Part 1: Common Financial Issues During a Divorce

Part 1: Common Financial Issues During a Divorce 

Divorce has many financial issues to consider. Major issues addressed by the court include support (child support and spousal support) and “Equitable Distribution”. To settle the issues involved in the Equitable Distribution, you will need to address your assets and debts..

New York is an “Equitable Distribution” state. Equitable Distribution addresses the allocation of marital property between spouses. 

Either through agreement, or after trial, marital property is divided during the divorce process. 

The first issue to be addressed is a determination of “Separate Property” versus “Marital Property”. Before property is divided in a divorce, the class of asset or debt must be determined. 

Understanding Marital Property 

Marital property refers to property that a couple acquires during their marriage.

Marital property includes: 

• Real property, such as a house or condominium you and your spouse purchased during the marriage. (Note: If premarital or other separate money is used, that money will be considered separate).
  
  
• Personal property, like cars and furniture that you and your spouse purchased during the marriage.
  
  
• Cash, securities, bank accounts, retirement accounts and pensions acquired during the marriage, or the increase in these accounts during the marriage. (Note: the law addresses passive and active increases in these types of assets. For example, if an increase is due to contributions or efforts of your spouse or self during the marriage. This will be addressed in more detail below).

How is Property Distributed? 

Once the marital assets and debts are determined, the parties will begin the process of valuing and then dividing their assets and debts. If the parties cannot agree during this process, the court will divide the marital assets and debts “equitably” after a trial. 

Dividing the property equitably means, in essence, making a determination after considering the circumstances of the case. Dividing assets and debts equitably does not necessarily mean equally.

There is no statutory requirement of a 50/50 split of marital property.

In New York, property is not automatically divided in half and distributed equally to each spouse. Instead, the court takes into account 13 specific factors in determining the equitable distribution of property:

1. The income and property of each spouse at the time of the marriage, and at the time of the divorce;
2. The length of the marriage and the age and health of both spouses;
3. If there are minor children involved, the need of the spouse who has custody of the children to live in the marital residence and to use or own its household contents;
4. The loss of inheritance and pension rights of each spouse because of the divorce;
5. The loss of health insurance benefits of each spouse because of the divorce;
6. Any award of support or maintenance the court will be making;
7. Whether one spouse made contributions to marital property that the spouse does not have title to; for example, where one spouse helps the other spouse increase their ability to earn more money by getting a degree or certification;
8. The liquid or non-liquid character of all marital property (“liquid” means that the property can easily be converted to cash);
9. The probable future financial circumstances of each party;
10. The impossibility or difficulty of determining the value of certain assets, like interests in a business, and whether one spouse should be awarded the business so it can be run without interference by the other spouse;
11. The tax consequences to each party;
12. Whether either spouse has wasted or used up any of the marital property while the divorce was ongoing;
13. Whether either spouse transferred or disposed of marital property at less than market value, knowing that the divorce would be happening.

Unless you have mixed or commingled your separate property with marital property or separate property is transmuted into marital property, your separate property remains yours after the divorce, and so does your spouse’s separate property.  The court will confirm that your separate property belongs to you and your spouse’s separate property belongs to your spouse.

Even after considering these factors, the court may take into account “any other factor” it finds to be fair in arriving at an equitable distribution of the marital property.  

Determining Marital Property and Separate Property 

Marital property defined as “all property acquired by spouses during their marriage, no matter whose name is on the title of the property. Generally, once the spouses are separated permanently, property acquired is no longer marital property. 

Separate property is the property spouses acquired before the marriage. It is the individual property that courts have no authority to distribute during the dissolution of a marriage.

Under the Consolidated laws of New York § 236, separate property not only includes property acquired before marriage but also property acquired by bequest, devise, descent, or gift during the marriage. Property that spouses agree to exclude from marital property by signing a prenuptial or a postnuptial agreement will be separate property. 

The issue of separate and marital property and not black and white. For example, there are times in which separate property can become marital property. One situation is if you mix or commingle your separate property with marital property, the court may consider part or all of your separate property to be marital property, and divide it up with your spouse. 

Examples:

• When you inherit stock and deposit it into a jointly-owned investment account, the courts may consider the money to be marital property, which will then be divided between you and your spouse.
  
  
• You owned a home before marriage, and its condition was extremely poor. After marriage, you and your spouse resided in the home and used marital funds to restore it. Perhaps, your spouse was  involved in the restoration process.  In this situation, a court would consider the marital funds that were used to improve the home, as well as your spouse’s direct contribution to increasing its value in determining equitable distribution.
  
  
• Prior to your marriage you had a bank account solely in your name. Once married, you added your spouse’s name to the account and you both then used it as a shared account, (both adding and withdrawing funds from the account). By adding your spouse's name, and commingling money, there becomes a presumption that one-half the original value of the account was a gift, making the account in its entirety marital property. 

Dividing Marital Property

After a determination or agreement is made as to what property is separate and what property is marital, an “equitable” division of such property will have to be made and the marital assets and debts will be divided. The separate property will be allocated to the spouse to whom it belongs.

Conclusion 

A divorce proceeding can be a very emotional time for the parties. Addressing ownership of assets and the responsibility for debts can become the focus of disagreements or hurt feelings. It may benefit you to find an attorney that you trust to guide you through this process.

Call the Law Office of Dana Stricker, PLLC, for a free consultation.