How Does Separate Property Become Marital Property in a NY Divorce?
Long Island divorce lawyer protects assets acquired before marriage
If you are going through a divorce, you might be shocked to find that assets you thought you owned exclusively might go to your spouse in the division of your marital estate. It doesn’t matter if you hold certain possessions near and dear while your husband or wife has never shown interest in that item. Remember, uninterested does not mean disinterested. How does separate property become marital property in a New York divorce? The experienced Long Island divorce attorneys at Bryan L. Salamone & Associates, P.C. can explain about the law relating to commingled assets and help you retain what is rightfully yours.
What is separate property?
New York divorce law uses the equitable distribution standard for the allocation of marital assets and debts. This means that when spouses cannot agree on who gets what, each keeps their separate property, while marital property is divided according to what the judge thinks is fair. The result does not have to split the value equally between the parties. In New York, separate property includes the following:
- Assets owned before marriage and kept separate during the marriage
- Inheritances received by an individual spouse
- Proceeds from personal injury claims
- Gifts from persons other than your spouse
- Appreciation in value of separate property
- New property purchased with the proceeds of separate property
- Property defined as separate in a valid marital agreement
Provided that you treat separate assets as yours alone throughout your marriage, they remain separate property during your divorce.
What is marital property?
Marital property consists of all assets and debts acquired by either spouse during the marriage that do not qualify as separate property, such as:
- Salaries and benefits
- Real estate and bank accounts
- Pensions and retirement accounts
- Assets purchased with marital funds
- Appreciation of marital assets
- Gifts from one spouse to another
It’s important to understand that an asset that was once separate property might be converted to marital property based on the way you hold and utilize that asset.
Common ways separate property can become marital property
Your separate property can become part of your marital estate through a process known as commingling and transmutation. Commingling refers to the act of mixing personal assets, such as cash, with marital assets. You could receive an $5,000 inheritance, which would be classified as separate property, but if you commingle that money by placing it in a bank account you share with your spouse, there won’t be a way to distinguish that money from the rest of the account funds if you get divorced at some later date.. Transmutation requires the intent to make personal assets marital property. When courts see commingling, they will generally assume transmutation unless the owner has taken steps to maintain the separate nature of the property.
Spouses can also earn an equitable interest in a business through their uncompensated participation. Thus, if one spouse contributes time and talent to a business and does not receive market-rate compensation, a court is likely to hold that fairness requires the business to be considered a marital asset.
Examples of how separate property becomes marital property
The following examples demonstrate ways in which separate property can be converted to marital property:
- Spouse A derives revenue from rental property purchased before the marriage and places that revenue in the couple’s joint checking account without maintaining a record of its provenance.
- Spouse A takes money from the couple’s joint savings account to remodel a vacation home received as an inheritance and does not repay the account.
- Spouse A owns a restaurant and asks Spouse B to work there for no compensation.
- Spouse A owns a store and Spouse B redesigns aspects of the business, leading to a steep increase in revenue.
In these instances, a spouse has treated separate property as marital property (commingling) without any conscious effort to maintain a separation. A court could infer the intent to transmute the property.
How to protect assets from becoming marital property
If you want separate property to remain separate, you can take these steps:
- Negotiate a marital agreement
- Keep separate accounts
- Document transactions
- Pay for services your spouse provides to your business
These issues can be complicated, so it’s imperative that you consult an experienced divorce attorney to develop a strategy that fits your circumstances.
Contact a knowledgeable Long Island’s divorce lawyer to discuss protecting separate property
Bryan L. Salamone & Associates, P.C. provides guidance on preventing separate assets from becoming divisible marital property in a divorce. Call us at 1.631.479.3839 or contact us online to schedule a free initial consultation.