New York divorce laws recognize that when a person gets married, they may already own property or have assets such as savings or investments. A person’s spouse may also enter the marriage with property, cash, and/or investments. The property a person owns at the time they marry is referred to as “separate property” in legal terminology.
A person and their spouse most likely acquire more real property and other assets during the marriage. The real property and other assets that a couple acquires during the marriage are what is referred to as “marital property.”
Furthermore, the marital property obtained during the marriage is referred to as the marital estate. Spouses may exclude certain property from the marital estate by entering into a marital agreement, such as a prenuptial or postnuptial agreement.
If there is no martial agreement regarding property, the property that spouses acquire during their marriage is presumed to be marital property. There are exceptions for inheritances, personal injury awards for pain and suffering, worker’s compensation, and third-party gifts.
What Is Marital Property and What Is Separate Property?
When filing for divorce in New York, a person wants to know how property is characterized. Marital property generally includes the following:
- Items purchased during the marriage, except for any contributions of one spouse’s separate property that they may have made to marital property, such as paying part or all of the down payment on real estate with separate property funds
- Personal property, such as cars, boats, airplanes, and furniture that the spouses acquire during the marriage
- Cash, securities, bank accounts, retirement accounts, and pensions acquired during the marriage
- Advanced educational degrees and licenses to engage in a business or profession acquired during the marriage, e.g., a license to practice medicine
- Gifts the spouses make to each other during the marriage.
Separate property includes the following:
- The real property a spouse owns before marriage
- Personal property that a spouse owns before marriage
- The real and/or personal property a person acquires through inheritance or as a gift from someone other than a person’s spouse during the marriage
- The compensation a person receives for personal injury during the marriage that is not related to lost wages or loss of earning capacity during the marriage
- The property a person acquires in exchange for their separate property during the marriage
- Any increase in the value of a person’s separate property, except to the extent that the increase is due to contributions or efforts of a person’s spouse or themselves during the marriage
- Property is specified as separate property in a written agreement between the spouses.
Also, when a person or their spouse files for legal separation or divorce, they have every right to agree on the division of marital property and separate property between them that they want. In fact, it is preferable to do so because it saves the couple money that might otherwise be spent on attorney’s fees.
If spouses are not able to agree, the court decides after a trial which property is separate property and which property is marital. The court would also decide what would be a just and equitable, but not necessarily equal, division of the marital property. The court might also rule on whether specific items of property are separate or marital if there is an issue in that regard.
Moreover, unless a person has mixed up or commingled their separate property with marital property or separate property otherwise changes character into marital property, a person’s separate property remains their separate property after the divorce, and so does your spouse’s separate property. A court would affirm that a person’s separate property belongs to them and their spouse’s separate property belongs to their spouse.
What Happens if Spouses Commingle Their Separate Property with Marital Property in New York?
A person may mix their separate property with marital property. In this case, the court may consider part or all of the separate property to have been transformed into marital property and divide it between the spouses.
This rule does not generally apply to real estate, particularly the marital home, where a separate property contribution to the purchase remains the separate property of the spouse who contributed it. A person should receive the return of their separate property contribution after the marital house is sold.
Some of the scenarios in which properties with different characters are mixed are as follows:
- A person inherits stock and deposits it into a jointly-owned investment account to which both spouses have contributed
- A person brought a valuable antique chair into the marriage, but it was in disrepair. They then encourage their spouse to get it back in shape for sale. The spouse has the chair renovated using marital income so that at the time of the divorce, the chair has dramatically increased in value. A court may consider the increased value of the chair to be marital property due to the spouse’s direct contribution to improving its value
- A person has a separate bank account from before their marriage in their name. After getting married, the person adds their spouse’s name. Adding the spouse’s name to the account creates a presumption that a gift of one-half the value of the account was made by one spouse to the other. The entire account has been changed to marital property.
How Is the Marital Property Divided in New York?
Once the court evaluates the whole marital estate, it starts the process of valuing and then dividing the marital property. New York courts must divide the marital property “equitably.” This means doing so in a fair manner, considering the circumstances of the case and the spouses involved. It does not mean “equally.” There is no statutory requirement for a 50/50 split of marital property in New York.
The court takes into account 13 specific factors in determining the equitable distribution of marital property in a divorce as follows:
- The income and property of each spouse at the time they get married and then at the time they file for divorce or separation
- The length of the marriage
- The age and health of both spouses;
- If the spouses have minor children, the need of the spouse who has custody of the children to stay in the marital residence and make use of or own contents of the household
- The loss of inheritance and pension rights of each spouse due to the divorce
- The loss of health insurance coverage by a spouse because of the divorce
- Any award of support or maintenance the court makes
- Whether one spouse made contributions to marital property that the spouse does not have title to; for instance, where one spouse assists the other spouse to increase their ability to earn more money by getting a degree or certification
- The liquid or non-liquid character of all marital property (“liquid” means that the property can easily be converted to cash)
- The probable future financial prospects of each party
- The difficulty of determining the value of certain assets, such as interests in a business, and whether one spouse should be awarded the business so they may operate it interference by the other spouse
- The tax consequences to each party
- Whether either spouse has wasted or used up any of the marital property during the divorce proceedings
- Whether either spouse transferred or disposed of marital property at less than market value, knowing that the couple would divorce.
Even after examining these factors, the court may take into account “any other factor” it deems to be fair in arriving at an equitable distribution of marital property. Also, certain types of property cannot be divided, and a part of it can be awarded to each spouse, such as real property.
In that situation, the court may make a “distributive award.” A distributive award is a money payment made by one spouse to the other, paid either in a lump sum or over time to compensate for the property which could not be sold and distributed in part to one spouse and in part to another.
How Are Real Property Improvements Treated in a Divorce?
The answer to this question depends on how the improvements were financed, whether with separate assets or marital assets, and the effect they had on the value of the property. Of course, it also depends on whether the property improved was separate property or marital property when the improvements were made.
Appreciation in the value of separate property can become marital property if the appreciation is due to the contributions or efforts of the spouse who is not the owner of the separate property.
In one case, the spouses recognized that their residence had increased in value by about $100,000 between the date of their marriage and the date when they filed for divorce. The spouses had spent $185,000 of marital funds during the marriage to improve the home. The renovations were paid for with marital funds, but one spouse had been more personally involved in the renovations than the other.
An expert appraisal showed that the improvements accounted for only about $11,000 of the increase in value. The court took into consideration the fact that the 2 spouses had different levels of involvement in the renovation. It also considered the fact that most of the appreciation of the house was passive and based on market forces rather than the improvements that were made. The court awarded the wife only 15% of the value of the property’s appreciation.
This case shows the careful type of analysis that a court would make and the factors it would consider in making its final decision.
It is important to remember that debt may also be separate and marital and must be divided when spouses divorce. So, another situation is that in which marital assets, e.g., the income of the spouses during the marriage, are used to pay off a debt that one of them incurred before the marriage, e.g., a mortgage loan for separate real property. In this case, the other spouse can recover their equitable share of the marital funds used to pay the debt.
In one case in New York, payments from marital funds had reduced the husband’s indebtedness on his separate property. A court ruled that the wife was entitled to half of the value of this reduction of the husband’s separate debt.
When Do I Need to Contact A Lawyer?
If you have an issue with improvements to real property made during your marriage, you want to consult an experienced New York divorce attorney. LegalMatch.com can connect you to an experienced lawyer who can collect all the relevant information, analyze your situation, and recommend the right approach for protecting your rights.
