What Is Equitable Distribution?
Marital versus separate property
New York State Domestic Relations Law defines marital property “as all property acquired by either or both spouses during the marriage and before the execution of a separation agreement or the commencement of a matrimonial action, regardless of the form in which title is held.” This means that in the absence of a pre-nuptial or post-nuptial agreement defining property rights otherwise, that all property acquired after the date of marriage until a separation agreement is executed or a divorce proceeding is filed will be subject to equitable distribution in the event of a divorce. All forms of marital property, both tangible and intangible, may be subject to equitable distribution. In sum, any property obtained during the marriage that has a value can be subject to equitable distribution. A non-exclusive list of property that may be subject to equitable distribution is as follows:
- Real property
- Personal property
- Household furniture and furnishings
- Jewelry, art, antiques
- Bank accounts
- Savings accounts
- Life insurance policies
- Profit sharing plans
- Retirement assets
- Business interests
- College degrees, graduate degrees, professional licenses, professional certifications
- Patents, trademarks, copyrights
- Stocks (including options)
- Broker margin accounts
- Loans receivable and accounts receivable
What about separate property? New York State Domestic Relations Law defines separate property as:
- property acquired before marriage or property acquired by bequest, devise, or descent, or gift from a party other than the spouse;
- compensation for personal injuries;
- property acquired in exchange for or the increase in value of separate property, except to the extent that such appreciation is due in part to the contributions or efforts of the other spouse;
- property described as separate property by written agreement of the parties.
Separate property is not subject to equitable distribution, but a court may consider the fact that one spouse possesses a substantial amount of separate property in fashioning an equitable distribution award.
Therefore, property acquired before the marriage will remain your separate property provided that the separate property has not been transmuted to marital property. Separate property can be transmuted into marital property when the actions of the titled spouse demonstrate his or her intent to transform the character of the property from separate to marital.
Transmutation can occur when marital assets and separate assets are commingled such that the two are no longer separate and cannot be traced to their original sources. Putting a separate property asset in joint names can rebut the presumption that the property is separate unless it can be proven that the property was placed in joint names for convenience purposes only and the separate property asset is still traceable to its original source. Commingling separate property with marital property funds can result in separate property becoming marital property, but commingling only a part of separate property does not necessarily result in other separate property that has not been commingled being transmuted to marital property.
If you contributed separate property towards the purchase or improvement of a marital asset, you may be entitled to a separate property credit at the time the property is distributed if you can prove that your contribution came from a separate property source. In sum, you would be entitled to get back your original contribution.
If you or your spouse own a separate property asset and the non-titled spouse makes active contributions to the property or asset and the value of the asset increases, the non-titled spouse may be entitled to an equitable share of the appreciation value. The contributions must be active, meaning that you or your spouse must have actually done something in order to cause the property to increase in value. Increase in value over time due to market forces or other factors outside the control of either party do not qualify as active contributions.
The term “equitable distribution” in the context of divorce refers to the distribution of marital property between the parties. Equitable is not synonymous to equal; courts must consider the totality of the circumstances and the realities of the marriage relationship. New York State law sets forth a number of factors which courts must consider before fashioning an equitable distribution award of marital property, as
- the income and property of each party at the time of marriage, and at the time of the commencement of the action;
- the duration of the marriage and the age and health of both parties;
- the need of a custodial parent to occupy or own the marital residence and to use or own its household effects;
- the loss of inheritance and pension rights upon dissolution of the marriage as of the date of dissolution;
- the loss of health insurance benefits upon dissolution of the marriage;
- any award of maintenance;
- any equitable claim to, interest in, or direct or indirect contribution made to the acquisition of such marital property by the party not having title, including joint efforts or expenditures and contributions and services as a spouse, parent, wage earner and homemaker, and to the career or career potential of the other party;
- the liquid or non-liquid character of all marital property;
- the probable future financial circumstances of each party;
- the impossibility or difficulty of evaluating any component asset or any interest in a business, corporation or profession, and the economic desirability of retaining such asset or interest intact and free from any claim or interference by the other party;
- the tax consequences to each party;
- the wasteful dissipation of assets by either spouse;
- any transfer or encumbrance made in contemplation of a matrimonial action without fair consideration;
- any other factor which the court shall expressly find to be just and proper.
In most circumstances, marital property will be divided in an equitable manner such that each spouse receives his or her equitable share.
However, even when equitable distribution is appropriate, courts also have the power to refrain from dividing certain marital property assets where division would be impractical or burdensome or where the distribution of an interest in a business, corporation or profession would be contrary to law and instead order a distributive award be made to the party not receiving a share of the property. This scenario is most often seen with respect to advanced degrees, professional licenses, business interests and professional practices. In these cases, it is important that both spouses receive their equitable share of the property, but equally important that one spouse retain the property in his or her sole possession in order to keep the business or practice up and running, or because that spouse holds the degree or license.
The court may also make a distributive award to supplement, facilitate or effectuate a distribution of marital property.
Part separate, part marital?
Situations will arise where property can be characterized as part separate, part marital, meaning that some of the property was acquired before the marriage, and some during the marriage. In these situations, an expert appraiser or evaluator must be hired in order to perform a detailed analysis of the property. The expert will ascertain the pre-marriage value and the post-marriage, pre-commencement value.
What is my property worth?
If the parties cannot agree to stipulate to a value of an asset, the services of an appraiser, actuary, or expert may be necessary. The expert will ascertain the pre-marriage value and the post-marriage, pre-commencement value. Neutral experts may be appointed by the court. The parties may also mutually select an expert of the their choice or hire separate experts to perform a valuation of the property. The court may select a date for the valuation of property or the parties may agree and stipulate to the date of valuation.
At Westchester Matrimonial, our experienced attorneys can assist you with any issues related to separate property, marital property, or valuation of property. Please contact us with your inquiries.