How to Divide Property Equitably in a Divorce—What the Court Considers
Deciding what to do about the marital home is just one aspect of the bigger question of how to divide your marital property in the divorce. If you and your ex are negotiating a no-fault divorce, you can work with your respective attorneys to iron out a settlement agreement that works for both of you. If it goes to litigation, however, the divorce court judge will ultimately decide how to divide your property. Let’s talk about what this process might look like—but first, a bit of background information.
Understanding Equitable Division
New York is an “equitable division” state. That means the court seeks to divide marital property fairly—and fairly doesn’t automatically mean equally. It also means the court only looks at marital property when determining how to distribute assets—not property owned exclusively by one spouse or the other.
Marital Property versus Separate Property
To understand how equitable division works, we must also understand the difference between separate and marital property, as described in New York Domestic Relations Law Section 236. Under the law, separate property is deemed to belong exclusively to one spouse. For example, if you owned a business or a piece of real estate prior to getting married, and if your spouse contributed nothing to improve it, that business or property remains yours when you divorce. By contrast, marital property constitutes anything you own together—essentially, assets obtained during the course of the marriage. If together, you bought a house or started a business, for example, that home or that business is marital property and will be counted among the assets to be distributed equitably.
One situation where things can get a bit muddy under this system, is where one spouse contributes meaningfully to the pre-existing asset of the other. Say, for example, prior to your marriage, you owned a piece of rental property, and then, during your marriage, your spouse helped you renovate the property in a way that improved its value and increased your rental income. While the real estate itself would still be separate property, the increase in value would be considered marital property and would be taken into account for equitable distribution.
Factors That Go Into Dividing Property Equitably
If you think about it, the judge has quite a task in determining how to distribute your assets fairly (after all, you’re in front of the judge because you couldn’t agree on it, either!). The court has many factors to consider, besides just the marital assets, and there’s no ironclad criteria to determine what is fair. Let’s look at just a few considerations:
- Income and/or potential income of each spouse. A higher-earning spouse may get a lesser share of the assets because of earning ability, while a spouse who is financially dependent or lacks earning potential may be awarded more of the physical property.
- Age and health of each spouse. A spouse in poor health or needing additional care may be awarded more assets, for example.
- Contribution of each spouse during the marriage. We already mentioned the example of one spouse investing value in the other’s separate property; courts may also consider how much each partner also contributed to growing the family’s combined assets. (By the way, being a homemaker or stay-at-home parent also counts as a contribution under New York law.)
- Extent to which either spouse squandered marital assets. Losses are taken into account as well as increases.
- Needs of the children and who will bear the most responsibility for them.
As complicated as this process can be, your divorce settlement plays a critical role in your ability to build a life after the divorce—and you really only have one chance to get it right.
If you and your ex still communicate amicably and reasonably, you can save yourselves a lot of headache and heartache to come up with an agreement. However, if you can’t agree or find yourself getting an unfair cut of the assets, you may need to take the matter to court to ensure your property is divided equitably—even if you don’t get everything you want from it.
Understanding Marital Property Division
One of the most difficult things about the end of a marriage is splitting up the assets. You and your soon-to-be ex-spouse may be at odds over certain items accumulated during the marriage. Who keeps the car? Who stays in the house?
New York is an equitable distribution state, which means that property must be divided as fairly as possible in a divorce. This does not mean that assets are automatically split 50/50, however. The court will look at many factors, such as the age and health of both parties, how each party contributed to the marriage, loss of pension rights or health insurance and maintenance awards. If there are children involved, the judge will also consider whether or not the custodial parent wishes to remain in the marital home.
Under New York law, only marital property is subject to equitable distribution in a divorce. Non-marital or separate property remains the possession of its original owner. Therefore, it’s important to understand what is rightfully yours and what you must split in a divorce.
What is Marital Property?
Marital property refers to all property acquired during the marriage by either spouse. This applies even if the title of a specific asset—such as a car or house—is in the name of just one spouse. All assets—including tangible and intangible assets—can be considered marital property. It includes money, cars, boats, houses, collections, furniture, antiques, stock options, businesses, retirement accounts and pension plans.
What is Non-Marital Property?
Non-marital property refers to assets titled to one spouse only. Examples of this include inheritances (even if the spouse received the inheritance during the marriage), personal injury lawsuit awards and assets owned before the parties married. This may include homes and bank accounts.
However, there are situations in which separate property can become marital though. For example, if you bought a home before marriage, but your spouse helped pay for the mortgage from time to time or helped with the upkeep and maintenance, then the court may decide that the house is marital property.
The same goes for inheritances and other gifts you received during the marriage. If you commingle this money by putting it in a joint bank account or use it to pay bills, it may be considered marital property.
Therefore, you want to take the appropriate steps to protect your assets. If you have inheritances, gifts, and assets that you obtained before marriage or acquired solely in your name during the marriage, you want to make sure they are not deposited with joint funds. Otherwise, they become fair game in the event of a divorce.
Contact a Saratoga County Divorce Modification Lawyer for Help with Marital Property Division
If you’re going through a divorce, it’s important that you understand the difference between the various types of property. You want to protect what’s yours. Make sure your property division after divorce is equitable and that you get what you deserve.
A Saratoga New York lawyer at The Colwell Law Group can assess your case and help you make the right decisions during a divorce. To schedule a confidential consultation, call our office today.
What Happens to the House and Other Real Estate During a Divorce?
“Who gets the house?”
Besides custody disputes over the kids, the question of how real estate should be divided—especially the marital house—is perhaps the most contentious issue most divorcing couples face. It’s not just about the monetary value; if it were just another asset, no one would care that much. Rather, the house carries sentimental value, usually for both spouses—and if you’ve been raising kids, tearing them from their childhood home could be devastating.
Needless to say, there’s a lot to iron out here—but truthfully, most of the challenge lies in finding a point of agreement with your ex. Here in New York, where we practice, the laws about asset distribution are fairly clear and balanced. The problem is that if you can’t agree on “who gets the house,” the judge will decide for both of you, and neither of you might like the outcome. Let’s discuss this tricky aspect of the divorce settlement so you know what to set your expectations and how to prepare for some potentially difficult discussions.
Equitable Division versus Community Property
One key factor in distributing assets during a divorce is whether the state you live in is an equitable division state or a community property state.
New York is an equitable division state, which means the judge has the right to evaluate and distribute assets between the divorcing spouses in a manner that seems equitable or fair. The division of property may not always be 50/50 in these instances, but the judge may exert more latitude in determining if one spouse or the other should keep the marital home, rather than just mandating a sale—usually compensating for the other spouse’s “half” of the property by distributing more of the liquid assets in his direction, for example. Other factors that may play into a split that isn’t exactly 50/50 may include such things as length of the marriage, income, health of each spouse, custody and financial expectations of each spouse.
By contrast, a handful of states currently use community property standards, which basically says any assets obtained by a couple in the course of their marriage are co-owned equally and must be divided 50/50. Under these rules, if a divorcing couple can’t agree between themselves on “who gets the house,” the judge will likely rule that the house must be sold so the proceeds can be divided evenly.
Marital Property versus Separate Property
Another differentiator to know in a divorce is the difference between marital property and separate property. In a nutshell, separate property is anything you own exclusively outside the marital bond—for example, if you owned real estate before you got married and your spouse did nothing to add value to that property, you will retain ownership of that property when you divorce. Marital property, on the other hand, is anything you and your spouse obtained together during the course of your marriage—so any property you buy together during the marriage counts as marital property. Even if only one of you appears on the title, if you bought the house while you were married, it’s considered marital property and must be divided equitably.
All that said, don’t presume your separate property is completely exempt. There is one possible fly in the ointment—whether your spouse added value to the property. For example, if you owned a piece of real estate before the marriage and your spouse helped you remodel it, the increase in value becomes marital property. If you want to keep that real estate when you divorce, you will have to negotiate in a way that gives your ex approximately half the value of what he put into the remodeling of your property.
Options for Dividing Up Your Marital Real Estate Holdings
Once you’ve identified how much of your real estate is marital property (which may just be the house you lived in), the question becomes how to divide that properly fairly and equitably in relation to your other assets. Effectively, you can resolve this question with one of three solutions:
- One of you “buys out” the other person’s interest in the home. If you want to keep the home and have the ability to refinance in your own name, you can simply “buy out” your ex’s part of the ownership, not unlike buying out a business partner who leaves the company.
- One of you keeps the home in exchange for other assets in the divorce agreement. For example, you may give up ownership of some stock options, a savings account, the extra car or even an additional piece of property you might own together, in exchange for taking full possession of the marital house.
- You sell the property and divide the proceeds equitably.
Again… equitably doesn’t always mean equally.
In a divorce agreement, especially one that is litigated, the judge will take into account a variety of factors to decide what is an equitable distribution of your real estate and other holdings. For instance, if you are a stay-at-home mom, if the kids have spent their entire childhood in that home, and if your ability to produce an income is significantly less than that of your ex, the judge may be more likely to award you the house, or possibly to award you a larger than 50-percent share if the house must be sold.
Determining who gets the house is never an easy question to answer, but in almost all cases you’ll both fare better if you can come to a mutual agreement with your spouse on how your real estate and other assets should be handled. A good divorce attorney can work with your ex’s attorney to help iron out those details so a judge doesn’t have to make those difficult calls for you.
What to Do If You Suspect Your Spouse Is Hiding Money or Assets
A few years ago, the National Endowment for Financial Education (NEFE) released the results of a sobering survey regarding married couples and their finances. Their poll revealed that nearly one-third (31 percent) of couples sharing accounts with a spouse or significant other had been financially deceptive toward their partner. Of these, 58 percent said they had hidden cash from partners. The types of deception included lying about income or debt, hiding bank accounts and credit cards, and more.
If this behavior happens this often within marital relationships, you can bet it happens when couples decide to divorce. Far too often, one spouse resorts to underhanded tactics to hide money or assets from the other—stashing money secretly, draining bank accounts, retitling property to relatives, understating income and overstating expenses—usually in an attempt either to cheat the other out of a legal share of the assets or to minimize the amount of support to pay, or both.
If you’re married and you discover that your spouse has a secret stash, it mainly breeds distrust and friction. However, if your spouse hides assets while you’re divorcing, it’s illegal—not to mention it can have serious repercussions on your financial future.
How Hidden Assets Can Hurt You
The law entitles you to approximately one-half of your total combined assets in a divorce settlement. If your ex manages to pilfer assets before they can be accounted for, your share of the settlement could be far lower than it should be. If the assets are found, the judge may be able to mandate repayment to you—but if, for example, an ex-spouse drains a savings account and spends the money, it may be gone for good.
Another way hidden assets can harm you financially is if you rely on your ex for a certain amount of support for yourself and any children. Your alimony or child support is determined in part by the spouse’s ability to pay based on income. If an ex successfully understates income or overstates expenses, it could greatly reduce the amount of court-mandated support you receive.
As frequently as this activity occurs, hiding assets during a divorce is still a dangerous game, and any spouse caught doing so may have serious penalties to pay. Let’s explore this common problem and what to do if you suspect it’s happening to you.
Signs Your Ex May Be Hiding Money or Assets
Here’s the good news: Stuff doesn’t just magically appear or disappear from places. It has to be moved from one place to the other. If you’re paying attention, you can usually detect one or more indicators that your ex is moving money or assets in secretive ways, even if you don’t yet know where the money is going. Some signs to watch for:
- Vague or deflecting answers to financial questions. You have the right to know specific numbers about what money is coming into your joint accounts and how it’s being spent. If your spouse gives generic, non-committal answers to these questions, avoids revealing passwords, etc., she may have something to hide.
- Over-emphasis on financial hardship. If you and your spouse are separated and he suddenly brings you a sob story about how he got demoted or how poorly his business is doing, this activity may be a smokescreen to hide what’s really going on—especially if there are no changes to his lifestyle, or if he starts spending money more lavishly.
- Unusual account activity. Watch for unexplained withdrawals from combined bank accounts, especially before divorce papers are filed. Look at bank statements prior to separation to see if your ex took out large sums of money, either in lump sums or smaller amounts over time.
- Unexplained giving. If your estranged spouse suddenly gets generous and starts giving things away to friends or relatives, you may be looking at a scheme to temporarily reduce his assets prior to the divorce. The idea would be to get those assets back after the divorce is final.
If You Suspect Your Ex Is Hiding Something
If you notice any of the above warning signs, the next step is to prove that assets are being diverted, and where from/to. But, as stated earlier, stuff doesn’t magically disappear—it has to go somewhere. You just have to find the trail. Some steps you can take:
- Hire a Forensic Accountant. “Forensic” means that someone uses scientific and investigative tools to discover financial wrongdoing. A forensic accountant can do a deep dive into accounting and other records to identify discrepancies and red flags that you can take to a judge.
- Hire a Private Investigator. Have your ex “tailed” to see where he goes and what he does, to identify possible signs of financial deception.
- Freeze Accounts to Stop the Bleeding. If you have reason to suspect your ex is pilfering, your attorney can ask the courts to freeze all assets until the divorce is final. But before doing so, realize that it will affect you, too: You may need to find some temporary support during this time, because you won’t be able to touch these assets, either. Yet freezing or closing accounts is often the safest way to protect your interests in the long run.
Enlist the Help of a Saratoga County Family Law Attorney
The legal team at the Colwell Law Group has experience handling this type of issue and will work to ensure your assets are handled fairly and accurately. Contact us today to get started!
What If My Spouse Hides Assets During an Albany Divorce?
Aside from child custody, property division is typically the most contentious issue in an Albany divorce case. New York follows an “equitable” distribution rule with respect to any property acquired during a marriage. This means that if the parties cannot agree how to divide their assets, a judge will do so taking into account a number of factors to ensure a fair, but not necessarily equal, distribution.
Unfortunately, some people try to game the system by hiding assets from their estranged spouse and the court. There are a number of ways to do this. For example, the spouse might accept payment for work “off the books” and in cash. They may even ask an employer to delay payment of previously earned bonus or commission until after the divorce is final. Or they can give money or title to certain assets to a family member–possibly under the pretext of paying a non-existent debt–until things blow over.
Make Copies, Get Legal Help
So what steps should you take if you suspect your spouse is hiding or concealing assets from you in anticipation of divorce? The first thing is to make sure that you have copies of all of your family’s financial records. Especially if your spouse normally handles the finances, it is critical that you keep separate copies of all bank statements, tax returns, pay stubs, and any other document related to marital property.
Go through your financial statements and take note of any unusual or transactions. If your spouse has made a series of unexplained withdrawals, for instance, that could indicate they are moving money into a “secret” account that you do not know about.
My Spouse is Hiding Assets During Divorce – Should I Call a Lawyer?
Your next step is to contact an experienced Albany divorce attorney. If your spouse is hiding assets, an Albany judge can and will take that into account when making an equitable distribution of property. At The Colwell Law Group, LLC, we have experience in working with forensic accountants and private investigators to make sure your spouse is being honest with you and the court. Call us today at 518-462-4242 to schedule a consultation.
Judge rules in favor of billionaire hedge fund manager
It looks like New York hedge fund billionaire Steven Cohen will not have to go to trial for fraud. A federal judge ruled that his ex-wife failed to produce enough evidence that the founder of SAC Capital Advisors hid assets from her during their divorce.
In her ruling, the judge said that Patricia Cohen has not produced evidence of any bank account, cancelled checks, property, or other assets belonging to Steven which he did not disclose to her in his 1988 financial statement.”
It’s been 18 years since the couple broke up, ending a nine-year marriage. Patricia Cohen alleged that her husband had filed a separate tax return in order to hide “substantial income” during their divorce proceedings.
Mrs. Cohen says that it wasn’t until years after their divorce that she learned that her ex-husband had received a $5.5 million dollar settlement over a failed investment in some apartments with a friend. She filed a lawsuit in late 2009 against Cohen, his brother and the friend with whom Cohen invested in the Queens apartments. A judge dismissed the RICO case against Cohen in 2014.
Patricia Cohen’s attorney has not yet said whether his client will appeal this most recent ruling. He did say, “”If all the evidence were put before a jury we believe a jury would find for Mrs. Cohen.”
When people with considerable assets and financial savvy divorce, it is possible to find ways to hide assets to minimize the amount of support paid to an ex-spouse. Often, New York family law attorneys will recommend bringing in a forensic accountant. These financial experts can work to determine just what assets a person has. While this may seem like one more expense you don’t need at this time, it can end up paying for itself many times over.
Source: Courthouse News Service, “Billionaire Steve Cohen Ducks Ex-Wife’s Suit,” Adam Klasfeld, May 20, 2016
Dividing Assets In A ‘Gray Divorce’ Can Be Complex
There was a time when a married couple that stayed together into their 50s was certain to remain together for life. Today, people who are 50 or older are getting divorced at twice the rate they did in 1990, according to the National Center for Family and Marriage Research at Bowling Green State University in Ohio.
In these so-called “gray divorces,” the stress of resolving child custody issues is typically avoided since children are grown. What becomes more critical when an older couple ends a marriage is the distribution of assets. One or both parties in a gray divorce may have substantial retirement savings that will be considered marital property. What appeared to be a substantial nest egg for two people nearing retirement must now be divided.
What Retirement Assets Are Marital Property?
New York law states that all assets in retirement accounts, whether they are 401ks, IRAs, pension plans, profit sharing or provided in any other fashion, are subject to equitable distribution as long as they were accrued during the marriage. Assets brought into a marriage are not subject to division, which is why it is wise to create a prenuptial agreement when entering into a second marriage.
Knowledgeable Legal Advice Is Crucial
When there are more substantial assets to divide, negotiating a settlement becomes more challenging. Thus, it is more important to work with a knowledgeable divorce attorney who can help you navigate the process. For example, it may make sense for one spouse to offer more of one’s pension plan in exchange for a lower spousal support payment. Careful analysis by a lawyer who has been through the process multiple times will help you make the right decisions.
How Can Divorce Affect Your Business?
Apart from issues involving children, the distribution of property is typically the most fiercely contested issue in any New York divorce case. When your assets involve your own business interests, things can become even more challenging. As has been reported by Reuters, a divorce can have an immense impact on small businesses.
The bottom line: You need to protect your legal rights and financial interests. If you are a Capital District business owner who is facing a divorce, it is imperative that you speak to a qualified Saratoga County family lawyer who has experience handling complex financial issues. Your lawyer will be able to assess your circumstances and find a solution that best protects your business.
Is Your Business Marital Property?
One of the first questions that business owners need to answer is whether or not their company is marital property. Under New York law, all marital property, including personal business interests, is subject to the state’s equitable distribution standard. Essentially, this means that if your business is marital property, your spouse will have a claim to some of the value of your company.
Any property obtained after the marriage began will almost certainly be classified as marital property. On the other hand, property will usually be considered separate if it meets any of the following criteria:
- It was acquired prior to the marriage;
- It was gifted or inherited; or
- It was specifically designated as separate property by a valid prenuptial agreement.
That being said, determining whether or not a business is marital property in New York is actually a far more complex question than that. A business that was acquired prior to the marriage (separate property) could potentially become marital property under New York law if the spouse worked full time at the company, putting in labor to increase the value. Ultimately, you need to get your case in front of an attorney who can review your individual circumstances.
Protecting the Value of Your Business
Ideally, your business interests will be protected before the issue of divorce ever arises for you. This can be done by consulting with an attorney who can help you draft a legally enforceable prenuptial or postnuptial agreement, which will spare your business from the divorce process entirely. Of course, you may already be in a situation where it is too late for that type of solution.
If your spouse has a claim to a portion of the value of your business, and you are now going through divorce, you need to protect the continued functioning of your company. At this point, it is critically important that you get a comprehensive business valuation to clarify the value of your business interests, so that you can avoid facing double dipping. When you have all of the information about your business, you can then move forward, finding a settlement that will allow your company to keep operating, undisrupted by your divorce.
Contact Our Albany Divorce Lawyers Today
At The Colwell Law Group, LLC, our dedicated divorce lawyers have helped many New York business owners through their divorce. If you have any questions about how divorce will affect your private business, please contact our team today to request your initial consultation. From our office in Albany, we serve clients throughout the Capital District region.
Avoid a Double Dip in Business Valuation During Divorce
When your divorce involves a privately own business, things can get tricky. You must do a valuation of the business to determine how it affects other assets in the divorce.
Some individuals mistakenly count the business twice in the equitable distribution process in a divorce. Unfortunately, this makes the Court think that you are wealthier than you actually are, which could significantly alter your property distribution or alimony in a divorce proceeding.
What is Double Dipping?
When you own a business, you have an asset, but you also have a stream of income. When you count the business as both an asset and as an income source, you have engaged in double dipping. The business should only be counted once in a divorce.
There is a similar problem in retirement accounts or pensions as well. Retirement plans or contributions are often divided as part of the property settlement, and that generally does not change after the retirement plan starts to pay out. That is because the income stream was considered when the retirement account was valued in the property settlement.
Valuing Closely Held Businesses
When you value a business, you consider all of the assets in the business. This includes contracts that you have currently and projected future income.
The projected future income is already a part of the valuation process, so considering the income again at an individual level counts that value twice. It is just like the retirement account example, above.
There are other ways to value businesses that do not depend on future cash flows. If you or your expert uses one of these methods to value the business, then you should include your business income separately. As you can see, knowing how your business is valued is an important part of the property division process in a divorce.
Contact an Experienced New York Divorce Attorney
In New York, it is generally an error to consider the business in both the property division portion of the divorce and the maintenance portion. Other states may have a different approach, however. It is important to speak with an experienced divorce lawyer who has dealt with valuing businesses in New York.
Divorce and Pet Custody
Pet custody is a major issue for animal-loving couples going through a divorce. A 2014 survey reported a 27% increase in cases involving family pets in the last few years. Divorcing couples are encouraged to work out pet custody arrangements on their own. Mediation may be able to help a divorcing couple reach a compromise, such as shared custody or visitation. However, a judge may not be able to enforce these agreements. If the spouses cannot reach an agreement regarding pet custody, they can ask the court to decide the matter for them. So how do family courts in New York decide who gets to keep the dog?
Pets as Personal Property
Most of the time, pets are considered to be “personal property,” like a couch or refrigerator. Under New York state law, a divorcing couple’s personal property must be divided fairly between the spouses. It can be challenging to include a pet in the division of assets process since its emotional value is often much higher than its economic worth. A pet may even be used as a bargaining chip by an exploitative spouse to gain a financial advantage.
Fortunately, New York and a handful of other states are slowly recognizing the shortcomings of a strict “pets as property” mentality. Alaska recently became the first state to mandate judges consider the “wellbeing of the pet” and give them the authority to enforce joint custody agreements. While New York does not go as far as Alaska, the Empire State has adopted a “best for all concerned” standard to determine ownership and custody of animals involved in divorce cases.
New York Pet Custody
New York case law has determined pets are not granted the same legal rights and advantages as children in divorce cases. However, a judge does have the discretion to decide what is in the “best interest for all” regarding pet custody matters. To decide what arrangement is best for the family, the judge may look at the following:
- Who owned the pet before marriage? If the dog or cat was adopted before the couple was married, a judge will likely determine the original owner is the rightful owner of the animal.
- Who is the pet’s primary caretaker? If the couple adopted the animal after they were married, a judge may look at who takes care of him most of the time to decide where the pet belongs.
- Who does the pet live with now? A judge will sometimes decide the pets should stay with whichever spouse retained custody of them after separation.
- What is in the best interest of the parties? The judge may consider other relevant factors such as which spouse has more emotional attachment, time, and resources to devote to caring for the animal, as well as the environment each spouse can provide. Any history of neglect or abuse will be taken into consideration as well.
Need Legal Help? Call a Columbia County Divorce Lawyer Today
For more information about pet custody and other family law issues, contact the Columbia County family lawyers at Colwell Law Group, LLC. We are prepared to assist you today.
Am I Liable for Debt Accrued by my Spouse?
Divorce can be a confusing and emotional process for all of the involved parties and one of the most common areas of confusion is the matter of debt liability. Will you be held responsible for the debts that your spouse accrued during the marriage? Are there only certain kinds of debt that you will be deemed responsible for? Is there a way to be released from this liability? These are a few questions you may be asking yourself when it comes to finances and your divorce.
Understanding Your Debt Liability
Debt liability for spouses may vary from state to state, but some general rules usually apply. Also, keep in mind that there are different kinds of debt.
Consider the following points:
- Equitable Distribution – Generally speaking, assets and liabilities accrued during the marriage are presumed to be joint and marital. That presumption is rebuttable though. Like most states, New York is an equitable distribution state. This means that laws pertaining to debt liability for spouses will differ from those in community property states.
- Credit Card Debt – In cases of credit card debt, the court may assign responsibility for unpaid credit cards after a trial. Alternatively, the spouses may be able to agree as to who will pay off each credit card. The presumption of joint debt can be rebutted if there is marital waste or a paper trail of self-serving transactions. Talk to an experienced divorce attorney about your options.
- Joint Credit Accounts – It is possible for creditors to seek compensation from either spouse if the responsible spouse ceases to make payments. The best way to prevent this is to get joint credit contracts, such as car loans, modified to reflect the new circumstances. If you are unable to get out of such an account, be sure to track your ex-spouse’s repayment activity. If your former spouse starts missing payments, discuss the matter with the creditor, and make the payments yourself if you have no other choice.
- Bankruptcy – If your former spouse files for bankruptcy after the divorce, you could be affected if your name still appears on certain credit contracts. To avoid this, talk to your divorce lawyer about having your name removed from such contracts when applicable.
Consult an Albany Divorce Attorney Today
Do not leave the details of divorce to chance. Whether you have questions about child custody, spousal support, or debt liability, the Colwell Law Group has the answers. We look forward to helping you navigate through the process of divorce.
Need a Saratoga County divorce lawyer? The Colwell Law Group, LLC, is a top family law firm in the area. Call us or fill out our quick online contact form today.
Equitable Division of Debt in a Divorce
Dividing Marital Debts Equitably—What You Need to Know
If dividing marital assets can cause contention in a divorce, separating marital debt can cause even more. It’s one matter to walk away with fewer assets. It’s another matter entirely to be saddled with debts you don’t feel obligated to pay. What can you do to protect yourself and your interests during this particularly sticky part of the divorce negotiations?
How Debt Division Works in New York
As an equitable division state, New York treats the assignment of debt in a divorce much the same way as it does the division of property and assets. The goal is not necessarily an equal split, but rather a fair division. There’s no set formula for this process, but here’s how the court will look at your debts in general:
- Debts you incurred prior to the marriage remain your responsibility
- Debts you incurred jointly with your ex will be divided between you
- Debts held by either spouse that are considered “marital debt” may also be divided between you
Of course, there are exceptions, and most of them center around the question of which debts are marital debt, and which are non-marital.
What Is “Marital Debt” and Why Does It Matter?
Basically, the court considers any debt marital debt if it was:
a) created for marital purposes;
b) if both spouses benefitted from the debt in some way;
or c) if both spouses showed intent to pay the debt.
Let’s look at some examples of how this may play out:
- Pre-existing student loans might be considered marital debt under New York law if the court determines both spouses benefitted from the resulting income.
- A pre-existing debt could be considered marital debt if the other spouse helped make payments on it, thereby inferring responsibility for it.
- A debt taken out in one spouse’s name is counted as marital debt if both spouses benefit from the funds (e.g., if you buy a camper in your own name that is used for family vacations).
On the other hand, these same variables can work to your advantage.
For example, if your spouse secretly opens a credit card during your marriage or uses a joint credit card to fund an affair, the judge may count it as non-marital debt, and your ex will be responsible for it—even though the debt was incurred during the marriage. Likewise, if you took out a home improvement loan in your name, because you had better credit than your spouse, you may share responsibility since your ex benefitted from the loan.
Other Factors When Dividing Marital Debt
In seeking an equitable division of the debt, the judge will also look at other mitigating factors, just as he does when dividing assets. These factors include:
- How long you were married (i.e., how long you shared debts together)
- Income/potential income of each spouse (i.e., respective ability to pay)
- Each spouse’s age and health
The judge may also review the division of marital assets when deciding who owes what. If you are awarded more of the marital property, for instance, you may also be assigned more of the debt as a trade-off.
Ways to Protect Yourself
Obviously, the judge’s decisions about shared debt can have a profound impact on your financial situation as you exit the marriage. Consider doing the following to protect your interests.
- Pay off as much debt as possible before the divorce. The less you owe before litigation, the better your chances of a positive financial outlook.
- Negotiate with your ex to divide your debts outside of court. If you are splitting amicably or can at least talk to your ex, you may be able to work out an agreement without taking the debts before the judge.
- Remove your ex as an authorized user on your credit cards. He’ll be legally responsible for any debts he incurs after you file, but having to prove when the debt was incurred can create unneeded complications.
- Document any loans you took in your name during the marriage and their purpose. Some of this debt may be marital debt to be shared with your ex.
- Refinance assigned debts into each spouse’s individual names. Creditors don’t care what the judge decides; if your name is on the loan, they hold you responsible. If you hold up your end of a shared debt and your ex doesn’t, you’re the one who takes a hit on your credit. Once the judge assigns the debt, separate the debts into your own names as much as possible.
How a Divorce Can Affect Your Retirement Planning
For many couples in New York, retirement savings are among their most valuable assets. Indeed, if you have spent a lifetime putting away money for your retirement, your savings may even be worth far more than your house. It is important for all separating couples to understand: A divorce can have a huge impact on your retirement planning. If you are getting divorced in Albany, NY, it is imperative that you are properly prepared so that you can protect your retirement savings and ensure financial security far into the future.
New York Divorce: Retirement Assets are Subject to Equitable Distribution
In New York, all marital property is subject to the state’s equitable distribution legal standard. Under this standard, a couple’s marital assets and liabilities are to be divided in a manner that is fair to both parties. All retirement assets, including individual 401(k) accounts, IRAs, pension benefits, and profit sharing plans will be subject to equitable distribution, as long as those assets were accrued during the couple’s marriage. The bottom line: Your retirement benefits can be split up during your divorce.
The Effects of Divorce on Retirement Planning
You Need Financial Clarity
When getting divorced, you will need to consider several different retirement planning issues. First, you should keep in mind that by nature, your divorce will alter your overall financial outlook. As such, you may need to make adjustments to your overall financial plan to ensure that you will have enough savings in retirement to support your lifestyle.
Divorce Might Affect Your Social Security Benefits
In the United States, retirement has long been considered a three-legged stool. This term refers to the fact that most retirees use three different sources of income to support themselves: Employee benefits (pensions, IRAs and 401(k)s), personal savings and Social Security benefits. When getting a divorce, you need to consider the impact on Social Security. Under current law U.S. law, if a marriage lasted for longer than ten years, a spouse may be entitled to claim a share of their former partner’s Social Security benefits.
What You Need to Know About Dividing Retirement Accounts
Finally, you need to be extremely careful when dividing the proceeds of your retirement accounts. Indeed, if you fail to handle retirement benefits properly, you could be subject to substantial early withdrawal penalties and even to other tax penalties. This is an area where an Albany divorce lawyer who has experience handling retirement assets will be able to help. Using a legal tool known as a qualified domestic relations order (QDRO), your lawyer will be able to help you resolve all issues related to your retirement assets, making sure that you will not face any unnecessary penalties and that your overall financial plan will be disrupted as little as is possible given the circumstances.
Contact Our Albany Divorce Lawyers Today
At The Colwell Law Group, LLC, our team has extensive experience handling all aspects of divorce, including retirement planning issues. To learn more about what we can do for you, please do not hesitate to call our Albany office today. We serve communities throughout the Capital District, including in Saratoga County, Schenectady County, Columbia County and Fulton County.