What Money Do I Keep After My Divorce?
When couples divorce the two primary concerns are custody (assuming children are involved) and finances. In my discussions with clients, opposing counsel, friends and family, the two most commonly discussed financial issues, are the ones with ongoing applications, known as alimony/ maintenance and child support.
To resolve the division of existing static financial interests, there is a principle known as equitable distribution, which means to fairly divide marital assets. In 2019, when the news of McKenzie Bezos left her marriage with 38 billion dollars, of course equitable distribution was in play.
Theory
The hallmark of equitable distribution is that both parties are owed fairness when dividing finances, the economic and noneconomic contributions of each spouse should be considered.[1] The foundation is that marriage is an economic partnership and upon divorce, its assets, should be fairly divided.[2]
Is All Property Divided In a Divorce? Marital v. Separate Property
In a divorce action not all property is “marital property” set for division. Some property can be considered separate property[3], such as:
(1) property acquired before marriage or by bequest, devise, or descent, or gift;
(2) personal injury awards;
(3) 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;
(4) property described as separate property by a prenuptial agreement.
Any of the four categories above would not be part of equitable distribution.
Presumption of Marital Property
All assets acquired during marriage are presumed to be marital property. It is the duty of the party claiming separate property status to prove as such.[4] For instance, in one case the court found that to appropriately determine ownership of art, invoices could not be proof of whether art was separate property according to the prenup.[5] Court said it is just a detailed statement of nature, quantity, or cost of goods so it is never regarded as evidence of title.
Agreement: Prenuptial or Postnuptial Agreements[6]
Prenuptial and postnuptial agreements are valid for the purpose of directing equitable distribution if it is notarized. Typically, if such agreements direct the outcome of marital property, courts will follow accordingly.
Some Exclusions to Marital Property
Federal Law: The Second Department found that social security benefits are not a component of equitable distribution which are governed by federal law; thus, state law does not apply.[7]
Life Insurance Distribution: The court in Gundlach v. Gundlachheld that cannot compel distribution of life insurance policies to parties’ children as court has no authority over equitable distribution in favor of children.[8]
Factors
Equitable distribution does not necessarily require equal distribution.[9] The court must consider the following factors[10] to distribute the property
(1) income and property of each party at marriage, and at commencement of the action;
(2) length of marriage, age and health of both parties;
(3) need of a custodial parent to occupy the marital residence;
(4) loss of inheritance and pension upon dissolution of the marriage;
(5) the loss of health insurance benefits upon dissolution of the marriage;
(6) alimony/maintenance;
(7) any claim, interest, or direct or indirect contribution made to buy such property by the party not having title, including joint efforts or expenditures, contributions and services as a spouse, parent, wage earner and homemaker, and to the career potential of the other. The court shall consider the direct or indirect contributions to the development during the marriage of the enhanced earning capacity of the other spouse;
(8) the liquid or non-liquid character of property;
(9) the probable future financial circumstances of each party;
(10) the difficulty of evaluating any asset or interest in a business, or profession, and the desirability of retaining such intact and free from any claim or interference by the other party;
(11) the tax consequences to each party;
(12) the wasteful dissipation of assets by either spouse;
(13) any transfer or encumbrance in contemplation of divorce without fair consideration;
(14) whether either committed domestic violence, against the other party and the nature, extent, duration and impact of such act or acts; and
(15) any other factor which the court shall expressly find to be just and proper.
Specific Factors in Depth
(1) Income and Property at Marriage
Transferred Property Not Necessarily Marital Property: Though title was transferred during the marriage to the Husband, that fact alone was not determinative of whether the property is marital in nature.[11]
Purchasing Separate Property with Separation Impending is not Marital Property: Where wife rented separate apartment and television and was not yet physically separated from husband, apartment and television did not constitute marital property. Wife did not permit husband’s entry to her apartment and it would be unlawful for him to take it.[12]
(2) Duration of Marriage, Age and Health of Parties
Duration: Appellate Division found that marital assets should be divided 70% to defendant husband and 30% to plaintiff wife given relatively short-term marriage of 5 years, parties’ income and property, award of exclusive occupancy of marital residence to plaintiff wife, and maintenance award to plaintiff wife.[13]
Age: Parties divorced after 20-year marriage. Cedarhurst apartment should not be marital property evidence wife successfully traced funds purchase of apartment back to proceeds of sale of three properties she owned prior to date of marriage. Regarding marital apartment on Manhattan’s Upper East Side, wife received 1/3rd of fair market value of apartment as of date of trial, given wife’s contributions to the household throughout course of marriage, advancing age, poor health, absence from the work force for most of her adult life with little prospect of finding employment to support herself.[14]
(3) Need of a Custodial Parent to Occupy the Marital Residence
Where mom was awarded physical custody of the children and husband could not show an immediate need for finances that would come from selling the house, the court said the wife could stay until their youngest turned 18.[15]
(4) Loss of Insurance or Pension Benefits
The fact plaintiff was no longer legatee under defendant’s last will and testament and may no longer be entitled to any distribution from the Family Trust, and in reviewing credible evidence, and considering legislative factors court determined that economic and social partnership of thirty-one year marriage required equal distribution of all marital assets.[16]
(5) Loss of Health Insurance
The Third Department found that a significant disparity in parties’ resources, fact that husband expended significant sums during pendency of action for which he was unable to account, wife’s health problems and lack of medical insurance following divorce and fact that equitable distribution award was fashioned in lieu of award of maintenance is justifiable.[17]
(6) Accounting for Alimony and Maintenance
Husband owned Gifford Engineering, LLC, and wife is college graduate, decorator and artist who primarily was homemaker, with only intermittently employment, during the marriage. Supreme Court found that husband had $332,431 annual income for purposes of calculating a maintenance award and awarded wife $6,000 non-durational maintenance per month.
While they awarded non-durational maintenance and relied upon statutory factors, including parties’ pre-divorce standard of living, wife’s sizeable distributive award and that she did not work outside of home most of marriage, it is wrong to double count husband’s business for purposes of equitable distribution and maintenance.[18]
(7) Contribution from Spouse not Holding Tile or Profession
Where spouses nearly doubled the size of the house while living there together. Wife worked, husband did not deny, to improve the house after the marriage, including painting, landscaping and redoing the floors, roof and siding of the house. Husband bought the house at $57,000 the value at the time of trial, was $120,000. Court found the house’s “appreciation is due to the contributions or efforts of the nontitled spouse”[19]
(9) Likely Future Financial Circumstances
Imputed Income: A court may impute income based upon such factors as the party’s education, qualifications, employment history, past income, and demonstrated earning potential”[20] However, imputed earnings from when one party was unemployed cannot not be included in marital property.[21]
Pension for Wife: The record establishes that plaintiff is entitled to a minimal pension based upon her part-time employment as a school secretary, and the court awarded he full value of that pension as part of its overall distribution of marital property.
(10) Difficulty of Evaluating Any Asset or Interest
There is a concept whereby a spouse can take interest in a spouse’s degree, career advancement or interest. For example, the Schacter court awarded Wife a 40% share of husband’s law firm[22] partnership, as the court tried a number of approaches to appropriately make the wife whole.
(15) Any Other Factor That Can Be Influential
Criminal Conduct. Where the husband had exhibited financial criminal conduct and it negatively impacted the family, the court held the unequal distribution was in order.[23] Additionally, the Court gave wife all proceeds of husband’s business since husband had unclean hands in connection with his transfer of company to shield it from the IRS.[24]
Transmutation: When Separate Property Could Become Marital Property
Just because some property was deemed “separate property” does not mean it cannot become legal property. Under the transmutation theory, 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.[25]
For example, the Third Department in the Vertucci case found that although husband asserted he contributed his separate property toward purchase of land for marital residence and construction costs, husband failed to prove that separate funds were used to purchase and construct the marital residence.[26] On the other hand, in a case where a mortgage on separate property was repaid with marital assets, there was no evidence that mortgage proceeds enhanced value of apartment or that wife contributed to value in any way.[27] Hence, separate property not converted into marital asset.
There are cases where one party can claim they in no way had in mind to convert something into marital property but did it out of convenience. In one case, wife got money from her mother made out to her, as a gift to use as down payment on marital home. She then deposited funds into parties’ joint account to use for down payment. Although transfer of separate property into a joint account is presumed to be marital property, presumption may be rebutted by proof that such funds were deposited for convenience, without intent of creating beneficial interest.[28]
Equitable distribution can be very tricky business. We know that you have either worked years for your money or have contributed in such way whereby you should be entitled to the money. For results-oriented representation in to properly divide assets in matrimonial law proceedings, call 516-268-7077 or e-mail us at jr@rubesq.com to schedule a consultation.
[1] Holterman v. Holterman, 3 N.Y.3d 1, 8, 781 N.Y.S.2d 458, 814 N.E.2d 765
[2] O’Brien v. O’Brien, 66 N.Y.2d 576, 489 N.E.2d 712, 498 N.Y.S.2d 743 (1985).
[3] Domestic Relations Law, § 236(b)(1)(d)
[4] Silver v. Akerson, 223 A.D.2d 499, 637 N.Y.S.2d 378 (First Dept. 1996).
[5] Anonymous v. Anonymous, 150 A.D.3d 91, 51 N.Y.S.3d 66 (First Dept. 2017)
[6] Domestic Relations Law, § 236(b)(3)
[7] Principe v. Principe, 229 A.D.2d 522, 644 N.Y.S.2d 1005 (Second Dept., Jul. 22, 1996)
[8] 223 A.D.2d 942, 636 N.Y.S.2d 914 (Third Dept. 1996):
[9] See, Repetti v. Repetti, 147 AD3d 1094; Halley–Boyce v. Boyce, 108 AD3d 503, 504.
[10] Domestic Relations Law § 236(B)(5)(d)
[11] Angot v. Angot, 273 A.D.2d 423, 710 N.Y.S.2d 105 (Second Dept. 2000):
[12] People v. Hudson, 269 AD2d 747, (N.Y.A.D. Fourth Dept., Feb. 16, 2000):
[13] Doscher v. Doscher, 137 A.D.3d 962, 27 N.Y.S.3d 231 (Second Dept. 2016)
[14] Rachimi v. Rachimi, 57 A.D.3d 277 (First Dept. 2008)
[15] Strohli v. Strohli, 174 A.D.3d 938, 945, 107 N.Y.S.3d 324, 332 (2019)
[16] Riechers v. Riechers, 178 Misc.2d 170, (Sup.Ct., Westchester Co., Rudolph, J. 1998)
[17] Hilts v. Hilts, 248 A.D.2d 788, 669 N.Y.S.2d 720, (Third Dept. 1998):
[18] Gifford v. Gifford, 132 A.D.3d 1123, (Third Dept. 2015)
[19] Biagiotti v. Biagiotti, 97 A.D.3d at 943, 948 N.Y.S.2d 445
[20] Carney v. Carney, 160 A.D.3d 218, 227, 73 N.Y.S.3d 694 [2018]
[21] Southwick v. Southwick, 202 A.D.2d 996, 612 N.Y.S.2d 704 (Fourth Dept., Mar. 11, 1994), lv. to appeal dismissed, 83 N.Y.2d 1000, 640 N.E.2d 148, 616 N.Y.S.2d 480 (N.Y., Jun. 30, 1994) (TABLE, NO. 471):
[22] Schacter v. Schacter, 176 A.D.3d 536, 537, 112 N.Y.S.3d 701, 702 (2019)
[23] Kohl v. Kohl, 6 Misc.3d 1009(A), 2004 N.Y. Slip Op. 51759(U), (Sup.Ct., N.Y. County 2004)
[24] Nerayoff v. Rokhsar, 168 A.D.3d 1071, 93 N.Y.S.3d 96 (Second Dept. 2019)(2019 WL 362120)(Jan. 30, 2019):
[25] Sherman v Sherman, 304 AD2d 744, 744 [2d Dept 2003]
[26] Vertucci v. Vertucci, 103 A.D.3d 999, (Third Dept. 2013)
[27] Cooper v. Cooper, 52 A.D.3d 429, 862 N.Y.S.2d 32 (First Dept. 2008)
[28] Noble v. Noble, 78 A.D.3d 1386, (Third Dept. 2010)
