What Are The Top Misconceptions People Have About The Divorce Process?
One of the most common misunderstandings about the divorce process is the issue of title.
Oftentimes people have retirement assets, bank accounts or even property that’s in their sole name. Because of that, they think the asset is theirs. The problem is that the divorce laws in New York actually say the opposite – title is not generally what the court looks at in dividing property. The overriding issue is whether or not the property was acquired during the marriage. Thus, if the property or asset was acquired during a marriage, then it is presumptively marital property irrespective of whose name is on the account or deed. In addition, if an asset actively accrues value during the marriage, that value – or what the law calls appreciation in the value of that account – is also generally marital property.
Some parties have money in bank accounts or assets in a portfolio and are now contemplating a divorce. How should they proceed?
First, New York has Automatic Orders which go into place upon the filing of a divorce. Thus, you cannot generally transfer or extinguish funds in a joint account after the filing unless your spouse consents. Money in the bank may be accessed for “usual & customary expenses,” which generally entails household bills. If you’re contemplating a divorce, it may behoove you to consult a Divorce Attorney now regarding what funds you can & cannot transfer.
Generally, assets one accrues prior to the marriage are one’s “separate property.” This means your spouse cannot ordinarily claim a right to such funds. However, the initial burden to prove a given asset is “separate” is on the holder of those assets. As such, you’re best advised to start gathering the financial institution’s statements which prove what funds or assets you held on the date of your marriage.
People may not realize their financial accounts are being “actively appreciated” during a marriage.
The common example is with either a pension or a 401(k) account. Thus, people often think that since it is their account with their employer, then their spouse doesn’t get to share in the asset. Unfortunately, they’re wrong. The problem is even if they had the pension or 401(k) account going into the marriage, any investment either by them or their employer into their account during the marriage is considered marital, such that the other spouse can claim a share of the account. Oftentimes it’s 50% of the marital portion of that account.
Many times, this not only raises eyebrows, but causes great stress on behalf of the moneyed spouse who has investment accounts. They feel it’s unfair! They feel like: “I had the foresight to invest money into my retirement, she didn’t save a penny, and now you’re telling me she gets half?!?”
It may be true his/her spouse didn’t do anything at all in regards to retirement, and didn’t even set up an IRA or 401(k). Maybe the other spouse haphazardly spent money on frivolous things during marriage, and as a result s/he has no assets at all when the divorce is filed. The other spouse was wise, used foresight and invested tens of thousands or hundreds of thousands of dollars into retirement accounts, only to learn that in a divorce case, half of that money simply belongs to the spouse who didn’t bother to put any money aside.
Then I have to explain to them the concept of “marital money.” Marital money is essentially any money which either one of them earns from any source during their marriage. Oftentimes people think “while I’m earning money from my job, that money is mine. After all, I earned it – my name is on the paycheck!”
I have to dispel this misconception. Once you say “I Do,” you have formed an economic partnership. And once you form an economic partnership, one partner to the partnership could be extremely enterprising and earn a lot of money, but basic partnership law says when you dissolve a partnership, everything is generally divisible 50/50.
Once things are divisible 50/50, the spouse that didn’t contribute anything to the partnership is still presumptively entitled to 50% of that which was accrued during the marriage. That will include situations in which one spouse has marital money from a job, rental income, or investment income. Once they take that money and invest it into financial accounts – whether those are retirement accounts, bank accounts, stocks, bonds, mutual funds, etc. – it is converted to assets. And it’s the assets that the court actually looks to in deciding what to divide between the spouses. So, it’s usually the assets that are most contested (other than custody issues) in a divorce case because of that raw feeling of unfairness.
Often a share of significant assets can turn on the precise definition of what constitutes “marital property” versus “separate property.” In a nutshell, a non-title-holding spouse gets a share of marital property, but does not share in separate property (though there are many exceptions to this).
New York Domestic Relations Law section 236 defines “marital property” as “all property acquired by either or both spouses during the marriage and before the execution of a separation agreement or the commencement of a matrimonial action, regardless of the form in which title is held,” except pursuant to the terms of a validly-drawn separation agreement, pre/post-nuptial agreement, or stipulation of settlement.
The same statute defines “separate property” to mean (1) property acquired before marriage or property acquired by bequest, devise, or descent, or gift from a party other than the spouse; (2) compensation for personal injuries; (3) property acquired in exchange for or the increase in value of separate property, except to the extent that such appreciation is due in part to the contributions or efforts of the other spouse; (4) property described as separate property by written agreement of the parties (as described above).
Thus, some cases are contested on whether a property of asset is “gifted” to 1 spouse by a relative during the marriage. The trial would then turn on what evidence there is that the gift was intended to only benefit the title-holding spouse, as opposed to benefitting the marriage as a whole.
A couple of other common misconceptions routinely “rear their ugly heads.”
One is regarding child custody – many parents who have “sole custody” (see Chapter 8) think they can relocate without the permission of the non-custodial parent. They cannot not. Doing so puts them at substantial jeopardy the Judge will order them to return the child to New York pending trial – and if they’ve established residence and/or employment in the other state, they’d have to leave everything behind to come back to New York (or give up custody of their child).
Another is the concern of non-monied spouses that they can’t afford a divorce lawyer, even if his/her spouse earns a lot of money.
In New York, the divorce law makes payment of counsel fees presumptive by the more-monied spouse to the less-monied spouse’s attorney. This means if the case becomes contested, the party who doesn’t earn all that much (if anything) can make an application to the Judge to force the other side to pay a portion of (or all of) the fees his/her own attorney would charge them.
At the uncontested stage, contribution towards the counsel fees of the less-monied spouse is subject to negotiation – there is no way to force this at the uncontested phase. I usually use the threat of counsel fees as a “carrot-and-stick” – either negotiate a fair settlement to my less-monied client, or else I will file a motion which will include a request for counsel fees. In the greater-NYC area at least, such awards are anywhere from a few thousand dollars to as much as $10-25,000 (or more). If one is the more-monied spouse, this presumption creates a great incentive to make a “good offer” to the other side, lest one be settled with paying not only their own attorney, but the other side’s attorney as well.
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