People contemplating divorce are often worried about how their property will be divided. This concern may be heightened in certain circumstances, such as when children are involved or when one of the parties does not work outside the home. In New York, property is first identified, then classified as either marital or separate property. Then, marital property is valued for the purpose of equitable distribution.
Identification and Classification
New York is an equitable distribution state. Equitable distribution does not mean marital assets are split equally. Instead, courts will use a litany of statutory factors to attempt to fairly or equitably distribute marital assets. Among the factors are the length of the marriage, the income of the parties, the tax consequences.
With a few exceptions, marital property includes any property the parties acquired during the marriage, regardless of how they are titled. Only marital property is equitably distributed; separate property is not. Generally, assets owned before the marriage, inherited or received by as a gift from someone other than their spouse are considered separate property.
After the marital assets are classified as marital, they need to be valued. Central to the issue of value, is when are they to be valued. Since divorce is a process that takes time, values of assets could greatly fluctuate from the time the action for divorce is commenced until the divorce is ultimately granted. Some assets are valued at the date of commencement or others at a date closer to trial.
The method of valuation depends on the type of asset. Some assets, bank accounts, retirement accounts, certificates of deposit, and stocks have a clear dollar value that can easily be determined at a given point in time, simply by looking at an account statement.
Other assets, like real estate, business, collectables and artwork, need be professionally appraised. Appraisers and forensic accountants are often used to establish the fair market value of these assets. You can read more about the use of valuation experts in my earlier blog, “Four Advantages of Using a Business Valuation Expert in a Divorce.”
For the most part, assets that are party-managed are considered “active” and are valued at the time of filing; assets whose value depends on the efforts of a third party or the market (such as a home) are considered “passive” and is valued close to the time of trial. I have written before about assets that should be valued when a divorce action is filed.
At Clement Law, we provide you with experienced, effective representation in your divorce and family law matters. We guide our clients through divorce and help them achieve results that protect their family, and their family’s future, after the divorce.
Contact us or call (212) 683-9551 to arrange for a consultation. We look forward to helping you.