By Sari M. Friedman, General Counsel
Fathers Rights Association NY and LI
What is Equitable Distribution? Many people think it means equal sharing of all marital assets when there is a divorce. But that's not true. There are "Community Property" states where an equal division is mandated. And there are "Equitable Distribution" states that allow the Court to award each party to the dispute a share of a "marital asset" in an amount the Court deems fair. New York is an Equitable Distribution State.
How Does Equitable Distribution Work?
Assets accumulated after the date of marriage and before commencement of an action to dissolve the marriage are called "marital assets". These assets are commonly equally divided but not always. There are times the court awards the non-titled holder less than half.
But assets that are acquired before marriage or after commencement of a divorce action are called "Separate Assets and not subject to Equitable Distribution. Included too in the "Separate Assets" category are special gifts or inheritances to one party during the marriage. However, separate assets that appreciate in value during the marriage do not necessarily reward the holder. That portion of the asset that represents appreciation during the marriage, is subject to Equitable Distribution. Except if the appreciation is due to market conditions rather than the active efforts of the party who owns it, then the appreciation is deemed passive appreciation and little if any distribution is made of the appreciation.
If, however, the asset grew in value due to the active efforts of one or both spouses (such as a business), then a greater award will be made of it when equitably distributed.
Be Aware of Special Situations
What if the owner of a separate asset co-mingled it by putting it in a joint name with the other spouse? The presumption is then created that the intent was to make it a "marital asset. The burden would rest with you then to explain why this was co-mingled if indeed the intent was not to create a marital asset.
The date used for valuing an asset to be distributed at trial is normally the value either as of the date the action was commenced or the date of the trial. Normally, if the asset is the result of one's labor such as a business or pension, the court uses the date the action was commenced under the theory that the other spouse should not be entitled to participate in the fruits of the other's labor after that point.
If, however, an asset fluctuates in value based upon market forces, such as stocks and real estate, then the Courts normally use a date of valuation as close to the date of distribution as possible, which is the date of the trial
Placing a value on certain assets can be troublesome. To value publicly traded stocks, one needs only to read the latest Stock Exchange quote. But it is much more difficult to value a closely held, on-going business such as a grocery store or print shop. Usually, accountants are hired for this job and disputes may arise as to what is the correct value. The actual value is determined by the Court.
Education acquired during a marriage which led to obtaining a degree or license such as, but not limited to, doctor, lawyer, accountant, nurse, etc. are also assets to be valued. Again, accountants are utilized to value these licenses and degrees. The approach normally taken is to look at the extent to which the advanced degree or license has enhanced one's earnings potential over the person's work/life expectancy. Thus, the more a person was earning before obtaining the license or degree, the more their prior career path could have likely produced in income, the less enhancement the new license or degree created in income and the lower the value of the education. Again, disputes arise over the proper value to be placed on these degrees or licenses and the Court will make the final decision.
Equitable Distribution can be complicated. That's why it is important to be aware of the law. Speak to your attorney and measure your options before starting an action. It can save you lots of future aggravation and hours of arguments.