I often do consultations where people say things like, “I’m married, but we keep everything separate.” They operate under the assumption that, because each party has assets in their own name, it’s separate property under the law. They think that the default in a marriage tips to individual title, and that the only things that are jointly owned are whatever has been purchased jointly and/or is held in joint names – unfortunately for them, this is a gross misconception. 

Everything purchased during the marriage is presumptively marital property, regardless of title. The burden of proof is on the person who wants to prove otherwise. 

For example, someone might purchase a property in their separate name during marriage. However, title in their sole name doesn’t matter. The overriding presumption is that everything purchased after the date of marriage is marital property. 

Inheritance is, by definition, separate property. That said, if someone uses their inheritance money to purchase a property that they put in their separate name — and then they use money earned during the marriage to pay towards the equity and the principal on the mortgage — then that person has commingled and made a portion of that house marital property. 

Businesses are handled a bit differently. When it comes to businesses, the titled spouse does get a leg up, and the non-titled spouse is typically entitled to smaller percentages than other aspects of equitable distribution, such as accounts, that weigh in favor of 50/50 splits. Non-titled spouses typically get approximately 5% – 33% of the value of the business interest, and where they fall on the spectrum and whether the court would go outside of this most common range is based on the direct and indirect contributions each spouse has made to the business. Let’s say a husband has a contracting business in his exclusive name, as appears on the corporate and business documents, his wife is presumptively entitled to a portion of the business, even though she is a non-titled spouse. 

Prenuptial and postnuptial agreements offer a means to explicitly delineate personal separate property from joint marital property. Their flexibility allows us to go above and beyond what the law provides and create unique solutions that make sense for the situation. 

To learn more and appropriately protect your rights and interests, contact us.

Cheryl Stein, Esq.
The Law and Mediation Offices of Cheryl Stein
745 Fifth Avenue, Suite 500
New York, NY 10151
Phone: (646) 884-2324
E-mail: cheryl@cherylsteinesq.com

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A couple of reasons for this include:

1.  Hindsight is 20/20. When you look backwards at things, they start to make sense.

2.  Through the discovery/disclosure process, each person learns a lot about the other that they may not have been privy to learning before. 

In mediation, the discovery process is not enforced, but each party has to sign in the agreement that there has been full disclosure; that they are satisfied with the disclosure; and that the agreements they come to are fair and equitable. Sometimes, parties choose to waive full disclosure for various reasons, including that they just want to get the process over with; that they want to have an amicable relationship with their ex-spouse and feel the disclosure process will create too much hostility; and that the disclosure process is too expensive and cumbersome. In these cases, we need to warn the parties that they may be blindly signing away some of their rights and include in the agreement that the parties waived their rights to full disclosure.  

In litigation, parties have to fill out a Statement of Net Worth, where they must include their separate and joint assets. Oftentimes when I’m working with a client on the Statement of Net Worth, they will give me a first draft that does not include their separate property. They ask me about a dozen times, “Do I really have to include that separate property?” They may further state in exasperation, “It’s nobody’s B.I. Business!” They hid that separate property from their spouse during the marriage and it’s like standing naked having to reveal it. I’ve seen cases where all of a sudden the party got so scared and started to agree to settle when the judge ordered them to reveal their separate property in totality. 

Most people don’t like their spouse better after discovery. Parties have “A-ha!” moments; things start to make sense to them. First of all, people see how their spouses spent money because personal and business credit card statements are subpoenaed. If one spouse billed a lot of $500 meals at restaurants and hotel charges during a specific time frame, it often confirms people’s suspicions that their spouse was having an affair during that period. 

Even through the discovery process, divorcing parties may not be satisfied. They still may feel there’s something underneath the surface that they’re not scraping up; that the other party was clever enough to hide something over the course of 25 years.   

The presumption is that anything accumulated during the marriage is marital property. The person who claims separate property must prove that. Tracing exactly what is separate and what is marital property hinges on the discovery process. A lot of times separate and marital property can become commingled, which we’ll talk about in another blog. 

This is obviously less important for people who get married when they’re very young, as they often don’t have a lot that’s separate. But once people get up there in years before getting married, and there’s a lot that’s separate, the tracing process becomes important.  

When clients decide if they want to settle or proceed, they have to be fully equipped. They need to have seen the numbers themselves. They need to have experienced some of the process that we were going through in litigation. They have to understand that what we were trying to do during discovery wasn’t just ordering people around. We were trying to find out what the best possible deal is, based on the numbers and the situation at hand. 

What’s interesting is that people try to lie so obviously. For example, one spouse may claim on their Statement of Net Worth that their car payment is $300 a month, but when you look at their credit card statements, it clearly shows that they’re paying $750 a month, or vice versa. 

I have my clients take an active role in the discovery process. I have them tell me everything they know and anything they want subpoenaed. Records are subpoenaed when litigation attorneys are not forthcoming. In addition to the attorneys, the parties themselves should look through their spouse’s records and account statements to look for inconsistencies, based on their experience being in a relationship with the person. 

Feel free to contact The Law and Mediation Offices of Cheryl Stein with any questions.

Cheryl Stein, Esq.
The Law and Mediation Offices of Cheryl Stein
Offices in Manhattan and Brooklyn
Phone: (646) 884-2324
E-mail: cheryl@cherylsteinesq.com

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