New York distributes property “equitably” in a divorce, and an equitable split can look much different in a high net worth divorce. Because of the complexity of these cases, it is a good idea for both spouses to work with attorneys who understand how to anticipate and manage a variety of complicating factors.
Only Marital Property is Divided
When a couple divorces, “marital property is distributed to the parties, but the property that is determined to be each spouse’s “separate property” remains with that spouse. The challenge, of course, is determining whether a variety of assets should be classified as “separate” or “marital.”
The general rule is that marital property includes all property acquired by either or both spouses during the marriage, while separate property is generally defined as property owned before the marriage. But there are complicating factors such as:
- Property acquired by one spouse during the marriage by a gift from a non-spouse or inheritance is generally separate rather than marital property
- A pre or postnuptial agreement might specify whether a particular property will be treated as marital or separate
- Property owned before the marriage can be commingled with marital property in which case it can be “transmuted” and become marital property.
- Some assets can have both separate and marital components such as when an otherwise separate asset appreciates in value after the marriage through the efforts or investments of either or both spouses.
So, the first set of steps when determining how property will be divided in a high-net-worth divorce is to identify and categorize all assets, both tangible and intangible, as either marital, separate, or a combination of each. Your attorney should be prepared to show why certain property should remain yours separately, or why certain property your spouse is claiming as separate belongs to you jointly. For instance, if your spouse owned a business before you were married which appreciated in value during the marriage and you worked in the business or took care of family needs so your spouse could focus on the business, you may be entitled to some share of the value of that business.
Locating and Valuing Property
High net worth divorces are more likely to involve undisclosed assets that must be ferreted out and valued, such as tax loss carry-forwards, off-shore or foreign bank accounts, unique collectibles, or interests in a closely held business. There may also be stock options, copyrights, royalties, patents, or other intangible assets. Sometimes the help of a forensic accountant is necessary to locate assets, as well as a valuation expert to get a fair valuation of complex assets such as stock options and intellectual property.
How a Judge Determines an Equitable Distribution
New York is not a community property state, so property classified as marital is divided according to equity rather than equality. Equity is a subjective concept. Courts are supposed to consider certain factors before deciding a fair division of property, such as each spouse’s separate income and property, their earning potential, the length of the marriage, and whether one parent will be providing primary care for minor children.
The court will also consider whether one spouse will be receiving maintenance payments and whether a spouse made contributions as a homemaker. Behavior that causes a marriage to fail is not supposed to be part of the consideration, but if one partner wasted marital assets such as buying gifts for a lover or gambling, those expenses could be counted against them.
Working with the Right Attorney is Crucial for Property Division in a High-Net-Worth Divorce
The terms of a divorce settlement or divorce decree generally will not be changed once in effect. It is important to get the information you need quickly and present it persuasively to obtain the results you deserve. The best way to protect yourself is to start working early on with an experienced attorney who knows how to handle high-net-worth cases. Your attorney can anticipate potential concerns and act to protect your interests at all stages of proceedings.
At Nolletti Law Group, we have decades of experience helping clients with complex assets receive the best possible outcome in their divorces so that they are prepared to move forward to a better life. To find out more about how we could assist in your case, contact us at your convenience.