Equitable Distribution
A divorce proceeding will result in the division of property acquired during a marriage. The distribution will be governed by the law of the state in which you reside. Community property states permit the distribution of marital property on a 50/50 basis. States which adopt the principles of equitable distribution allow for the consideration of many factors in determining the allocation of assets. New York is an equitable distribution state, meaning that marital property will be divided among the spouses but not always on a 50/50 basis.
The division of property is a separate issue from maintenance, and child support. However, since the financial situation of each spouse is considered for purposes of determining support and distribution awards the issues can be considered together for settlement and judgment purposes. If spouses can not come to an agreement as to how their assets will be divided pursuant to a settlement or prenuptial agreement, the judge will make the decision which will be set forth in an order.
Not all assets are subject to the provisions of equitable distribution. Marital property, to be considered for distributive purposes, refers to all assets acquired during the marriage and prior to a separation agreement or commencement of a divorce proceeding, by either or both spouses. Separate property is not subject to equitable distribution or division pursuant to the provisions of community property. Any asset acquired prior to the marriage, an inheritance or a gift from a party other than the spouse and compensation for personal injuries are separate property. Additionally, an 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 or property described as separate property by written agreement of the parties are not subject to division during a divorce.
Any asset obtained prior to marriage is not subject to equitable distribution. However, it can be argued that the increase in value of a business or property acquired prior to a wedding is marital property if such appreciation was caused by the active participation of a spouse. For example, if your partner has founded a business prior to your marriage and the venture increases in value due to his hard work, the appreciation thereof will be considered a marital asset although the original value is separate property. However, passive appreciation, caused by market forces, inflation, or efforts of third parties will remain separate property. Generally, the family residence is considered marital property as both spouses reside in it and are responsible for the maintenance, economic or otherwise, thereof. Pensions, IRAs and businesses built up during the course of the marriage are considered marital property as are bank accounts, stocks and other similar investments. Gifts from parties not a spouse or assets inherited or obtained through personal injury litigation are separate property.
There are instances where separate property can be viewed as marital property. If separate property is commingled with marital property the distinctions between the two become unclear. For example, if an inheritance, separate property, is deposited into a joint account, marital property, the funds, or the increase in value thereof, could be considered for distribution purposes. Steps can be taken to avoid this issue, such as maintaining separate bank accounts for assets acquired via gift or bequest. Accurate records of all transactions relating to any gifts or testamentary bequests accrued during the course off your marriage are essential.
If no agreement between the spouses exists as to the distribution of assets, the court will determine how the property will be divided. Separate property will remain separate but marital property will be divided equitably between the spouses considering the circumstances of the case and of the respective parties. The court will consider the income and property of each party at the time of the divorce for distribution purposes.
Although equitable distribution, maintenance and child support are separate issues they can be considered together for settlement purposes. It might behoove you to accept less in the way of support in order to obtain a higher percentage of the marital assets or visa versa.