Property classification and division is one of the most important elements of a divorce in New York. These issues are vital, especially in high-asset New York divorces.
The following scenario is a good example. Assume Wendy Wife and Hank Husband are joined in the bonds of holy matrimony. Wendy’s parents gave her several thousand dollars as a wedding gift. She pours all that money into an investment property that Hank owned before the marriage. After the improvements, there is a steady stream of tenants in the investment property who pay $3,000 a month.
Clearly, the money was Wendy’s non-marital property. The gift occurred before the marriage. It’s also clear that Henry’s investment property was non-marital property. He bought it before he married Wendy. But everything else is extremely murky.
If Hank and Wendy get divorced, Hank’s investment property may be his separate property, Wendy’s separate property, or jointly-owned marital property. The same thing applies to the rent hank received. The general rule is this: income from non-marital property is non-marital property, and the income from marital property is marital property.
Property Classification in a New York Marriage Dissolution
The investment property conundrum is a classic example of commingled property. These issues are very common with regard to property assets, and debts as well. For example, Husband might use funds from his paycheck (marital property) to pay off a student loan he incurred before the marriage (non-marital debt).
To classify the investment property, a judge would need to look at more evidence than mere ownership papers. The outcome could go one of several ways:
- If Wendy’s gift went to new carpeting and other purely cosmetic things, a judge would probably rule that the house was still Hank’s non-marital property and he was entitled to all the rent received in connection however.
- If Wendy’s gift went to more substantive changes, such as eye-catching new landscaping or an addition, a judge might apply the transmutation That case, the house would be marital property and Hank and Wendy would split all the past rents 50-50. Wendy’s case would be stronger if one or more of the tenants said something like “I rented the house because of the new addition.”
- If Wendy’s gift went to structural changes, like foundation work, the transmutation might be even broader. A judge could rule that a portion of the house was now hers.
Contact a Skilled Lawyer
Classifying and dividing marital property is often a very complex exercise. For a confidential consultation with an experienced family law attorney in New York, contact The Mandel Law Firm. Convenient payment plans are available.