ASSET Rich and Cash Poor: Temporary Relief and the Sale of Marital Assets
It’s no secret that money can be a contentious issue during a marriage and even more so during a divorce, especially if you and your spouse could never agree how to spend it. You always wanted that Florida condo and that classic car, but now you’re getting divorced and can’t pay the bills. Some couples may be over invested in non-liquid assets, some might not be able to support two households on their income alone or in some unfortunately circumstances, the historic bread-winner may become unemployed. That new boat or the equity in the marital residence is not going to pay the bills. So what happens when you’re asset rich and cash poor?
While there are several options available to divorcing couples, one potential avenue is the sale of marital assets. This is usually not a very popular idea, but is sometimes necessary as certain assets are expensive to maintain or because you and your spouse cannot support yourselves on your current liquid assets. Prior to the 2016 amendments to the Illinois Marriage and Dissolution of Marriage Act, it was possible to ask for temporary relief under Section 501. However, since the Amendments effective January 1, 2016, Section 501(a)(3) specifically provides that the court has discretion to order the sale of marital assets as a form of temporary relief.
To be able to order the sale of marital assets, parties generally have to show that their income is insufficient to cover their expenses and there are no liquid accounts which can be drawn upon. Maintaining or maximizing what is left of the marital estate is of the utmost importance, so selling assets that are expensive to maintain, like a vacation home, classic car, or boat can be the most compelling argument. Not only do these assets usually carry significant equity, but maintenance costs are draining on the marital estate.
In the event that the court does order the sale of marital assets, there are several options of how the funds can be allocated. If immediate liquidity is necessary, the sale proceeds can be divided equitably as a pre-distribution of marital property. Although, there are some instances where one party’s spending habits can create a slippery slope when they have access to cash. Therefore, in some cases, it may make sense to hold any sales proceeds in an escrow account or a bank account that is subject to a temporary restraining order with periodic distributions to both parties. If one chooses to hold the funds, any order or agreement must be clear and determine if the funds are considered a property distribution or temporary support.
The bottom line is, when families go from one household to two, expenses no doubt increase. If a family is cash-poor, they need to come up with a temporary solution to support the family until the divorce has been finalized and the case resolved.