When Separate Property Is Not Separate

Division of property is a hotly debated topic in many divorces. A recent Appellate Division case defined an instance when separate property is not actually separate property. 

In New York, the assets and debt of the marital estate are subject to equitable distribution during divorce. When couples cannot agree on how to distribute their property, the court strives to divide it fairly, but not necessarily equally. 

Property owned by either party prior to marriage is considered separate, unless it is commingled with the marital estate during the marriage. In Foti v. Foti, Paul Foti sought reversal of an earlier ruling that allowed Gina Foti to maintain certain properties and businesses as separate for purposes of their divorce. 

In New York, the law defines property as separate if it meets the following criteria: 

• The property is acquired before marriage or by gift or bequest.
• Property is compensation for a personal injury.
• Property is exchanged for separate property, except when efforts of the other spouse enhance the value of the asset.
• The property is the subject of a written agreement between the parties. 

In February of this year, the court found Ms. Foti had established her real estate and management companies as separate property, given to her by her father. However, the court also found Ms. Foti took the interest on the properties as tax losses in a jointly filed federal income tax return. 

In deciding the properties of Ms. Foti were commingled with the marital estate, the court noted earlier precedent that “[a] party to litigation may not take a position contrary to a position taken in an income tax return.”

When you need to protect your interests and assets during divorce in New York, call us at Bryan L. Salamone & Associates.