KELLY M. CURRO, ESQ.
DIVORCE IS NOT AS SIMPLE AS 'WHAT IS MINE IS MINE AND WHAT IS YOURS IS YOURS.'
The legal definition of a marital asset does not usually comport with common assumptions people have. Many assume that a marital asset is only an asset in joint names. 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.” New York State Domestic Relations Law Section 236 Part B (1) defines both marital and separate property. When considering divorce, these definitions, applied to the parties’ facts, determine what assets are part of the marital estate and will be subject to division.
In identifying what assets are marital, you need to determine when the asset was acquired. Even if it is in just one spouse’s name, if it was acquired after the date of marriage, it will be classified as marital. There are some exceptions, as the statute also defines separate property. Unless it can fit under one of the separate property definitions, in general all income and assets acquired after the date of marriage until a legal cutoff date, are considered marital assets.
I have heard many times in an initial client consultation that this will be a very simple divorce as the parties have never shared bank accounts and have kept all other assets separate from each other. When I then explain that New York State has its own definition of what a marital asset is, things may no longer be so simple. New York State treats the married couple as forming an economic partnership at the time they marry. It does not matter who earned it or invested it. This can be frustrating, when one spouse was a saver and the other a spender. The saver may have significant assets solely in their name, but the assets were earned entirely during the marriage. The other spouse may have saved nothing but the saver’s assets become part of the asset division.
This can become more complex when the asset is not as simple to value. The value of a bank account can be determined from reviewing a statement. What about the spouse that begins a business and grows it during the marriage? The other spouse did not take any part in the business. The other spouse was not a partner, shareholder or employee. The business, because it was acquired after the date of marriage is presumed a marital asset. This usually results during divorce proceeding in significant expenses to value the business and determine what share the other spouse is entitled to under the law. The business owner did not realize that New York’s Domestic Relations Law created an interest for his or her spouse based on the timing of the acquisition after the date of marriage.
During the marriage a spouse may inherit substantial funds from family. The legal definition of separate property under the Domestic Relations Law includes inheritance. If a divorce occurs later, the spouse that received the inheritance wants to claim it as separate property. However, during the parties’ marriage, if those inherited funds are put into a joint account or commingled with other marital funds (such as earnings during the marriage), they may not maintain the status of separate property.
Couples can opt-out of the New York State Domestic Relations Law’s definitions of marital property and separate property by entering into a written agreement that complies with the formality and legal requirements of the Domestic Relations Law. This can be done prior to marriage by entering into a prenuptial agreement. This can be done during a marriage by entering into a postnuptial agreement. Many couples getting married assume if they have no substantial assets coming into the marriage that there is no need for a prenuptial agreement. Once you know what assets are considered marital by legal definition if there is a divorce, you may want to change those definitions. You and your spouse can define by a prenuptial agreement what you want to be considered marital and separate assets. Once you are married if one spouse inherits substantial funds, you can make clear in a postnuptial agreement how they will be treated if there is a subsequent divorce.
The key is planning. By having knowledge of the legal definitions, you can then make a more informed decision of what planning to do before and during marriage. As every situation is different and how the law applies depends upon the specific facts, it is best to consult with an experienced attorney to obtain guidance for your unique situation. Laws also vary from state to state. Make sure you are consulting with legal counsel that can give advice in your jurisdiction.
This article is not intended as a substitute for consultation with an attorney to best understand and assess your personal needs and objectives.
Kelly M. Curro, Esq. is an attorney licensed to practice in New York State. She practices in the Capital Region with the law firm of Ianniello Anderson, P.C.