High Net Worth Divorce in New York
Division of property issues are one of the most highly contested issued for couples dissolving their marriage in New York. High net worth individuals stand to gain or lose significantly more during the divorce process, which makes understanding the basics of this division even more important.
First, it is important to understand that New York is what we call an “equitable division state” when it comes to divorce and the dividing of assets (see New York Consolidated Laws DOM section 236 Part B(5)). This does not necessarily mean “equal,” rather, it means a “fair” division of assets (fair is primarily in the eyes of the Judge). Married couples seeking the dissolution of their marriage can, the majority of the time, expect to hold rights to half the income earned and assets accrued during the marriage. For high net worth unions, the stakes can be high. Moreover, contested divorce petitions are more expensive and lengthy in time to finalization than uncontested divorces. Wealthy couples holding title to properties, investments, retirement accounts, and business entities will find themselves involved in a complex litigation proceeding if seeking court valuation and division of those assets. Maintenance (alimony / spousal support) is also an issue that is most commonly litigated for divorcing couples that have a high net worth and/or are high income earners.
Equitable Division of Assets – How It’s Done
New York law dictates that this “equitable distribution” be assigned to the marital property during a divorce proceeding, as non-marital (separate property) remains non-marital. The courts apply an apportionment principle that relies on a calculus of the weighted contribution to determine equitable distribution based on both financial and non-financial factors. For example, if one spouse has contributed significant financial wealth to the relationship while the other spouse was a homemaker, the court will assess distribution of property according to principles of shared equity, meaning that the high-income earner may or may not be given a larger or smaller share of the marital property. Numerous factors account for how the court will decide who gets what. New York Statute, found in Section 236, state the following for primary consideration:
(1) the income and property of each party at the time of marriage, and at the time of the commencement of the action;
(2) the duration of the marriage and the age and health of both parties;
(3) the need of a custodial parent to occupy or own the marital residence and to use or own its household effects;
(4) the loss of inheritance and pension rights upon dissolution of the marriage as of the date of dissolution;
(5) the loss of health insurance benefits upon dissolution of the marriage;
(6) any award of maintenance under subdivision six of this part;
(7) any equitable claim to, interest in, or direct or indirect contribution made to the acquisition of such marital property by the party not having title, including joint efforts or expenditures and contributions and services as a spouse, parent, wage earner and homemaker, and to the career or career potential of the other party. The court shall not consider as marital property subject to distribution the value of a spouse’s enhanced earning capacity arising from a license, degree, celebrity goodwill, or career enhancement. However, in arriving at an equitable division of marital property, the court shall consider the direct or indirect contributions to the development during the marriage of the enhanced earning capacity of the other spouse;
(8) the liquid or non-liquid character of all marital property;
(9) the probable future financial circumstances of each party;
(10) the impossibility or difficulty of evaluating any component asset or any interest in a business, corporation or profession, and the economic desirability of retaining such asset or interest intact and free from any claim or interference by the other party;
(11) the tax consequences to each party;
(12) the wasteful dissipation of assets by either spouse;
(13) any transfer or encumbrance made in contemplation of a matrimonial action without fair consideration;
(14) any other factor which the court shall expressly find to be just and proper.
Other factors that can have a substantial impact on how marital property is divided include a premarital agreement (“pre-nup”) or a history of financial mismanagement of shared property and assets during the marriage by one spouse and should be investigated – this is known commonly as “dissipation of the marital estate.” It means that one spouse took money that was marital (owned/shared by both spouses because it accrued or was acquired during the marriage) and was spent “outside” of the marriage or mismanaged in a grossly negligent or intentional manner.
Agreement During a High Net Worth Divorce?
A divorcing couple can voluntarily split property to reduce the time and expense in the divorce proceeding. Primarily done by skilled divorce attorneys who understand the benefit of saving their clients potentially hundreds of thousands if not millions of dollars, the process may involve a period of legal separation and a less adversarial approach to negotiating outside of the courtroom. High net worth couples can begin the legal process of divorce by signing a written separation agreement.
What Exactly is Marital Property and What Are the Main Exceptions?
First, to reiterate, only marital property is divided during a divorce. Property acquired during a divorce that is not marital property and thus, remains the separate property of one spouse, include an inheritance. Unless this inheritance is placed in a joint account or used to purchase property titled in both spouse’s names, it normally remains separate property and not subject to division. Other instances of property acquired during the marriage that remain separate property of one spouse include a personal injury award. Note that personal injury is distinctly different from workers compensation. Workers compensation relates to a paying of income for injuries sustained at a job (so it basically replaces the lost past, present and/or future income), and this is divisible in a divorce. Personal injury awards, on the other hand, are primarily for “pain and suffering”, and are normally not divisible during a divorce.
Does “Fault” Matter for Dividing Property?
Unlike every Hollywood movie where the cheating billionaire husband hides his affairs so as to avoid getting “taken to the cleaners,” New York does not look at the fault for the dissolution of marriage as a deciding factor on division of the marital assets. The exception to this, as previously stated, relates to the dissipation issue. For example: if a spouse purchases a condo for his/her paramour or takes expensive vacations with said paramour under the guise of a “business trip”, those amounts of money spent “outside of the marriage” may be recouped to the marital estate if proven to be legitimate dissipation. What is considered “fair” or “equitable” within New York law is based on a continuation of the same standard of living by both spouses after the divorce. New York Consolidated Statutes, Domestic Relations Art.13, § 236 provides the rules to Special Controlling Provisions for divorce proceedings in the state.
The Silverberg Law Firm, P.C. is a law firm focusing on divorce and family law matters in Westchester County and Manhattan, New York. Contact The Silverberg Law Firm P.C. for consultation and representation if you are involved in a High Net Worth Divorce matter in New York.