Dividing Assets in Divorce
Equitable Distribution of assets is based upon the New York Domestic Relations Law. There are a few basic principles in dividing assets—what you came into the marriage with is typically protected and/or you’ll receive a credit back for it.
What was accumulated during the marriage generally is divided between the parties. While the division of assets is usually categorized as a 50/50 or “equal” split, a common principle recites that “equitable does not mean equal.”
How Is Debt Divided in Divorce?
Debt is a hotly litigated topic, especially during times of economic struggle. Debt accumulated during the marriage is often shared between the parties, at a rate to be agreed upon or litigated. The most common divisions are 50/50 to share all marital debt and/or to apportion the debt on a pro-rated basis commensurate with each party’s income.
How Are Business Assets Divided in Divorce?
If a business was created prior to the marriage, it’s deemed a separate asset. However, any active contribution during the marriage that increased its value may be partially deemed a marital asset subject to equitable distribution.
If a business was created during the marriage, the asset will be deemed marital in nature. However, each spouse’s contributions will be assessed in determining the portion by which it will be divided in a divorce proceeding. New York Courts typically will award (to the non-business spouse) 10-30% of the business value as the portion in which a marital business can be equitably divided in a divorce settlement and/or litigation.
What Happens to Retirement Funds in Divorce?
Retirement funds after a trial can only be divided by the court’s order of a Qualified Domestic Relations Order (“QDRO”), which is a financial vehicle to equitably divide the marital portion of the retirement account without triggering a taxable event. The QDRO for a pension/retirement plan is determined by each party’s contribution (and/or length of service with the employer funded pension plan) and is calculated by the financial institution.
For all retirement accounts with a defined contribution plan (i.e., 401(k), IRA, 403b, etc.), the monthly statements of the value will provide the necessary information to calculate each spouse’s marital portion of the account. Additionally, retirement monies are typically subject to the gains and/or losses of the stock market through the date of the distribution to the non-titled spouse.
Divorce Assets Acquired before Marriage
The burden to prove assets acquired prior to the marriage is on the spouse alleging this. In the event you can show the asset was acquired prior to the marriage, and thereafter no marital monies and/or active efforts were contributed towards that asset during the marriage—then the asset, including passive appreciation, shall remain entirely separate in nature.
In the event that the asset was acquired before the marriage but thereafter maintained during the marriage, changed/altered/renovated during the marriage, lived in during the marriage, etc.—then the non-titled spouse has an equitable claim and can request to change the identification of the asset from separate to partially marital. This is an issue for the Court to determine. As practitioners, we have many ways to resolve these claims and/or, if necessary, litigate before the Court.