I. What is Equitable Distribution of Marital Property?
During a marriage, each spouse will usually accumulate assets in his or her name. Frequently, there will also be assets titled in the name of both spouses, jointly. “Equitable distribution” is the equitable, and not necessarily equal, division of those assets between the spouses pursuant to a matrimonial action.
Absent an agreement between the parties, a court will determine each parties respective rights to “marital property” and “separate property,” and will provide for the disposition thereof in the final judgment. DRL 236-B(5)(a). Marital property “shall be distributed equitably between the parties, considering the circumstances of the case and of the respective parties,” whereas separate property shall remain that spouse’s property. DRL 236-B(5)(b), DRL 236-B(5)(c).
II. What is Marital Property? What is Separate Property?
All property can be divided into either marital property or separate property.
Marital property is all property acquired by either or both spouses during the marriage and before the execution of a separation agreement or the commencement of a matrimonial action, regardless of the form in which title is held. DRL 236-B(1)(c) (emphasis added). Marital property does not include any separate property. Id. It is important to note that, in determining whether the asset is marital property subject to equitable distribution, it does not matter which spouse holds title.
Separate property is any property:
- acquired before the marriage;
- acquired (inherited) by bequest, devise, or descent;
- gifted to one spouse by someone other than the other spouse;
- representing compensation for personal injuries (except to the extent that the claim represents deferred compensation earned during the marriage);
- acquired in exchange for separate property;
- representing the increase in value of separate property during the marriage, except to the extent that such appreciation is due in part to the contributions or efforts of the other spouse;
- described as separate property by written agreement of the parties pursuant to DRL 236-B(3).
The courts have developed a presumption that property acquired during a marriage, and prior to commencement of a matrimonial proceeding or the execution of a separation agreement, is marital property.
A spouse attempting to prove that such property is actually separate property must do so by by clear and convincing evidence. Fields v. Fields, 905 N.Y.S.2d 783, 785 (N.Y. 2010) (citing, DeJesus v. DeJesus, 665 N.Y.S.2d 36 (N.Y. 1997)).
This presumption is supported by the legislative intent that the definition of marital property be read broadly, while separate property be construed narrowly. Price v. Price, 511 N.Y.S.2d 219, 222 (N.Y. 1986) (citing, Majauskas v. Majauskas, 463 N.E.2d 15 (N.Y. 1984)).
Remember: marital property can be almost anything, so think creatively:
- Accumulated vacation days over the years? Marital property.
- Tax exemptions for the children in the years following divorce? Marital property (technically).
- Escrow account associated with mortgage on residence for payment of next year’s property taxes? Marital property.
III. Can Separate Property Turn into Marital Property? Transmutation & Commingling[S]eparate property which is commingled with marital property or is subsequently titled in the joint names of the spouses is presumed to be marital property. Gately v. Gately, 113 A.D.3d 1093, 1094 (4th Dept. 2014) (internal quotations omitted). In other words, separate property can be transformed into marital property by way of commingling or transmutation. So, what is commingling and transmutation?
Transmutation is where separate property in one spouse’s name is transferred into or exchanged for property held in both parties’ names, that is called “transmutation.” By putting separate property into a joint account, it is presumed that the titled spouse intended to give an interest in the property to the other spouse, i.e., there was “donative intent.” See also, Banking Law 675(b).
The only way to overcome this presumption is by “clear and convincing evidence that the asset was titled jointly as a matter of convenience, without the intention of creating a beneficial interest, and that the funds in the account originated solely in the separate property of the spouse who claims the separate interest.” Renga v. Renga, 86 A.D.3d 632 (2d Dept. 2011).
EXAMPLE: John and Mary are married in 2001. In 2002, John gets a $100,000 settlement from a lawsuit regarding a personal injury he sustained in 2000. For simplicity sake, assume the entire $100,000 represents pain and suffering. On June 1, 2002, John deposits the $100,000 in a joint bank account with Mary. On June 20, 2002, John withdrawals $25,000 and moves it into an account in his sole name. After numerous deposits of marital money and withdrawals for marital expenses, $50,000 remains in the account in 2010 when Mary and John file for divorce. What is marital or separate property? Most likely, the $25,000 John withdrew will remain John’s separate property, as the deposit was in the account for such a short period of time. However, the remaining $50,000 will likely be marital property, particularly considering the deposits of marital property.
Commingling is where separate property has been mixed in with marital property, regardless of who has title to the marital asset. Once commingled, the party making the separate property claim must “trace the source of the funds [that he contended were separate property] with sufficient particularity to rebut the presumption that they were marital property.” Bailey v. Bailey, 48 A.D.3d 1123 (4th Dept. 2008) (internal quotations omitted).
EXAMPLE: In 2000, Mary has a bank account in her sole name with a balance of $100,000. John and Mary are married in 2001. Mary is earning $200,000 per year and deposits her earnings into the bank account. She makes frequent withdrawals for marital expenses, such as groceries and rent. When John and Mary file for divorce in 2010, the account balance is $100,000. The account is still in Mary’s sole name. Is the account marital property? Almost certainly, yes, unless Mary can trace the deposits of marital money made during the marriage.
IV. How Will a Court Divide Marital Property?
In the context of equitable distribution, even where an asset is entirely marital, it is well-established that “equitable” does not always “equal.” Arvantides v. Arvantides, 64 N.Y.2d 1033, 1034 (N.Y. 1985); Guarnier v. Guarnier, 155 A.D.2d 744 (3rd Dept. 1989); Ackley v. Ackley, 472 N.Y.S.2d 804 (4th Dept. 1984).
As noted by well-known author and expert in New York matrimonial law, Timothy Tippens, Esq.:
The purpose of equitable distribution law is to achieve a fair allocation of marital property upon dissolution of the marital economic partnership. Towards this end, the statute bestows broad power, flexibility, and discretion on the matrimonial court. While there are those who urge that the statute should be amended to embody a mandate or presumption of equal division, the legislature has, to date, declined to adopt such a restriction.
1 New York Matrimonial Law and Practice, Section 3:29. Again, the Courts have repeatedly held that the equitable distribution law does not require an equal division of martial property. In fact, just because a particular asset is marital does not necessarily mean that a spouse is entitled to a distribution of any part of it.
The distribution of marital property will greatly depend on the type of asset (home, business, rental property, etc.) and the particular facts of a case. For example, it is typical to have equal division of the marital residence. On the other hand, based upon relevant case law, an unequal division of marital appreciation from a separate property business asset should be expected.
Furthermore, short term marriages without children tend to have distributions based upon each parties’ economic contribution to the marriage, while distributions in longer marriages tend to be closer to 50-50.
Nonetheless, in determining equitable distribution of the marital property, the court will consider the following factors:
- the income and property of each party at the time of marriage, and at the time of the commencement of the action;
- the duration of the marriage and the age and health of both parties;
- the need of a custodial parent to occupy or own the marital residence and to use or own its household effects;
- the loss of inheritance and pension rights upon dissolution of the marriage as of the date of dissolution;
- the loss of health insurance benefits upon dissolution of the marriage;
- any award of maintenance under subdivision six of this part;
- any equitable claim to, interest in, or direct or indirect contribution made to the acquisition of such marital property by the party not having title, including joint efforts or expenditures and contributions and services as a spouse, parent, wage earner and homemaker, and to the career or career potential of the other party;
- the liquid or non-liquid character of all marital property;
- the probable future financial circumstances of each party;
- the impossibility or difficulty of evaluating any component asset or any interest in a business, corporation or profession, and the economic desirability of retaining such asset or interest intact and free from any claim or interference by the other party;
- the tax consequences to each party;
- the wasteful dissipation of assets by either spouse;
- any transfer or encumbrance made in contemplation of a matrimonial action without fair consideration;
- any other factor which the court shall expressly find to be just and proper.
While it is (very much so) in the discretion of the court, a spouse may be entitled to certain credits during equitable distribution, including, but not limited to reimbursement for:
- marital money used to pay down the other spouse’s separate property indebtedness (such as student loans, or expenses related to a separate property residence), or
- separate property which was used to create a marital asset
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