Property Division: Marital Property vs Separate Property in New York

What’s mine is mine, what’s yours is yours, and what’s ours is ours. Or is it? When it comes to divorce in New York, divvying up property is one of the most difficult, if not downright contentious, issues.

New York is an equitable distribution state, which means that marital property is divided “fairly.”

Separate property is exactly that: separate from the marital property, although determining what is, in fact, separate can be less straightforward than it would seem.

Whether your divorce is uncontested and you are preparing a marital settlement agreement or you need legal guidance in the case of a contested divorce, it helps to understand how the courts see marital versus separate property.

Marital property

In its simplest terms, marital property is anything (both debts and assets) that was acquired during the course of your marriage.

These assets may be considered marital property if they were wholly acquired during the marriage:

• • • Homes or other real estate
    • Vehicles such as cars, SUVs, motorcycles, boats, RVs and other forms of transportation
    • Garden tools and implements, including lawnmowers, leaf blowers and other motorized or hand tools
    • Artwork and decorative objects
    • Furniture
    • Household items
    • Joint checking or savings accounts, securities or investment accounts
    • Retirement accounts
    • Pets (yes, even the family pet; although a law passed in January, 2018 now requires the courts to consider not only who bought the pet, but who cared for the pet when making a determination)

“May be considered marital property” is the operative term here.

If, for instance, one spouse already purchased a house before the marriage, but the other spouse was financially helping to improve or maintain the property that will be taken into consideration, as will any increased value of the house.

Retirement plans are especially tricky. In “defined” plans, such as 401(k)s, any portion that a spouse contributed prior to marriage is separate property.

However, since it may have appreciated in value, that appreciation may be subject to marital property rules.

Determining what is marital property versus what is separate property often requires the help of an expert. Pension plans are subject to a formula established by the New York State Court of Appeals.

Separate property

If you bought it or acquired it before you got married, it’s yours. This includes inheritances, gifts, real estate, vehicles, investments, vehicles—even compensation from a personal injury settlement.

Proceeds from the sale of any items prior to marriage are also considered separate property, as is anything you purchased with those proceeds before you were married.

Having a prenuptial or postnuptial agreement helps avoid any confusion in the case of a divorce and is a good idea. Any asset that’s important to you, and that you “owned” prior to marriage, can be covered by this agreement.

Things to remember about separate property:

• • • Be careful about comingling assets. Once that happens, it can be nearly impossible to figure out who owns what, and it will inevitably be considered marital property.
    • If you put your spouse’s name on the deed to a house you purchased before you got married, it is no longer separate property.
    • An increase in value of a property that is the result of a spouse’s contribution to improvements is “active” appreciation, and that portion is likely a marital property. This is separate from “passive” appreciation due to market values.

And then there are debts…

Debts acquired during the marriage are part of the equation and must also be considered when dividing property. Just as with assets, debts are subject to equitable distribution under New York law.

Divorcing couples can come to an agreement regarding debt under a marital settlement agreement, or the court will split the debt equitably.

If a credit card is in both spouse’s names, it can affect the credit rating of both, even if the payment has been assigned to only one spouse by the court.

Joint accounts should be closed as soon as possible upon divorce.

Learn more about your rights and responsibilities in division of property in a NY divorce

To get more information about marital and separate property—and to make sure you are getting the fairest possible deal­—contact us online or call us at (212) 349-1600 to schedule a consultation with a New York City equitable distribution attorney.

We serve clients throughout Manhattan, Brooklyn, Queens and the Bronx and are conveniently located just two blocks from Grand Central Station.