How To Preserve Your Separate Property

You may be considering marriage and own valuable assets.  You may be married and about to receive a personal injury award, an inheritance or a large gift from someone other than your spouse. In either case, you may be wondering if you can preserve these assets as your separate property should your marriage end in divorce.

New York State law requires that, in an action for divorce, the court equitably distribute marital property. Marital property, generally, is defined as “all property acquired by either or both spouses during the marriage and before the execution of a separation agreement or the commencement of a matrimonial action, regardless of the form in which title is held.”

Marital property does NOT include property that has been excluded from that category by a valid agreement between the spouses, or spouses-to-be, nor does it include “separate property.” New York State law defines separate property as

     (1) property acquired before marriage or property acquired by bequest, devise, or descent, or gift from a party other than the spouse.

     (2) compensation for personal injuries.

     (3) property acquired in exchange for or the increase in value of separate property, except to the extent that such appreciation is due in part to the contributions or efforts of the other spouse.

     (4) property described as separate property by written agreement of the parties.

So, the assets you bring into the marriage are your separate property. The assets you and your spouse agree in writing will be your separate property are your separate property.  The assets you acquire by means of a personal injury award, inheritance or gift from a third party are your separate property. Why, then, is there a need to preserve the character of these assets as “separate” so they are not subject to equitable distribution upon a divorce?

Since the statutes generally referred to as “The Equitable Distribution Law” went into effect in 1980, the courts have been tasked with interpreting these laws and applying them to the facts presented to them in each case. The decisions handed down have identified ways in which “separate” property of a spouse may become “marital” property subject to equitable distribution. How can you protect your separate property?

If you are contemplating marriage, enter into a Prenuptial Agreement with your soon-to-be-spouse. Retain the services a matrimonial/family law attorney so that the form and content of the Agreement meet the legal requirements to protect your rights.

If you are already married and receive separate property as defined above (personal injury award, inheritance, gift from third party), maintain that property in your individual name. Do not add your spouse as an owner of an account, nor add his/her name to the deed or other title document governing the asset. Do not “comingle” (mix) your separate property with marital property by, for example, depositing marital funds into your separate property account. If you use your separate property to buy another asset, keep that new asset in your name alone. A Postnuptial Agreement, signed after the date of marriage, but during the marriage) is another way to define and confirm your rights. Such agreements must also conform to certain legal requirements.

If in doubt as to your best course of action, consult with the experienced matrimonial/family law attorneys at O’Connell & Aronowitz for advice as to how to proceed. The matrimonial/family law attorneys at O’Connell & Aronowitz have decades of experience in drafting and negotiating Prenuptial Agreements and Postnuptial Agreements and in advising clients on how to protect their assets.