Marital Property vs. Separate Property In A Divorce: Part One

To divide property when people get divorced in NY (equitable distribution) the first question is whether the item is marital or separate property. The question sounds simple but the answer is not. There are hundreds and hundreds of cases that determine what the rules are and how to apply the rules and then the exceptions to the rules.

The first step is to determine if the property was obtained before the marriage or during the marriage.

The next step is to determine if the property was acquired during the marriage does it fall into one of the exception categories and therefore is deemed separate even though it was obtained during the marriage.

The next step is to determine if the property is separate property has there been "commingling" which means adding marital property to what is separate property.

The next possibility is that the asset may have been separate property (pre-marital or exception property) but that it has been "transmuted" into marital property which means that what was once separate has become marital because of placing the asset into joint name/title.

Examples of some of the above items are as follows:

Separate property before the marriage. A house or a bank account bought before the marriage and only in the one person's name. No marital funds are added or spent on the item and any change in value is due solely to market appreciation rather than work of either spouse.

Property acquired during the marriage that is still deemed separate property are items received by inheritance, received as a gift, or compensation from a personal injury suit for pain and suffering or the exchange of one item of separate property for another similarly valued item provided that they remain only in the recipient's name. (Examples: sell Apple stock and with that money buy Microsoft stock; sell house number one and take the money from house number one to buy house number two for the same price.)

Commingling separate property is when a spouse has an account with $100,000 in it that is in sole name and acquired before the marriage BUT during the marriage new money such as wages or other marital monies are added to the account. During the marriage when money is spent and taken from the account which money was spent the original money or the new money?

Transmutation of separate property into marital property occurs when an asset is already determined to be separate property BUT at some point the other spouse's name was added to the account or the title of the property. There is a further exception even to this situation when separate property is put in both names thus creating marital property, however the joint titling is proven to be for "convenience purposes" and then the Court takes the asset and determines that it will be treated as separate property. This will require further explanation.

Once the property is determined to be separate property or marital property there are still credits that may be received by either person based upon actions taken during the marriage. These actions will be described in Part Two of this Blog Series.

As a preview, the questions will revolve around the value of credits that should be given for the creation of the separate property but there is an increase in value due to marital efforts, the change in value of separate property during the marriage and the cause for the change, the credits given when separate property becomes marital property, what type of contributions qualify for credits and what happens if the asset loses value.

Even from this very brief and surface view description this topic is very complicated and filled with legal nuances that can only truly be explained in a consultation with an experienced matrimonial attorney. However, hopefully these blogs will alert the reader to some of the questions and issues that arise.