In New York divorces, there are three categories of property: marital, separate and those that contain components of both
What qualifies as marital property?
Marital property includes property acquired by both parties or either spouse during the course of marriage, regardless of the name on the title. This does not include certain acquisitions, for example bequests or personal injury recoveries. Dividing marital property can become contentious when spouses think of a business or a retirement fund as “theirs alone” when in fact it’s not and must be distributed equitably (unless otherwise stated in a prenuptial agreement). Many assets people assume to be “separate” do NOT fall in the legal category of separate property.
Separate property as a legal category includes property and assets acquired before marriage, inheritance, personal injury recoveries, and gifts from a non-spouse to a designated spouse. Separate property can seem easy for the parties themselves to identify, but this isn’t always true. Simply having an account titled in your name alone does not make the property separate. It takes expertise to identify and protect separate property, particularly since separate property can easily be converted into marital property over time.
What qualifies as separate property?
First, here’s a snapshot of some of the assets and property deemed separate in New York State:
· Property either spouse acquired before marriage. This includes cash savings, investments, art, jewelry, and real property.
· Property either spouse received individually as an inheritance.
· Property acquired by gift, legacy, or descent from someone other than the spouse, either before or during marriage.
· Property acquired in exchange for property acquired before the marriage or in exchange for property acquired by gift, legacy, or descent. Examples: using the proceeds of sale of a pre-marital house to purchase a new home.
· Compensation for personal injury not related to loss of wages or earning capacity.
· Property characterized as separate property in a valid prenuptial agreement or other written contract.
· Property acquired from the proceeds or appreciation in value of separate property—unless that appreciation is partly due to efforts or contributions of the other spouse.
· Property acquired by a spouse after a the date of commencement (the date the Summons for Divorce is filed).
How separate property can become marital property
Separate property includes factors that can add complexity such as:
“Commingling.” This occurs when separate property becomes mixed with marital property to such an extent that the separate-property status can no longer be identified. The commingled asset becomes a marital property. This issue can arise in circumstances such as:
· when funds in a separately titled savings account also contains deposits from an annual bonus during the marriage
· a vacation home was owned prior to marriage but titled was transferred to joint names and your spouse made an investment in its renovation
· inherited funds from a family member were deposited into a joint account and used the funds for daily living expenses
· you purchased a home with your spouse after marriage, but you used your inheritance as a down payment.
· you inherited stock but deposited it in a jointly owned investment account.
Tracing your separate property
This represents a challenge for many people during the divorce process. You must provide your attorney with documents demonstrating that not only you owned the asset (whether it is real estate or funds in an account) prior to the marriage, but also that you kept it separate from the date of your marriage to the date when the Summons for Divorce was filed or that we can trace what happened to the funds sufficiently to convince the Court that you are entitled to a separate property credit. For people who have been married for a longer time, the records may be hard to obtain. If you haven’t kept copies of statements and other documents supporting your separate property claim, most financial institutions will not be able to provide you copies. They are only required to maintain records for 5 years, although most retain documents for seven.
What if there is an increase in the value of separate property?
Whether this is stock appreciation or real estate appreciation, its status as separate property depends on how its value appreciated and if either you or your spouse, or both, actively worked to increase the value.
The importance of protecting your separate property
In a divorce, you want the process of identifying separate vs. marital property (and dividing marital property) to be done correctly. Its impact on your post-divorce life can’t be overestimated. Therefore, you want to be sure you don’t make financial mistakes you can’t reverse.
Think of it this way: Family law attorneys with a CFL credential can understand financial complexity quickly, reduce court time or avoid litigation, and deliver the best possible legal settlement. This is important for any divorce and is especially crucial for high-asset and/or financially complex cases.
Finding an experienced and financially savvy attorney is crucial from the beginning of your divorce. As a matrimonial attorney who has handled many financially complex and high-profile cases in New York State, Faith Miller has the experience, knowledge, and judgment to achieve the best financial outcome for you. “I have 35 years of experience and additional training as a Certified Financial Litigator (CFLTM),” she notes. This important differentiator means Faith has advanced training in accounting, taxation, investments, valuation, forensics, and compensation.
Remember: Every divorce is different and the value of assets and property can be difficult to pinpoint, even in amicable divorces.
Are you ready to meet with an experienced family law attorney who has over 30 years of experience and the advanced training of a Certified Financial Litigator?