New York is an “equitable distribution” state, meaning a divorcing couple’s marital property must be divided equitably between the spouses. Equitable division refers to a “fair” division, not necessarily an equal one, but only “marital property” is divided. “Separate property” is a distinct category that is exempt from property division in a New York divorce, meaning you get to keep any assets that are considered “separate.” Disputes often arise over whether a particularly sought-after asset is considered marital or separate, however, which is why it is so important to understand what distinguishes these categories.
Many of Your Assets Obtained During Your Marriage Are Likely Considered Marital Property
In New York, marital property includes all income earned by either spouse during the marriage. Any asset purchased with income that is categorized as marital property is also generally considered marital property regardless of who predominantly uses or benefits from the asset.
Put another way, an asset is likely considered marital property if:
- The asset was obtained after you became married
- It was purchased using money you earned after you were married
Examples of assets that are usually categorized as marital assets if they meet the above requirements include:
- Real estate. This includes any residential or commercial property.
- Vehicles. Cars, motorcycles, boats, or other types of vehicles can all be considered marital property, no matter whose name is on the ownership documents or who primarily uses them.
- Furniture. This includes everything from beds and couches to dining sets and decor items.
- Jewelry. This can include necklaces, earrings, watches, and more.
- Appliances. Items like refrigerators, washing machines, dryers, and ovens can also be considered marital property.
- Investments. Stocks, bonds, mutual funds, and other financial investments made during the marriage using income obtained while married are typically considered marital assets.
- Retirement funds. Marital property extends to retirement benefits that either spouse accrues during the marriage. This includes pensions, 401(k)s, and IRAs. Even though these assets may be under one spouse's name, the portion accrued during the marriage is still generally considered marital property and subject to equitable distribution.
- Business interests. Any interests, shares, or stakes in a business acquired during the marriage using income earned during the marriage are typically categorized as marital property. Even the increase in value of a separately owned business can be considered marital property provided the increase is due to the efforts of the non-owning spouse during the marriage.
- Intellectual property. Patents, copyrights, and trademarks can all constitute marital property under certain circumstances.
- Artwork and collectibles. This includes items such as paintings, sculptures, antiques, and rare coin collections.
Marital debt, like assets, is also divided equitably. Debts incurred during the marriage, regardless of who is technically responsible for them, are considered marital debt. This includes credit card debts, mortgages, and car loans acquired after the marriage begins.
Separate Property Has to Stay Separate During a Marriage
In New York, separate property is formally defined as assets that are owned individually by either spouse and are thus not subject to equitable division in a divorce. In practice, separate property can refer to various types of assets that are obtained or owned under certain conditions before and during a marriage.
Separate property includes any assets, financial or otherwise, owned by either spouse prior to the marriage. This may include real estate, vehicles, personal belongings, or any financial investments. The key factor here is the ownership status of these assets before the marriage began. If they were owned exclusively by one spouse before the wedding, they can remain separate property throughout the marriage and are not necessarily subject to division during a divorce.
Note that assets obtained through the use of separate property during a marriage are also generally considered separate property. For example, if you exclusively owned a piece of real estate before you were married, sold that real estate during the marriage, and used the resulting funds (which were kept separate from any joint accounts) to purchase another piece of real estate, that new property would likely be considered separate property under New York law.
Any gifts or inheritances received by either spouse during the marriage are also considered separate property. This rule applies regardless of the source of the gift or inheritance. Whether it is from a family member, a friend, or an unrelated party, if a gift or inheritance is given specifically to one spouse, it remains their separate property.
Additionally, compensation received for personal injuries, except for loss of earnings, is categorized as separate property. Therefore, if a spouse receives a settlement or award from a personal injury claim, it is not typically subject to equitable distribution.
Separate Property Can Become Marital Property If You Are Not Careful
Separate property can become marital property in one of several ways, including a process known as "commingling." This occurs when separate property is mixed or combined with marital property to such an extent that it becomes impossible to distinguish one from the other. For example, if your separate property is a pre-marital bank account and during the marriage funds from marital income are deposited into this account, the entire account may become marital property. Similarly, if you use separate property, such as an inheritance, to pay off the mortgage on a marital home, that inheritance might be deemed to have been commingled with marital property and thus become subject to equitable distribution.
Another scenario that might transform separate property into marital property is through "transmutation.” This can occur when a spouse intentionally changes the nature of the property from separate to marital. For instance, if you own a home (classified as separate property) prior to your marriage but then add your spouse’s name to the deed after getting married, this might be interpreted as an intent to make the house marital property. Such actions can cause the asset to be viewed as a gift to the marriage, thus transmuting it into marital property.
Additionally, there are circumstances where the increased value of separate property during the marriage can be considered marital property, especially if the increase is the result of the efforts or contributions of the non-owning spouse. This is particularly true for businesses owned by one spouse prior to the marriage. If the other spouse contributes to the business, either by working in it or helping it grow and increase in value, that increased value may be considered marital property.
In light of these complexities, it is crucial to be aware and careful with the handling of separate property in a marriage. Unintentional commingling or transmutation can significantly impact the division of assets during divorce proceedings.
Our Attorneys Can Help Ensure Equitable Division in a New York Divorce
At Arnel Law Firm, our seasoned family law attorneys are equipped with over 35 years of legal experience and a deep understanding of New York's divorce laws. If your divorce involves disputes over who gets what, our team is prepared to guide you through the intricacies of equitable distribution. We meticulously analyze each client's unique situation, taking into account the complexities of marital and separate property. Our goal is to ensure that your rights are upheld and that the division of property is carried out fairly. We can fight to protect your interests and achieve your specific objectives, whether that involves securing your share of marital assets or safeguarding your separate property from unwarranted division.
Schedule a free initial consultation today by calling (718) 550-3024 or contacting us online.
