Identification of marital vs. separate property in divorce
Equitable distribution in a divorce means that all marital assets will be split fairly between both spouses. What is not included are separate property assets.
August 29, 2013 /24-7PressRelease/ -- Identification of marital vs. separate property in divorce
Article provided by O'Brien & Associates
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There are two primary laws or philosophies that govern divorces in the United States regarding asset and property division--community property and equitable distribution. In the former, all marital assets are divided equally, in a 50-50 split, so that both spouses receive the same valued amount. Equitable distribution, on the other hand, disperses marital assets in the manner deemed most fair by the court. This may or may not be equal to both parties. New York is an equitable distribution state.
What is marital property?
Before identifying who gets what in a divorce settlement, a determination of what is separate property versus what is marital property must be made. In some situations, this is simple. For example, an inheritance given to one party or gifts given to only one spouse (by someone other than the other spouse) are considered the separate property of the receiving spouse.
Sometimes, however, the identification of an asset as marital or separate is not so clear cut. Let's say one spouse purchased a home when still single. Three years later, that person married and both spouses' incomes contributed to the mortgage and maintenance of the home for the duration of the marriage. Initially the home was the sole and separate property of the purchasing spouse but some portion of the home's value is likely to be considered marital property since joint marital income was used to provide for and support it.
One spouse's business may or may not be separate property
Following the same principle as above, a business owned and operated by one spouse may have a portion of its value deemed as marital property if any marital assets or income were used to contribute to the operation or growth of the business.
In cases where a business is owned and/or operated jointly by both spouses, there are multiple factors that determine which portion of the business each spouse shall be given. These include when the business was started and how much of the business income is generated by which spouse.
Prenuptial, postnuptial and shareholder's agreements
There are three documents that can help protect spouses in a divorce from losing valuable assets:
A prenuptial agreement can protect spouses against losing any type of identified asset during a divorce if drawn up and signed prior to marriage.
A postnuptial agreement can be useful if one spouse decides to start a business after getting married and wants to ensure that the business remains his or her separate property. However, this is not completely clean as there should be identified parameters about the use of marital funds toward the business.
A shareholder's agreement is specific to a business and can be put in place for any business situation, not just for businesses co-owned by spouses. This type of agreement should be created when a business is initially started to identify the means by which it will be valued if one partner, or spouse in the case of a divorce, chooses to leave. It can help avoid undue arguments in the process later on.
Secure good counsel
Clearly the delineation of what is separate and what is marital property can be messy and has a direct effect on the ultimate financial outcome of a divorce for both parties. Ensuring that you have the best legal representation and advice possible is critical to protecting yourself in such a situation.
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