What Can Turn Separate Property Into Marital Property in a Divorce?

In a New York divorce, marital property is subject to division through the process known as equitable distribution. Separate property generally remains with the spouse who owns it. However, the classification of an asset as separate is not always permanent. Over the course of a marriage, actions taken by one or both spouses can convert separate property (in whole or in part) into marital assets.

Marital property broadly includes assets acquired by either spouse during the marriage, no matter how they are titled. These can include income, real estate, retirement accounts, businesses, investment returns and much more.

Separate property, by contrast, typically includes:

• Anything owned by one spouse before the marriage began
• Gifts and inheritances received by one spouse
• Certain personal injury awards
• Equity or increased values of separate property 
• Money or assets acquired in exchange for separate property
• Property that is carved out by marital agreements 

While assets in these categories start out as separate property, their treatment during the marriage eventually determines their status. 

Commingling, or the mixing of separate funds with marital funds, is a common way that assets are converted. For example, if one spouse deposits their inheritance into a joint account that is used for shared vacations and other joint expenses, that may blur the ownership lines enough to make whatever remains marital funds. Adding a spouse’s name to the deed of property that was owned prior to marriage or placing separate funds into jointly titled investment accounts can create a presumption that the asset is intended to be part of the marital estate.

Disputes over real estate illustrate how separate property can become partially marital. A home purchased before the marriage may clearly be one spouse’s separate property, but the equity that has been gained over time might be marital if the mortgage payments and home improvements were made with marital income. 

Business interests are analyzed similarly. A company owned by one spouse before marriage may retain its separate base value, but any growth that is tied to either spouse’s labor (paid or unpaid) or to the reinvestment of marital earnings back into the company may create a marital interest.

Because the classification of property as either marital or separate can have substantial financial consequences for equitable distribution in a divorce, careful financial management and informed legal counsel are essential.

The law firm of Jakubowski, Robertson, Maffei, Goldsmith & Tartaglia, LLP in St. James, New York, work with clients across Long Island facing the financial consequences of divorce. Call 631-360-0400 or contact us online to schedule a free initial consultation.