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FAQ Marital Property & Financial Assests

Marital Property & Financial Assets FAQ

When a spouse is served with a summons for divorce, attached to the summons is a document titled “Notice of Automatic Orders.” This notice has the legal effect of a court order prohibiting a party from accessing any marital property and using it for any other purpose than is necessary in the ordinary course of business or meeting your day-to-day needs. Cleaning out a joint bank account for this reason would be considered a “dissipation of marital assets.” The party who removed these funds would be ordered to replace them and/or give the other party a credit as part of any final settlement. If getting the offending party to take the proper steps to rectify the loss required litigation, they would be responsible for the other party’s attorney fees.

 

If a spouse raids a joint bank account for extramarital purposes before a divorce action is begun …….this may be considered the wasteful dissipation of marital assets and the spouse may be responsible for putting this money or equivalent value back in the marital pot at divorce time. For example, if one spouse spends money on a paramour, such as jewelry or vacations prior to divorce, those funds would be a credit to the other spouse when they get divorced.

If it’s determined after a divorce has been completed that one spouse hid assets, the entire divorce can be reopened. This may also occur while the divorce is pending. In either scenario, the  offending party may be subject to a contempt charge and be responsible for attorney and other fees incurred to uncover the asset,  reopen the case,  and bring this information to the court’s attention.  Judges have many tools at their disposal to punish a party for contempt, including fines, attorney fees and even incarceration.

A financial windfall after a divorce action is separate property. However, in determining a spouse’s ability to pay support, these resources are relevant and must be disclosed.

 

Debts incurred after the divorce action are the separate responsibility of the spouse incurring the debt. This gets tricky when the person incurring the debt has used a joint credit card or line of credit. The non-responsible spouse must take all steps necessary to get their name removed from any liability for this debt. Simply saying “Oh, you pay the credit card balance until it’s paid off” is not a good answer. MasterCard and American Express don’t care what your divorce judgment says. If your name is on the account, they can legally go after you to collect, and failure to maintain the account properly will impact your credit.

New York is an equitable distribution state. Equitable does not mean equal or a 50-50 split. Generally, the law provides that marital property should be divided equitably or fairly. Typically, a divorce will involve the division of equity in real property, retirement accounts, bank accounts, vehicles, and household contents. The exact division will be different for each case, taking into consideration the parties’ goals and circumstances. Marital debt also must be equitably divided. In most cases, the interplay between the division of property and debt drives the resolution. An agreement reached between spouses is usually preferable over a decision by a judge after trial. If spouses are able to work together, they are usually more satisfied with the terms, which can incorporate details that a judge will not.

Property acquired after the spouses physically split, but are still married, and no divorce action has been commenced, is marital property. The court will take into consideration the specific facts of this scenario in dividing property acquired under these circumstances. The division is equitable, not equal. The court will start from the premise that this property is marital.

There are some common pitfalls that people may be unaware of that may change separate property into marital property. For example, if one spouse receives a personal-injury settlement and deposits the funds into a joint bank account with the other spouse, this separate property has become marital. The idea is that the receiving spouse has intentionally changed the ownership of separate property from separate to marital by depositing it in a joint account where both spouses are titleholders and have the legal ability to access all the funds in this joint account. This concept also applies to inheritance proceeds. For example, if one spouse inherits a parent’s home and decides to refinance the property to make improvements, and both spouses’ names are the new mortgage, and title is transferred into both names, the property has become marital.

Property that is not considered marital is identified as “separate property” by law. Any property owned prior to the marriage is separate property. Inheritance proceeds, in any form, such as real property, cash, stocks, and bonds, is separate property, whether it is received before or after the marriage. The settlement proceeds from a personal-injury matter are the separate property of the spouse receiving the funds. Property acquired after the commencement of the divorce action is separate property, unless marital property was used to obtain it.

Marital property is defined as all property acquired by either or both spouses from the date of marriage until the date of a separation agreement or commencement of a divorce action. The form of the title of any property is irrelevant. The law is based on the concept that marriage is an economic partnership, and tangible property should be equitably divided. There are some surprising applications of this rule. Gifts made between spouses are considered marital and not the separate property of the recipient. Lottery winnings are considered marital, particularly if the ticket was purchased with marital property. And by the way, your paycheck is marital property.