In order to make you fully aware of the consequences of the division of marital real estate in connection with the dissolution of your marriage, we need to develop certain information. You can help us discover the relevant facts that will shed light on the information we need and will influence our recommendations and, ultimately your decision. Some of this information can include: how the property is titled, what debts or other specific obligations exist that are liens against the property and will encumber its title, how is the property being used, and what is the value of each parcel of real estate.
- How is the property titled?
Real estate that is part of your “marital estate” typically consists of property titled in your name, in the names of you and your spouse jointly, in an Illinois land trust, or in an entity such as a corporation or limited liability company. The easiest way to discover how title is held is to locate the title insurance policy issued when the property was acquired. Using the information we derive from that policy, we will order a “tract book search” from a title insurance company to get updated information on your title. This is relatively inexpensive and will provide a significant portion of the information we need.
If the real estate is titled in your or your spouse’s name only and needs to be transferred as part of an agreed or court-ordered property settlement, the spouse holding title will typically transfer title by the execution of a statutory “quitclaim deed” by which he or she transfers only all or part of whatever interest he or she owns to the receiving spouse. Unlike a “warranty deed” by which you acquired the real estate, a “quitclaim deed” includes no warranty of good title – it simply transfers whatever “right, title, or interest” that is owned by the transferring spouse. In order to notify the world of the transfer of title to Illinois real estate by deed, every deed – including the “quitclaim deed” described above — must be recorded with the County Recorder as part of the public records in the county where the real estate is located.
Owners of Illinois real estate who wish to conceal their names from the public records often opt to have the real estate titled in the name of a bank or title company “as trustee under trust agreement dated ___ and known as trust number ______”. This language signifies the use of an Illinois land trust agreement by which the land trustee is a mere title holder with no powers to convey or otherwise deal with the real estate. The land trust agreement will contain the names of the beneficiaries (you and/or your spouse) and the holders of the “power of direction” by which they may direct the trust to act. In order to discover the details of the land trust arrangement, it is necessary that we obtain a copy of the land trust agreement. If you cannot do so, we can subpoena the land trustee to obtain the information.
If the real estate is owned by an entity such as a corporation or limited liability company, the entity will have to execute a deed to the receiving spouse. Similarly, with a land trust, we will have to obtain and examine the records of the entity, which can be obtained by a subpoena if necessary.
It is important to know that the County and possibly the municipality wherein the property is located, charges a recording fee and a transfer tax for all such deeds and possibly transfers of beneficial interests under land trusts. The “transfer tax” can be expensive and is not necessarily exempt simply because the real estate is transferred as part of a dissolution of marriage. We assist our clients in calculating and allocating the burden of this transfer tax.
- What debts or other specific obligations exist that are liens against the property and will encumber its title?
This information is important. Any liens against the property will have to be satisfied if the spouse who is to receive sole title to the property can be assured of being able to immediately sell and convey a clear and merchantable title. The most typical liens or encumbrances are those created with your consent (such as a mortgage) and those arising by operation of law (such as the entry of a judgment against one or both spouses holding title, the recording of a federal income tax lien against either spouse or the perfection of a mechanics’ lien against the property by a contractor who was not paid for the labor or material furnished by the contractor). Additionally, certain obligations such as real estate taxes, insurance and utility bills that are billed in advance or arrears can be prorated so that each spouse pays his or her fair share. The tract book search we will order will list any and all liens and encumbrances against the property, so we can be informed, and can inform you, of the risks inherent in a talking title for the property and of the steps to be taken to deal with each specific lien. In addition, the existence of a lien will affect the value of the property to be transferred to a recipient spouse (see par. 3 below)
- How is the property being used?
If it is being used as a residence by the spouses, there should be an agreement regarding the contents of such property. If the property is an investment by the spouses (for example, a residential apartment building, a strip shopping center, or a commercial warehouse) each spouse should have access to historical and current financial statements, to enable them to evaluate the net profit or loss generated by the property. Additionally, both spouses must have access to all outstanding leases or service contracts affecting the property. This information can sometimes (but not always) be gleaned in part from income tax returns filed by the entity owning the property or from management reports if the property is externally managed. Our attorneys are knowledgeable in dealing with such properties and will know what information to seek to enable you to make solid decisions regarding whether or not to demand sole ownership of the property or to concede it to your spouse.
- What is the value of each parcel of real estate?
If the parcel is of sufficient worth to require it, we work with a network of certified real estate appraisers for all types of properties in order to get an order of magnitude to estimate its value. Obviously, any appraisal must take into account any liens against the property (as discussed in par.2 above) as well as market conditions and other relevant statistics. However, it must be remembered that any appraisal is nothing more than an educated opinion as to what a willing buyer will pay and what a willing seller will accept. Therefore, if you see an appraisal that does not satisfy your gut feeling of the worth of the property, we can always demand that the property be listed for sale instead of allocated to either spouse.
Howard C. Emmerman, Commercial and Family Law Partner
For more information on Mr. Emmerman, please visit: beermannlaw.com/team/howard-c-emmerman.
