When asked to name the most contentious issue in a divorce, most people tend to say child custody or alimony. But another major source of conflict is dividing a couple's property, especially deciding who'll get the marital home or even the family pet. Whether you're hoping to reach an agreement with your spouse or you fear a legal fight over the issue, it's important to understand how New York's matrimonial law deals with property distribution and allocation of debts.
New York isn't a community property state. Instead, New York follows the rule of "equitable distribution" in divorce. That means that judges will distribute a couple's assets and debts based on what's fair under the circumstances of each case. Fairness doesn't necessarily translate to a 50/50 split, which is the goal in most community property states.
The first step in property division is to figure out which property and assets are "marital" and which are "separate" (or nonmarital). The distinction between marital and separate property is important, because marital property and debts are distributed between the spouses in divorce, while each spouse normally keeps their own separate property.
New York law defines separate property as:
(N.Y. Dom. Rel. §236(B)(1)(d) (2024).)
Here's an example of how property appreciation might count as separate or marital property: Say a spouse owned a house before getting marriage. To the extent that the property increased in value simply because of the housing market, the appreciation would remain separate property. But if the other spouse contributed money for a renovation, the portion of the house's appreciation that was due to that improvement would be marital property.
Under New York law, marital property is all property that either or both spouses acquired during the marriage, except for the specific types of separate property discussed above. It doesn't matter whose name is on the title to the property.
In this context, "during the marriage" means up until the couple filed for divorce or signed a separation agreement (more on that below).
(N.Y. Dom. Rel. §236(B)(1)(c) (2024).)
Separate property can at times become marital property (a process known as "transmutation" in legalese). Sometimes the transmutation is intentional, such as when a spouse who owned a house before the marriage adds the other spouse to the title of that property.
Separate assets can also be changed into marital property in a process called "commingling," which is basically mixing separate and marital property. For example, say one spouse had a separate bank account before getting married, but during the marriage both spouses deposited money in the account and drew money out. Even if the name on the account never changed, the entire account will likely be considered marital property. Similarly, if a spouse deposits inherited money into a joint account, it will probably lose its character as separate property.
The easiest way to avoid a battle over dividing property in a divorce is to address the issue before the wedding, with a prenuptial agreement. In the agreement, you can list all of the assets and debts that each spouse is bringing into the marriage, as well as establish the rules for dividing property if you get divorced.
But even you don't have a prenuptial agreement, you can still avoid a trial on the property issue in your divorce by reaching an agreement before you file for divorce or while you divorce is in progress. In this case, you'll need to submit your agreement to the court so that it can be made part of an official court order as part of your final divorce judgment. But judges typically approve these property agreements as long as they appear fair to both spouses.
Also, you should know that the entire divorce process will be quicker and less expensive if, by the time you file your divorce papers, you and your spouse have reached a comprehensive settlement (or "separation") agreement that addresses all of the issues involved in ending your marriage.
Once you've identified which property is marital and which is separate, the next step is to figure out how much each marital asset is worth, as well as the correct amount of all marital debts. You'll save both time and money (think attorneys' fees) if you and your spouse can agree on property values rather than taking the fight to court. You might need to hire an appraiser or other financial expert to set an accurate value on some types of property, such as real estate, pensions or retirement accounts, and a business or professional practice.
Property values change over time, so the valuation date can make a difference. Under New York law, as soon as it's practical after a couple has filed for divorce, the judge must set the date (or dates) they'll use to value each asset. Those dates may be anytime from the filing date to the trial date. (N.Y. Dom. Rel. §236(B)(4)(b) (2024).)
If you and your spouse aren't able to agree on your property division, a judge will have to do that for you. When making that decision, New York law requires judges to consider any relevant circumstances, including all of the following:
By including that last factor, the law recognizes that it may be impractical to divide a business or professional practice. For instance, if one spouse plays an integral role in running a family-owned business, giving the other spouse an interest in that business could be counterproductive, especially if the other spouse has no relevant expertise. Similarly, a judge may not award an interest in a spouse's law practice to the non-lawyer spouse, because that spouse isn't licensed to practice law. In situations like this, the judge will typically award the actual business or professional practice to the spouse who's running it, and then award different property to the other spouse to make up the difference.
(N.Y. Dom. Rel. §236(B)(5) (2024).)
The judge will also assign each spouse responsibility for a portion of the marital debts, after considering the same circumstances (listed above) to reach a fair distribution.
Marital debts include any liability that either spouse took on during the marriage and used for the family's benefit. For example, if one spouse applied for a store credit card and used it to buy clothing for the couple's children, that debt will be part of the distribution in the couple's divorce.
Note that once a spouse has filed for divorce in New York, the court issues an automatic order barring both spouses from taking on any unreasonable debts. That includes taking out a second mortgage, borrowing on other credit lines, or using credit cards other than for usual household or business expenses, or reasonable attorneys' fees for the divorce. (N.Y. Dom. Rel. §236(B)(2)(b)(3) (2024).)
Also, be aware that the distribution of debts in divorce won't affect the agreement either spouse made with a lender. For instance, if your ex was assigned responsibility for the balance on a joint credit card but doesn't pay the bill, the lender could go after you for the overdue payments. In order to avoid serious credit problems, you would probably have to pay the bill and then go back to court to seek reimbursement from your ex.
The law in New York doesn't say which spouse should receive the family home in divorce. But notice that the judge will consider whether a custodial parent needs to live in the family home for the sake of the children (along with the other factors listed above). That consideration might tilt the balance toward awarding the property to the custodial parent.
Also, the law allows a judge to order that one spouse will have the right to live in the home, at least for a certain period of time, regardless of the form of ownership on the deed. (N.Y. Dom. Rel. §236(B)(5)(f) (2024).)
If one spouse is awarded ownership of the family home in the divorce, the judge will often aim for a fair overall property distribution by awarding different assets to the other spouse as compensation for their share of the couple's equity in the house. But it the couple doesn't have enough assets to do this, the judge will probably order the couple to sell the house and divide the proceeds between them. (Learn more about the different options for dealing with the family home in divorce.)
Despite how most people feel about their pets, the law considers animals as property. In most states, that means that pets are distributed in divorce just like cars or other property. However, New York has joined a few other states by giving special treatment to companion animals in divorce. Under the state's law, judges must consider the animal's best interests when deciding which spouse will keep the family pet after divorce. (N.Y. Dom. Rel. §236(B)(5)(d)(15) (2024).)
Sometimes, couples want to reach an agreement about dividing their property and debts (or any other issues), but they hit a roadblock. When that happens, divorce mediation might help. Most divorce mediators are familiar with all aspects of a divorce. But if the main bone of contention in your divorce is how to divide your property, or if you have complicated assets like a business or retirement plans, consider choosing a mediator with particular financial expertise (such as a certified divorce financial analyst) who can help with valuing those assets as well as guiding you to a division of property that's fair to both of you.
Unfortunately, mediation doesn't always work, or it might be inappropriate (such as when you suspect that your spouse is hiding assets). In that case, you should strongly consider speaking with a lawyer. Among other things, an experienced family lawyer can help get all of the information you need about your spouse's finances, refer you to good financial experts when that's necessary, negotiate a favorable settlement for you, and—if that doesn't work—protect your interests in court.