Is New York a Community Property State?

• Community property vs. equitable distribution
• Factors the court considers
• Breaking down and dividing debt
• References

New York is not a community property state. It is an equitable distribution state. 

In this type of state, the court tries to determine what an equitable, or fair, distribution of divorcing spouses’ debts and assets looks like based on a list of thirteen factors. This split often won’t be the equal split of assets that many imagine when they think of a divorce, which is how assets are roughly split in community property states.

Community property vs. equitable distribution

In a community property state, the assets of people in a marriage are generally shared equally. In the event of a divorce, assets are generally divided as a 50/50 split in such states, where about half of the divorcing spouses’ assets go to one party and the other half to the other. There is still nuance in such states, and the split isn’t always truly equal, but this can be thought of as the general trend in such states.

Since New York isn’t a community property state, this principle doesn’t apply to spouses who divorce in the state. Equitable distribution refers to a more complex process some states use when splitting assets as the result of divorce. 

Basically, New York recognizes that a roughly 50/50 split of property during a divorce isn’t always fair. Importantly, New York recognizes that couples may have shared property, but they also have individual property. 

Read: What Is the New York Divorce Process?

How does equitable distribution work in New York during divorce?

One of the most important elements of equitable distribution is what qualifies as marital property as opposed to individual property. Marital property is any property that is considered to have been owned by a married couple before their divorce rather than owned by an individual. 

Common examples of marital property include the following:

• Real estate you and your spouse bought during the marriage, excluding some purchases meant to contribute to individual property (like paying part of a down payment on a piece of individual property)
• Personal property bought during the marriage, including cars, art, and most other goods
• Most forms of cash and other ways of storing money acquired during the marriage, including pensions
• Advanced educational degrees and permits
• Gifts given to each other
  
  

Factors the court considers

Broadly, the court will generally consider 13 factors when deciding on how to equitably distribute assets during a divorce. They are as follows:

1. Income and property

One of the main things a court looks at when determining what will be equitable is the income and property of both parties at the time of the marriage and at the time of the divorce. They will generally try to avoid major unjust shifts in a person’s lifestyle and income as a result of their distribution of assets (within reason).

2. Length of marriage

The court will account for the length of a marriage and the age and health of both spouses. 

3. Needs related to minor children

When divorcing parties have minor children or those who may need ongoing support from a guardian, the court accounts for the needs of those children and which resources either party might need for their role in the care of those children.

4. Loss of inheritance and pension rights

A divorce can change a person’s inheritance and pension rights, often reducing the amount they stand to inherit and get through their pension. This loss (as well as any gain) will be accounted for when assessing how to distribute assets.

5. Loss of health insurance benefits

A court needs to account for any loss of health insurance benefits due to a divorce, as this may change a number of other elements of both parties’ financial situations, especially if one has ongoing medical issues.

6. Awards of support or maintenance

If a court awards any type of support or maintenance payments to either party of a divorce, this will also be accounted for as part of determining what an equitable split of goods might look like.

7. Spousal contributions

If a party made a contribution to something they won’t have access to after the divorce, such as helping their spouse pay for their degree while the two were married, the court will take that contribution into account, so there is some recompense awarded for the contribution.

8. Liquidity of assets

Certain assets need to have their liquidity accounted for, which is an assessment of how easily an asset can be turned into cash. Cash is considered extremely liquid and is very easy to split, whereas assets like a house or collection of patents can be more difficult to readily convert into cash.

9. Probable future financial circumstances

The court accounts for the likely financial circumstances of the parties divorcing when determining an equitable split, paying close attention to parties who are likely to struggle financially or do especially well regardless of how the final split is broken down.

10. Impossibility or difficulty of determining the value of certain assets

Some assets can be difficult or impossible to determine the value of, with one common example being interest in a business. Some assets may also shift in value depending on how they’re split. Business assets are generally more valuable together than split between both parties. While the specifics vary, the court will usually try to make it so one party is granted a business in such a way that the other can’t easily interfere with that business.

11. Tax consequences of actions taken

The court will take into account the tax consequences their actions may have, factoring in things like how property might be taxed and how a party might be taxed given the level of income they’re likely to attain.

12. Wasteful spending and use

Wasteful use of marital property, including money, is considered, at least if that spending occurred as a divorce was ongoing. 

13. Rushed transfer or disposal of marital property

Sometimes, a party of a divorce will rush to transfer or dispose of shared property, knowing the divorce is coming. They may do this to try and quickly get liquid cash, or they may do it as an act of spite. Regardless of the reason, courts will account for these actions if noted, and it will likely hurt what that person receives.

Read: 6 Important Things to Know If You're Getting a Divorce in New York

Breaking down and dividing debt

Fundamentally, debt is treated much like other types of property in New York. The court will attempt to determine what a fair, equitable split of that debt looks like using similar factors as those discussed above. They will also look at other contributing factors, like if the debt was mostly the result of one party’s actions or if the debt had been one person’s debt before the marriage.

References