When you decide to file for divorce, one of the most pressing matters is what will happen to the property you and your spouse own. Unfortunately, property distribution during a divorce can be incredibly complicated, as there are several factors that must be considered. As such, property disputes are especially common throughout Long Island communities like Jericho, Old Westbury, and the surrounding Nassau County areas. Understanding how property is classified and divided can help you protect your financial future. As such, the following blog explores what you should know about this process and the importance of working with Long Island property division lawyers during these complex matters.
How Does New York Classify Property During a Divorce?
In New York divorces, property is considered marital or separate. Marital property generally includes assets acquired during the marriage, while separate property is typically any asset owned prior to the marriage, inheritances, gifts solely to one spouse, and certain legal awards. Under the equitable distribution standard, only marital property is subject to division.
First and foremost, it’s important to understand what property is up for distribution during a divorce. When you and your spouse decide to file for divorce on Long Island, you should know that only marital property will be subject to division. The courts will not subject your separate property to division. As such, it is critical to understand what constitutes marital versus separate property under New York state law.
In general, the laws regarding property division are established under New York Domestic Relations Law §236, which outlines how marital and separate property are defined and distributed.
What Counts as Separate Property in New York?
In New York, separate property is anything you owned before or after the marriage that is in your name only. For example, if you purchased a rental property before your marriage, and only your name is on the title, it would be considered separate property and therefore, not subject to division during your divorce.
Key Examples of Separate Property
- Assets owned prior to the marriage
- An inheritance received solely by one spouse
- Personal injury compensation awarded to one spouse
- Gifts given specifically to one spouse
- Property is defined as separate though marital agreements
What Is Considered Martial Property?
On the other hand, marital property includes any assets that you purchased during your marriage or with your spouse. This can include things like your primary residence, vacation homes, businesses, or even your vehicles.
Common Examples of Marital Property
- A marital home
- Joint bank accounts
- Retirement accounts accrued during the marriage
- Business interests developed during the marriage
- Investments
- Stock options, RSUs, or bonuses earned during the marriage
Can Separate Property Become Marital Property in New York?
You should note, however, that it is possible for separate property to become marital property. This can occur if assets are co-mingled.
For example, if you purchase the aforementioned vacation home before your marriage, but use funds from a joint bank account to pay for a renovation to the property, it can then be considered marital property, as you used joint funds. In this instance, the court would consider the increase in value to the property marital, but the actual property itself as separate.
However, if you were to deposit an inheritance into a joint bank account, the entirety of the funds would then be deemed joint property.
Examples of Commingling That May Change Property Classifications
- Depositing inheritance funds into a joint bank account
- Using marital assets to renovate a separately owned home
- Placing a spouse’s name on the title of a previously separate asset
- Mixing separate funds with joint investment accounts
What Is Equitable Distribution of Property?
Once it is determined what assets are marital versus separate, the court will begin determining how to divide these assets. Under New York law, the courts adhere to the equitable distribution method for joint assets. Essentially, this means all property you and your spouse own together will be divided fairly as opposed to evenly.
In some instances, a fair split of assets is even, a 50/50 division is not always guaranteed.
Factors Courts Consider When Dividing Property
To determine how to divide assets equitably, the courts will examine each spouse’s contributions to the marriage. This includes financial and domestic contributions as a means of protecting stay-at-home parents.
Factors the Court May Evaluate
- The income and earning capacity of each spouse
- The duration of the marriage
- Contributions made as a homemaker or caregiver
- Whether either spouse hid or wasted assets
- The value of each spouse’s separate property
- Tax consequences
How Are Complex Assets Like Stock Options and RSUs Divided?
In some Long Island divorces, like those in Jericho, Brookville, or Old Westbury, property distribution becomes more complex when stock options or restricted stock units (RSUs) are included.
These assets are generally awarded as employment compensation and may not vest until years after they are granted. As such, the court must consider:
- When the stock option or RSU was granted
- Whether the award compensates work performed during the marriage
- When the vesting period is
- Whether only a portion of the award is considered marital property
How Courts Value Stock-Based Compensation
Unfortunately, stock options and RSUs are inherently volatile in nature, meaning their value rapidly and drastically fluctuates. As such, the court can utilize several methods to determine the value, including:
- The present value of the stock
- Using formulas to determine the future value of the stock
- Delaying division until the option or RSU vests
- Awarding a percentage of the asset when it becomes payable
Contact an Experienced Long Island Divorce Attorney Today
When you are going through a divorce, understanding how these assets should be divided is critical. Unfortunately, many are unaware of their rights, which can lead to a less than favorable outcome during these matters. As such, connecting with an experienced attorney with the Sklavos Law Firm is in your best interest. We understand how complicated a divorce can be, which is why we will do everything in our power to make this process as simple as possible. Contact us today to learn more.