Finances in Divorce: Assets
In terms of the assets, it’s important to note that what’s included and what’s excluded from the marital estate is not always clear. The marital estate is a blanket term for whatever assets are subject to distribution by a court (if you were in court having a judge make the decision). The contents of a marital estate vary from state to state. In New York, it encompasses everything that you and your spouse got by virtue of your own efforts between the time that you got married and the time that you commenced an action for divorce or agreed on what we often call a “stop the clock date” or valuation date for the marital estate.
The marital estate can be altered by a prenuptial agreement or postnuptial agreement. Overall, however, if you or your spouse earned something, if something was paid to you in compensation for your efforts over the course of the marriage, or if you exchanged that compensation for something else like real estate, then that is included in the marital estate. Something that you had before you married or something that you got after the period of time between the marriage and the end of the economic partnership would not be part of the marital estate. However, it would only be separate property as long as you maintained its separateness. It is very easy to turn a separate asset into a marital asset by putting a little bit of marital money into it.
For instance, take a situation where you had a 401(k) with money in it from before you were married, and then after your marriage you come back from your honeymoon and go back to work. Without thinking about it, you or your employer makes a contribution into what was your separate 401(k). The post-honeymoon money that was contributed into the 401(k) was made during the duration of your marriage. Now what once was a separate asset has become a marital asset due to the commingling of monies. While that doesn’t necessarily indicate a strict 50-50 distribution of your 401(k) upon your divorce, it does mean that the 401(k) is now something that you will need to talk about how to divide instead of just leaving it aside as a separate asset.
Premarital or post-marital assets are not the only things excluded from the marital estate. In New York, an inheritance from a family member, a gift from somebody other than your spouse, or even a personal injury recovery payment might be excluded from the marital assets as long as it’s kept separate. Even still, there might be some issues with overlap in these cases, as it’s very easy to commingle these things and to change their nature.
In order to make sure that all assets are identified, we need a shared understanding of your economic reality. To achieve this, we take a look at your statements and your tax returns, we put it altogether and we ask the parties to sign what’s called the Statement of Net Worth.
The Statement of Net Worth is a sworn statement through which the signer avows that, as far as each person understands the economic situation, there’s no more assets, and there’s no less; your finances are no different than what is recorded. If you sign it and you are lying, you are subject to the penalties of perjury.