New York divorce courts divide marital property using a system of equitable distribution. Understanding what qualifies as marital property and how courts divide it can be vital to protecting your rights in divorce.
In this blog, we'll cover the distinction between separate and marital property, the factors New York divorce courts consider when determining marital property, and how to protect your property and avoid debt in a New York divorce.
Separate Property vs. Marital Property
In divorce, the court will divide the couple's property into two categories: separate property and marital property. Here's a closer look at both:
Separate Property
"Separate property" is property belonging exclusively to one party and not subject to division in divorce. Examples of separate property include:
- Property acquired before marriage: Any asset or property a person owned before the marriage remains theirs after the divorce.
- Gifts or inheritances: Property or money received as an inheritance or gift during the marriage is considered separate property as long as it's not commingled with marital assets.
- Property acquired after separation: Any assets acquired by one spouse after the separation date are considered separate property.
- Certain personal injury awards: Money awarded to one spouse as compensation for personal injury or other individual claims may be deemed separate property, depending on the circumstances.
Marital Property
In contrast, "marital property" is any property acquired by either party during the marriage, no matter who is named on the receipt or title. For example, marital property includes:
- Income earned during the marriage: Any income earned by either party during the marriage is categorized as marital property.
- Real estate purchased during the marriage: Property bought during the marriage, even if one spouse paid for it or it is in one spouse's name, is marital property.
- Retirement benefits and pensions: Even if the retirement accounts are in only one spouse's name, the value accrued during the marriage is typically marital property.
- Joint investments or businesses: Any investments or business interests made during the marriage are considered marital property.
Equitable Distribution in New York
Once marital and separate property are determined, New York follows the "equitable distribution" principle to divide the marital property. Equitable distribution means dividing the property fairly but not necessarily equally. The court aims to achieve an outcome that is just and reasonable, taking into account various factors that may affect the fairness of the division.
Unlike "community property" states, where assets are typically divided 50/50 between spouses, equitable distribution allows for a more flexible and individualized approach. For example, one spouse may receive a larger share of the property if they contributed more to the marriage regarding income or homemaking or if they have greater financial needs following the divorce.
The key idea behind equitable distribution is fairness, not equality. New York divorce courts consider each spouse's financial and non-financial contributions when dividing assets. The same process applies to the division of debts (discussed further below).
14 Factors NY Courts Consider When Dividing Marital Property
In New York Domestic Relations Law 236 B(5)(d), there are 14 statutory factors the court may consider in making a fair and equitable division of marital property. The factors include the following:
- The property and income of each party at the time of marriage and the time of divorce action commencement.
- The length of the marriage and the health and age of both parties.
- Whether a custodial parent needs to occupy or own the marital residence and use its household effects.
- Any loss of pension or inheritance rights upon the date of marriage dissolution.
- Any loss of health insurance upon the date of marriage dissolution.
- Any post-divorce maintenance awards.
- Any equitable interest in, claim to, or contribution (indirect or direct) to the acquisition of the marital property by the party that does not hold the title.
- The liquidity of the marital property.
- Probable future financial circumstances of each party.
- The difficulty or impossibility of evaluating any asset or interest in a corporation, business, or profession. The economic benefits of retaining the asset or interest intact and free from interference or claim by the other party.
- The tax consequences for each party.
- Any wasteful dissipation of assets by either party.
- Any property encumbrance or transfer made in contemplation of the divorce without fair consideration.
- Any other factor the court may expressly find to be just and proper.
For example, in dividing up an art collection, the court may consider which spouse contributed to acquiring or maintaining the collection and whether the collection was purchased with marital or separate funds. The court may assess the collection's value and determine whether it should be sold and the proceeds divided or if one spouse should receive the collection outright.
Dividing Debt in New York Divorce
Just as New York courts divide marital property, they also divide marital debts, including mortgages, credit card balances, car loans, and other liabilities that accumulated during the marriage. Rather than dividing marital debts 50/50, equitable distribution aims to divide debts in a way that is fair to both spouses, considering factors such as each party's ability to pay and their financial needs post-divorce.
In some cases, one spouse may end up with a larger portion of the debt, particularly if they have a higher income or greater assets. In other cases, the court may allocate debts based on which spouse incurred the debt, or which party benefited more from the expenses.
There are currently nine community property states (Idaho, California, Arizona, Nevada, Louisiana, New Mexico, Washington, Texas, and Wisconsin). In situations where the parties have lived in different states, which state's laws will apply regarding marital property?
In general, the law of the state where the divorce is filed will apply to the division of marital property. Therefore, if a couple moves to New York after years of living in another state, New York's equitable distribution laws will govern the division of marital assets, even if the property was acquired in a different state.
However, in some cases, if a couple resides in different states or different countries, determining jurisdiction over the divorce and property division can become complicated. It's important for individuals in such situations to consult with a divorce attorney familiar with interstate family law to ensure a fair property division.
Protecting Your Property and Avoiding Debt in Divorce
Pre-nuptial and post-nuptial agreements can help define the terms of property ownership and division in the event of a divorce. These agreements can offer clarity and reduce disputes down the line.
Additionally, keeping separate property separate and not commingling assets can help protect them from being classified as marital property. Always be cautious about taking on new debts in both your name and your spouse's name during the divorce process, as these debts will likely be considered marital liabilities.
Property division in divorce can be overwhelming, but understanding how New York equitable distribution works can help clarify the process. If you are facing divorce, our experienced New York divorce lawyers can help you understand your rights and protect your interests. Contact us today at 212.682.6222 or Connect Online.