In this Article (click a heading to go right to that section):
- Equitable Distribution: A Complete Summary
- Types of Property Assessed in a Divorce
- Equitable Distribution Is Not Equal
- Who Gets the Marital Residence?
- How Are Marital Debts Allocated?
- Dividing Business Assets
- What Happens to the Engagement Ring?
- What If My Spouse Tries to Hide Assets?
- Dividing Retirement Accounts
- High Net Worth Divorces
- Learn More About How Long Island Property Division Laws Affect Your Divorce
When a married couple divorces, they must either agree on how to divide their property and if not, their property must be divided fairly between each spouse according to New York law. This can be difficult to manage and leaves many divorcing couples frustrated and unsure of where to turn or what to do next. Here’s your comprehensive guide to property division in a Long Island divorce.
Like most other states, New York uses “Equitable Distribution” laws to determine how to divide property between spouses. This method ensures that what each spouse receives is fair, with all assets and circumstances considered. First, all property must be listed, valued, and sorted by type.
There are generally two types of property assessed in a divorce:
Marital property is any property acquired by either spouse during the marriage, with the exception of gifts. This can be earned income, the marital home, and any goods purchased during the length of the marriage. Only marital property is subject to the laws of equitable distribution.
Separate property is defined as property that was owned by one spouse prior to the marriage and brought into the marriage and is not subject to equitable distribution. For example, if one spouse owned a home in their own name before getting married, the home would remain the property of that spouse. Gifts given to one spouse during the marriage, such as an inheritance or a personal injury settlement, are also considered separate property.
“Contrary to popular belief, equitable distribution does not necessarily mean equal.”
Contrary to popular belief, equitable distribution does not necessarily mean equal. For example, if a divorcing couple as $6,000 in their bank account, a judge may not automatically award $3,000 to each spouse. Instead, the financial circumstances of each spouse are evaluated. Say one spouse has a vehicle and a steady job, but the other spouse has neither. A judge may decide to award the entire $6,000 to the nonworking spouse in exchange for the vehicle and to give them a better starting off point after the divorce. What is considered equitable in each case is largely determined by the judge presiding over it.
What happens to the marital home is one of the key issues of property division. A divorcing couple can choose to reach an agreement about how the home will be allocated, or if they are unable to agree, a judge will make that decision for them.
Typically, a home can be:
Sold So the Proceeds Can Be Split Between the Spouses
In many cases, the easiest way to allocate real property such as a home is to sell it and split between both spouses. Sometimes, the funds may not be split equally. For example, if one spouse worked and made the majority of payments on the home, a judge may decide to award more of the proceeds from the home’s sale to that spouse. Or, if one spouse is the custodial parent of a couple’s children and will need to secure new living accommodations suitable for the children, more of the sale proceeds may be allocated to that spouse.
Legally Transferred to One Spouse
In other cases, one spouse may agree to allow the other to keep the marital home. Often, this is what occurs when the divorcing couple has children of which one spouse is the custodial parent. Since the above scenario of finding new housing that properly accommodates the needs of the children can sometimes be challenging, it may be easiest to allow the custodial parent to keep the home. In exchange, a judge may award the other spouse more of the liquid assets from the couple’s bank accounts, or find another way to ensure the division is equitable.
Like assets, marital debts are intended to be distributed equitably between divorcing spouses.
Debt that is acquired during the marriage is typically shared debt. This includes loans, credit cards, and other types of debt, even if that debt is only in the name of one spouse. A judge may split shared debts down the middle and order each spouse to pay half, or they may assign some debts to one spouse and the remaining debts to the other. How shared debt is allocated largely depends on the type and amount of debt, the financial circumstances of each spouse, the ability of each spouse to make payments on the debt, and how the debt was incurred.
Debt that is acquired prior to the marriage typically remains separate from the equitable distribution process. For example, if one spouse went to college prior to getting married and owes student loans, they would continue to maintain sole ownership over those loans after the divorce.
- Selling the Business
- Co-Owning the Business
- Buying Out the Business
Selling or dividing business assets between spouses tends to make a Long Island divorce trickier than the average split. There are generally three ways to divide a business in a divorce:
Selling the Business
Like a marital home, both spouses may agree to sell the business and split the proceeds. However, you and your ex-spouse will need to agree on the value of the business, find an interested buyer, and facilitate the sale. Market fluctuations are also a consideration, and selling the business may not necessarily provide the highest payout for either spouse. If that’s the case, one spouse may contend the sale of the business, forcing you into litigation or another solution.
Co-Owning the Business
If you and your ex-spouse are amicable, you may be able to co-own the business. You may be able to co-manage the business and continue making financial and other business decisions together, or one spouse may primarily manage the business while the other accepts payments for their share of the assets. This can ensure the longevity of a business and continued income for both spouses, however, many divorcing couples find this remedy difficult due to conflict.
Buying Out the Business
Often, one spouse will “buy” the other’s interests in the business, effectively transferring ownership from both spouses to the one purchasing the other “half.” If the buying spouse has enough liquid assets on hand, the transaction is relatively simple. This is often not the case though. What may be more likely to occur is the buying spouse agrees to make payments to the selling spouse over a period of time, also known as a structured buyout. It’s important to work with an attorney to ensure that the paperwork for the buyout is equitable.
“You and your spouse are legally required to make a full financial disclosure at the start of your divorce. Failure to do so, or attempting to hide assets, could result in losing those assets or potentially even legal consequences, such as being held in contempt of court.”
Sometimes, a spouse will attempt to hide assets before filing for divorce or responding to a divorce petition. This usually happens when an asset was acquired during the marriage and would be considered shared. By “hiding” the asset prior to the divorce, the spouse claiming ownership keeps the asset from being counted among other shared assets. Often, hiding assets takes the form of “gifting” or “selling” an asset to a friend or family member, or changing the name on the title of an asset.\
You and your spouse are legally required to make a full financial disclosure at the start of your divorce. Failure to do so, or attempting to hide assets, could result in losing those assets or potentially even legal consequences, such as being held in contempt of court.
“Retirement savings can be one of the highest-value assets that an individual owns and are critical to address in a divorce. Because retirement accounts are subject to certain taxes, dividing them can be difficult.”
Retirement savings can be one of the highest-value assets that an individual owns and are critical to address in a divorce. Because retirement accounts are subject to certain taxes, dividing them can be difficult.
Pensions and 401(k)
If one spouse has a sponsored retirement plan like a pension or 401(k), the other spouse is legally entitled to half of it unless there is a prenuptial or postnuptial agreement stating otherwise. If you are the spouse seeking your half of your ex’s retirement funds, you’ll need to complete a Qualified Domestic Relations Order (QDRO) with the help of your attorney. A QDRO protects your share of an IRS tax-qualified retirement plan by allowing the funds to be withdrawn from the account and placed into a retirement account of your own without penalty. You may need to work with an actuary to determine the amount of the retirement plan that is rightfully yours.
Generally speaking, engagement rings — and other similar gifts — are not considered marital property and therefore are not subject to the laws of equitable distribution in New York. This means that even though one spouse may have purchased it intending the marriage to last, it belongs to the spouse who received the gift whether or not the marriage remains intact. Contrary to popular belief, this also applies to engagements that have been called off. A formerly-engaged individual is not legally required to give back the ring — or any other gift — that was given to them during the course of a romantic relationship.
“In high net worth divorces, litigation isn’t necessarily the least desirable course of action. In fact, it may afford a better outcome for lesser earning spouses than mediation or arbitration.”
While the goal for many divorcing couples is to avoid as much stress, cost, and time as possible, this often means making compromises. Often, these are financial in nature but not always. In high net worth divorces, however, making compromises in an attempt to settle the divorce quickly may not be in the best interest of one spouse.
For example, say one spouse has the potential to gain hundreds of thousands of dollars in a divorce settlement plus alimony, but their ex is pressuring them to agree to a much smaller settlement and no alimony. Although signing the agreement would hasten the end of the divorce, it would leave one spouse severely shortchanged. In a case like this, it may be better for the lesser earning spouse to contest the settlement offer. That spouse could potentially put forward a counteroffer, but once a stalemate is reached, the couple will have to pursue litigation.
In high net worth divorces, litigation isn’t necessarily the least desirable course of action. In fact, it may afford a better outcome for lesser earning spouses than mediation or arbitration.
Property division is one of the most significant aspects of a divorce. The more assets you and your spouse share, the more complicated your divorce becomes and the more important ensuring the division of your property is done correctly and equitably.
At Hornberger & Verbitsky, P.C., we have significant experience working with all types of divorces, including both contested and uncontested divorces. We can help you negotiate a fair agreement regarding the split of your assets with your ex-spouse and if you’re not able to reach an agreement about how to divide your property, we can help you litigate. We have the ability to zealously advocate for the best interests of you and your loved ones and will work hard to ensure that the final judgment in your case is as beneficial for you and your family as possible.
Contact us today to learn more about Long Island property division and start to explore your divorce options. Call now for your consultation at 631-923-1910.