Equitable Distribution in New York: Marital vs. Separate Property

New York is an equitable distribution state. That phrase confuses almost everyone, so here is what it actually means for a Suffolk County divorce.

Marital property

Marital property is everything either spouse acquired from the date of marriage until the filing of the divorce, regardless of whose name is on the title. That includes the house, bank accounts, retirement accounts, a business started during the marriage, cars, and debts. Marital property is subject to equitable distribution.

Separate property

Separate property stays with the spouse who owns it: assets owned before the marriage, inheritances, gifts from someone other than the spouse, personal injury compensation, and property designated as separate in a valid prenuptial or postnuptial agreement. The catch is that separate property can become marital if it is commingled, for example by depositing an inheritance into a joint account or using it to renovate the marital home. The increase in value of separate property during the marriage can also be partly marital if it was due to the other spouse's efforts.

Equitable means fair, not equal

The court divides marital property based on a list of statutory factors, including the length of the marriage, each spouse's income and property at the time of marriage and at the time of divorce, each spouse's contributions as a wage earner or homemaker, the custodial parent's need to occupy the home, the loss of inheritance and pension rights, tax consequences, and wasteful dissipation of assets. In a long marriage an equal split is common. In a short marriage, or where one spouse brought substantial assets, it may not be.

The marital home

The home is usually the largest asset and the hardest issue. Options include selling and dividing the proceeds, one spouse buying out the other, or deferring the sale while the custodial parent and children remain in the home for a set period. On the East End the question is complicated by second homes and rental income. The court will look at who can afford to keep the house and whether it is in the children's best interests to stay.

Pensions and retirement accounts

The portion of a pension, 401(k), or IRA earned during the marriage is marital property. Pensions are typically divided by a qualified domestic relations order (QDRO) that gives the nonemployee spouse a share of each payment when the pension is paid. Defined contribution accounts are divided by transferring a portion of the balance. These orders must be drafted precisely, and errors are expensive.

Businesses and professional practices

A business started or grown during the marriage is marital property, even if only one spouse worked in it. The business is valued, usually by a forensic accountant, and the nonowner spouse receives a share of that value, often paid over time so the business does not have to be sold. The valuation date and the method are frequently contested.