Discord in a divorce can quickly escalate when it comes to dividing assets. Spouses will often find they have stark disagreements about what’s “mine” and what’s “ours,” and about what constitutes “fair.” On top of this, many people enter the divorce process with confusions or misconceptions about the division of assets.
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Before you enter the process, you should learn as much as you can about what assets can and can’t be divided, what’s shared and what isn’t, and what courts will consider before handing down a decision. Read about some of the most common confusions below.
1. If “what’s mine is yours and what’s yours is mine,” we should split it all 50/50.
Some states are “community property” states: this means that the law grants an exactly equal share of all income earned and assets (as well as debts) acquired during a marriage to both spouses, no matter the circumstances of the relationship and domestic arrangements.
Most states – including New York – are “equitable distribution” states. This standard grants far greater discretion to judges to determine what’s “equitable,” or fair, in distributing assets. A judge will consider many factors, such as each spouse’s actual contributions as well as earning potential, the value of a non-earning spouse’s contributions in the home, and anything else he or she considers relevant. These factors will apply to all marital property, meaning any income earned or assets acquired between the date the marriage began to the date one party filed for divorce. The final division of assets in a New York State divorce may end up close to a 50/50 split, but either spouse could, in most cases, receive anywhere between one and two thirds of the marital property.
2. My hobby items and collectibles are mine alone.
Let’s say you have a collection of rare Pez dispensers. You have Pez dispensers featuring the countenances of obscure Looney Tunes characters, popular country singers, minor league baseball players, and famous dictators. Throughout your marriage you’ve cherished this collection – the actual dispensers – much as the act of collecting: you’ve traveled to meet Pez dispenser dealers and enthusiasts all over the world, spending your income on travel and lodgings as well as on the plastic candy carriers themselves. But your spouse doesn’t share in the passion for Pez. Your spouse has said on many occasions that your hobby would be silly if it wasn’t such a money pit. In fact, the collection was probably one of the issues that led your spouse to serve you with divorce papers.
But now, your spouse’s attorney has hired an expert appraiser who’s signed an affidavit that your collection is worth hundreds of thousands. Unfortunately for you, your spouse is entitled to a share.
That doesn’t mean that a judge will divvy up the collection between the two of you (or, like Solomon, threaten to bisect or behead your plastic progeny). If a collection is one spouse’s exclusive passion, that spouse will almost always get the physical items. The other spouse, however, is entitled to a share of that collection’s equity. This would apply to cars, coins, artwork, and anything else that appreciates (even if he or she never “appreciated” the collectibles).
There are some exceptions. If you’re a passionate collector, part of your collection probably predates your marriage. Because anything either party acquired before a marriage or after one filed for divorce does not count as marital property, you could argue that some of the equity of the entire collection is yours alone. You will need to provide documentation proving that you acquired individual pieces in the collection outside the “marital” timeframe, and hire an expert assessor to help the attorneys and the courts to determine what portion of the equity is divisible.
3. I can avoid distribution by moving assets out of the state or giving them to friends.
When one spouse files for divorce, the court will issue an order freezing all the assets of both parties. This doesn’t mean that you’ll lose your credit cards, but it does prevent either party from selling significant assets, moving assets between accounts, or even giving assets away. If you violate this order, you could face severe penalties and risk losing the assets in question. Even if you moved an asset to an account in another state or even another country, that state or country will in almost every case recognize the jurisdiction of the New York court hearing your divorce case, and those out-of-state or offshore assets will be subject to distribution.
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4. My spouse isn’t entitled to my retirement.
Retirement plans count as marital property. This includes pensions like 401(k)s, 403(b)s, 457s, HR10s, IRAs, and Social Security benefits (if you’ve been married at least 10 years).
One common complication is that many retirement plans predate a couple’s marriage. In these cases, each spouse will be entitled to (usually) 50 percent of the portion of the other’s plan that accrued during the marriage. In most cases, 50% of the portion of the plan that accrued during the marriage is transferred out or paid to the alternate payee – the other spouse. Then the titled spouse retains the portion that was theirs prior to the marriage and 50% of the portion earned during the marriage.
5. My spouse isn’t entitled to the business I own and operate alone.
A business does count as marital property, though a court will consider actual ownership as well as individual investment of time, money, and energy in determining who gets what share. For example, if one spouse opened a business before marriage and continued to operate it alone during the marriage, the other spouse would be entitled to a small share. If the non-owner spouse took on some role in operating the business, such as a job in office management or sales, he or she would be entitled to a greater share, though probably less than 50 percent. If both spouses opened the business together and shared equally in investment and operation, each would probably be entitled to half.
In an amicable divorce, both parties might be able to continue to work together as business partners. With greater acrimony, this could be inadvisable and even disastrous. In these cases, it’s better for one spouse to buy out the other’s equity, or for both to sell the business and split the proceeds.
6. I’m entitled to equal equity of a home my spouse bought before we were married.
If your spouse bought a property before marriage, that is separate, not marital, property. As long as the deed stayed in his or her name, you will not be entitled to a share in its total equity, even if you lived there and payed off the mortgage together for many years.
However, if you have contributed to the mortgage (for example, through payments from a joint account), the court will consider the house a “commingled” asset. If it has appreciated over the course of your marriage, you will be entitled to a portion of that increase in value.
7. I’m entitled to my spouse’s inheritance.
Inheritance is not marital property and therefore not subject to distribution – even if a spouse received an inheritance during marriage. This could change, though, depending on how the spouse kept that inheritance. If it was a cash inheritance and the inheritor kept it in a separate account under his or her name only, and did not commingle any inherited funds with funds in a joint account, the court will not consider the inheritance to be marital property. If the inheritance was a piece of real estate held in the inheritor’s name only, and the inheritor made no improvements to the property using marital funds, it will remain separate property. However, if the inheritor put his or her spouse’s name on any cash account or property, the court may determine that all or part of the inheritance is marital property.
8. I can take back my spouse’s wedding ring.
The court considers a wedding ring to be a gift. While engagement rings go back to the respective givers in the event a couple calls off a marriage, wedding rings stay with the recipients.
There is one exception: if the ring was a family heirloom of the giver, it could go back to the giver (or the giver’s family) in the event of a divorce.
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The dedicated attorneys at Jean M. Mahserjian, Esq., P.C. offer sound and reliable counsel on issues that impact your home, your closest relationships, your finances, and your future. Our clients throughout Albany and Saratoga County come to us with questions regarding their rights and obligations, the costs and benefits of different courses of action, and their chances of prevailing in legal disputes. By arming our clients with knowledge, we keep them engaged and in charge, directing the strategies we employ to deliver the relief they seek. If you have questions about equitable distribution of debts and assets in a divorce, contact us today to set up a free consultation.
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