer of Separate Funds to Avoid Creditors
© 2004 National Legal Research Group, Inc.
ILLINOIS: In re Marraige of Barnett, 344 Ill. App. 3d 1150, 802 N.E.2d 279 (2003).
During the marriage, the husband conveyed a separate property account from his sole name into the wife's sole name to protect the account from certain creditors. The court affirmed a lower court decision holding that the husband acted with true donative intent, so that the transferred account was the wife's separate property. The court also affirmed an order preventing the husband from introducing further evidence on the parties' finances after a series of significant discovery violations.
The husband appealed from the portion of the trial court's judgment dissolving his marriage that determined that a bank account containing approximately $1.5 million, which had been the husband's separate account but which was later made a joint account and still later placed in the wife's name alone, constituted the wife's separate property under a theory of a donative transfer. The appellate court affirmed the order.
In arguing his appeal, the husband asserted that no donative transfer had been intended because he placed the name of the account in the wife's name alone in order to protect the funds therein from two malpractice actions then pending against him. He admitted, however, that when he made the transfer he no longer had an ownership interest in it. The wife testified that the husband gave her the account because he was much older than she, he wanted her to feel secure, and, at the time, he still cared for her. Under the Illinois Marriage and Dissolution of Marriage Act, when nonmarital property is transferred into some form of co-ownership, a marital property interest is presumed. Moreover, it was recognized that the converse was true. One spouse could make a gift to the other of marital property, which the receiving spouse could then claim as nonmarital. Even where title is placed solely in one person's name however, there is a presumption that the property is marital, although the presumption could be overcome by clear, convincing, and unmistakable evidence. In the present case, the lower court did not rely on the transfer alone. That court had found that there was clear and convincing evidence that the husband had a donative intent. By transferring the bank account to the wife's name alone, he gave up all dominion and control over the asset, which made it distinguishable, according to the court, from earlier Illinois case law wherein, in the context of a transfer of a house, the husband had retained control over the property and had made all necessary payments on the outstanding loan, as well as insurance, taxes, and maintenance costs. The appellate court stated that, since the husband was alleging that by asserting that he made the transfer in order to protect the funds in the account from potential creditors, he was either lying now or lying then as to what was his true donative intent. Such a decision was one for the trial court, and the court on appeal would not reverse it absent an abuse of discretion.
Another significant issue in the case was the trial court's sanction against the husband for failing to comply with discovery requests. Because of the husband's repeated refusals to answer motions for discovery in a timely fashion, the trial court barred the husband from presenting further evidence as to his financial condition after a specified date. The court of appeals found no abuse of discretion on the part of the trial court in issuing its sanction.
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