New York Divorce Lawyer Explains the Division of Assets Procedure
In New York, marital property is equitable divided. Thus, you need to consider two issues in dividing your property. The first is: what is equitable. The second is: what is marital property.
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What is Equitable Distribution?
The first issue is often the easiest. In the vast majority of case, marital property is equally divided in New York. New York public policy values the contributions of a wage earner and a homemaker equally in the accumulation of property. Thus, unless there is a compelling fairness argument to be made, a New York Court is not likely to divide property in any other manner. In attempting to negotiate an agreement, most individuals find that a simple agreement to equally divide property is what works.
Equally dividing property does not mean that each piece of property has to be equally divided. If you have $50,000 in assets, you would ensure that each party took $25,000 in assets. If one party takes the house and the other party takes other assets, that is fine. The equality of the bottom line on the ledger sheet is what matters.
What is Marital Property
In general, marital property is all property that is accumulated from the date of your marriage until the date you commence a divorce action or the date you sign a separation agreement, whichever is earlier.
Property includes vehicles, investment funds, bank accounts, collectibles, the value of a degree earned during the marriage, vested and non-vested pension and retirement benefits, stock options, cash value of life insurance policies, real estate, furnishings and jewelry, businesses, and so forth. If you are not sure if a particular item should be included as property, you certainly should inquire of your attorney to find out.
Property that is not marital is called separate property. Separate property includes gifts and inheritances, lottery winnings, and property owned prior to marriage. Sometimes, separate property is turned into marital property. The rules on these issues are not complex, but can seem unfair. For example, if Aunt Millie leaves you $20,000 and you put it into a joint account, but seek a divorce six months later, your spouse may well be entitled to one half of that inheritance. On the other hand, if Aunt Millie leaves you $20,000 and you put that money into a house in joint marital names, but seek a divorce six moths later, you may well be entitled to a full refund of all of that separate property.
Pensions/Retirement Funds
We have addressed pensions and retirement funds on a separate page. Please carefully review that page. If you are going to enter into a separation agreement and uncontested divorce, you must determine how your pension and retirement funds are going to be divided.
If you have defined contribution plans with any employer or defined benefit plans with the State of New York or General Electric, we will include the necessary language regarding those plans in your separation agreement. If you have defined benefit plans with other employers but will not be dividing those plans, we can also address those plans in your eparation agreement. However, if you want to divide a defined benefit plan with one of those other employers, we cannot offer you our $895 uncontested divorce package. The potential complexity of the retirement plan documents and the potential risk to a non participating spouse if those documents are not reviewed or the available benefits not investigated is too great for us to undertake that obligation without doing more work that is contemplated in our standard uncontested divorce package.
If you still want to have us undertake your work, contact us and let us know what plan you have to have divided. We may be able to undertake a review of that plan and prepare your separation agreement and uncontested divorce at a cost that is still acceptable to you.
Debts
Marital debt must also be divided when you prepare your separation agreement. If the debt was incurred during the marriage, it is marital debt. It does not matter if that debt is in your name or your spouse’s name. However, if you are agreeing to divide debt that is in both names, keep in mind that the creditor, i.e. bank or mortgage company, will not be bound by your agreement. Thus, if your spouse agrees to pay off a joint credit card debt but does not, the bank may successfully sue you for that debt. Try to fashion an agreement that does not leave you exposed to that issue.
Real Estate Refinance
If one spouse will retain the marital residence, consider how that will be accomplished. Can that spouse obtain financing in their own name. If not, is your name staying on the mortgage? How long will that last for? Who will do the paperwork. You can retain one New York Divorce Lawyer to represent both of you for the real estate transfer. That work is not included in our uncontested divorce package. In general, it is advisable for you to retain a New York Divorce Lawyer who is familiar with your local real estate practice to undertake that work.
When considering how the real estate will be divided, you must specifically address whether and how any tax or other escrow accounts will be divided. New York Courts do not consider those accounts to be the “proceeds of sale”. Thus, simply provided for a division of the proceeds of sale will not get you back what you may believe to be your share of those funds. Also, if your spouse keeps the house and refinances with the same bank, or does not refinance, you might not see any of those funds back.
As with other issues, the rule here is to be careful and be explicit. If you do not provide for something in your separation agreement, you will not get it.
Pensions and Retirement Funds in Divorce
In general, pensions and retirement funds come under one of two categories: defined contribution or defined benefit plans.
Defined Contribution Plans
A defined contribution plan is one such as an IRA, Simple IRA, 401k, SEP Account, and so forth where the plan participant contributes somewhat set amounts to those funds. Those funds do not pay out guaranteed sums of money. Rather, at any given time, the plan participant can access their account information and determine what is in their account. The plan participant generally contributes to these forms of plans and the participant’s employer may also contribute sums to these plans on a periodic or other basis.
Dividing these plans does not involve tremendous difficulties. If done with a Qualified Domestic Relations Order, the sums in the plan are divided in whatever proportion is requested by the parties in their separation agreement, and the non participating spouse sets up a rollover IRA into which that spouses funds are deposited. The transfer is not taxable.
Two issues must be addressed in the Separation Agreement with regard to these plans. The first is what happens to sums that may be due from the employer but not yet contributed. For example, if you and your spouse decide on February 1st to enter into a separation agreement and to equally divide the monies in a 401k, you need to consider whether there are monies due to be paid into that fund from the prior tax year. Many employers make those payments in the subsequent tax year. If you simply state that you are dividing what is in the account, the non participating spouse may be short changed.
The second issue is the consideration of appreciation or depreciation to a fund after the date of agreement. For example, if a 401k contains $40,000 and you and your spouse agree to equally divide that fund, you should not simply agree to give or take $20,000 as a one half share. That fund may significantly appreciate or depreciate before a Qualified Domestic Relations Order can be prepared, submitted to the Court and signed, and submitted to the Plan and effected. Thus, your agreement must clearly state what will happen to appreciation depreciation to that fund in the interim period.
A note of caution which is applicable to both defined contribution and defined benefit plans. If your separation agreement does not say that you get it, you do not get it. Thus, you cannot ask for appreciation on your funds after the fact. Those issues must be discussed and agreed upon before your separation agreement is finalized.
Defined Benefit Plan
A defined benefit plan is more like a traditional pension which provides a set pension payment on a monthly basis at the time of retirement. The plan participant may or may not contribute to this form of plan. These plans often provide many benefits in addition to the monthly payment paid at the time of retirement. For example, they may provide a pre-retirement death benefit, a post retirement death benefit, a single life annuity, a joint and survivor annuity, early retirement benefits, and more. Each plan has it’s own range of benefits and each plan has it’s own requirements for the preparation of a Qualified Domestic Relations Order.
The benefits that are available and the impact if those benefits are not preserved for a non participating spouse are significant in the realm of defined benefit plans. More important, if the benefits that are required by the non participating spouse are not set forth in the separation agreement, they can not be obtained in a Qualified Domestic Relations Order.
Given the tremendous complexity of these plans and the significant sums of money that are often at stake, the review of defined benefit plan documents and preparation of Qualified Domestic Relations Orders pertaining to them are not included in our basic uncontested divorce flat fee package.
Are you splitting up the debts in your marriage between you and your spouse? Contact experienced New York Divorce Lawyer Jean Mahserjian to aid you.
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