Who Gets What: Top 3 Assets Couples Fight Over
Divorce is not easy. To make matters worse, it is also not as straightforward as you were hoping it would be. While the matter of child custody litigation always takes centerstage during a divorce, how the marital property is divided between either spouse is a close second. In the state of New York, the law establishes that when it comes to divvying up all your possessions, the principle the courts adhere to is known as the equitable distribution of marital property.
Now what exactly constitutes marital property, you ask? Simply put, any (and all) assets acquired during the length of the marriage is referred to as marital property. To be clear, when we say “length of the marriage”, we mean the length of time that passed from the day that you two acquired a marriage license to the day a complaint for divorce was filed. Anything – be it asset, debt or obligation – acquired during that timeframe is referred to as marital property.
For example, say you filed a complaint for divorce on March 15. A month later, you buy a PS4 and your spouse buys an Xbox. The two game consoles, unfortunately, so not count as marital property. However, if you cashed out a part of your 401K after the complaint for divorce was filed, and you used that money to buy a diamond ring of some sort, that is still part of the marital property. It is important to note that marital property includes both property rights and obligations. Hence, assets and debts are both considered to be marital property.
Which brings us back to equitable distribution of marital property. Now that we are clear about the “marital property” part, let’s delve deeper into the “equitable” part. Contrary to what most people believe, “equitable” does not mean “equal”. Far from it, to be honest. “Equitable” means “fair”. This means that the courts can use a 50/50 division as a starting point, but a judge will then divide up the marital property in a manner that is fair.
What Happens to Our House?
I understand why this might be such a concern. I have always looked at my house, not merely as a building under whose roof I live, but as something more. It is a home. It is a witness of your lives. The memories and stories carved into its walls etch out the story of your lives as a family. It is so much more than just wood, brick and stone.
Unfortunately, with divorce, this silent spectator of your lives is either given to one of the spouses, or it is hacked into different pieces. The courts usually let the two parties attempt to come to a resolution about the marital home themselves. If they are unable to do so, the courts will then proceed to let one of the two parties buy the other out. This ruthlessness of the courts often tends to offend some people. Sometimes, people feel emotionally distressed by this. But trust, me it is for the best. The judge will not consider either party’s personal feelings about ownership of the house. Whichever party has the wherewithal to buy out the other’s equity and maintain the house is the one who gets the house. The judge will always try to rule in favor of what is fair.
Depending on who wants the house and who has the wherewithal to keep the house, there are only three possible outcomes.
- If you want it: You buy your spouse out. You would typically get an appraisal for the house, finds out how much equity is, and write your spouse a check and consequently refinance it. In this case, your spouse will be required to move out.
- If your spouse wants it: Your spouse buys you out in the same manner as mentioned above and consequently, you will have to move out.
- If you both want it: In the event that you both want the house, and you both are able to afford to do so, the judge will sell the house. I know this seems cold and heartless.
When it comes to a house that was bought by one of you prior to the marriage, it will be treated as separate property. This means that it will not be subject to equitable distribution, and the party that bought the house will keep it. However, depending on how the property was treated after the marriage the other spouse could get a share of the home.
- Whoever has the financial wherewithal to buy the other out, gets the house.
- If both parties want the house and can afford to buy the other out, the judge sells the house.
- A house bought prior to the marriage is typically considered separate property.
What Happens to an Inheritance?
For instance, let us assume that your grandmother passes (may she rest in peace) and leaves you the assets to her estate in her will. She does not make any mention of your spouse in spite of having known you were married. The assets to her estate are then considered an inheritance. Because these assets were acquired by you during the marriage, the manner in which those assets were treated upon their receipt may influence whether you’ll have to part with a portion of those assets upon divorce.
Generally however, your inheritance is not subject to equitable distribution. This is because, the law does not consider inheritance as marital property. It is considered to be state property, and it taken to belong to the party that received it. In the state of New York, whether or not you have to part with a share of your inheritance depends on how you treated the property after you acquired it. In some cases, the court may choose to award a percentage of it to your spouse. If the inheritance is liquidated and the funds deposited into a joint bank account that is in turn used for joint marital expenses, the inheritance loses its immunity as separate property. Similarly, if the inheritance is used to renovate your home, it may also lose its immunity.
- An inheritance is generally treated like separate property, and is not subject to equitable distribution.
- However, if the funds from the inheritance were deposited into a joint bank account, the recipient of the inheritance might have to part with a share of it.
What Happens to a Retirement Plan?
Divorce is a pretty costly affair. What with upfront lawyer fees and the adverse effects on one’s emotional health, a divorce can easily rip a wormhole in your wallet. However, sometimes divorcing couples do not realize that it can also have some severely detrimental effects on either party’s future financial security. You guessed it. Retirement plans.
If you are worried about your retirement savings, it is likely one of the largest and most valuable assets you own. We understand that this is perhaps one of the more important issues in the divorce proceedings, simply because of the ramifications is has on your financial future and stability. Even though it is one of the most pressing of concerns, it tends to get very complicated. Because a retirement plan brings with it certain tax implications, it is often not handled properly.
Typically, if the retirement assets were accumulated during the marriage, they will be subject to equitable distribution. if your spouse has a retirement plan that is being sponsored by an employer (like a 401K, or a pension plan), you are legally entitled to a part of the balance unless you both signed a prenup that states otherwise. This principle is the same the other way around. If you are the one with an employer-sponsored retirement plan, your spouse is entitled to a part of it. On the other hand, if they were accumulated before the marriage, those assets will likely be considered separate property.
- If the retirement assets were accumulated during the marriage, those assets will be up for equitable distribution.
- If the assets were accumulated before the marriage, then those assets will not be up for division.
When going through a divorce, there are many assets couples fight over during the equitable distribution phase. One Call Does it All with our Divorce attorneys in Buffalo NY. John Dudziak and Rebecca Talmud will help you start your journey.