How to Divide Commingled Assets in an Equitable Distribution State like New York

In New York, equitable distribution means that marital property is divided between spouses fairly but not necessarily equally. This approach considers several factors, including the duration of the marriage, the income and property of each spouse, and future financial needs, ensuring that the division is just and reasonable rather than strictly 50/50.

How Commingled Assets Complicate Property Division

Commingled assets significantly complicate the equitable distribution of property during a divorce, blurring the lines between individual (separate) and marital property. Commingling occurs when assets acquired before the marriage are mixed with those acquired during the marriage, making it challenging to distinguish one's separate property from marital assets.

Examples of how assets can become commingled include:

  • Depositing pre-marriage savings into a joint bank account used by both spouses for marital expenses.
  • Using an inheritance (separate property) to make payments on a marital home, thereby investing individual assets into marital property.
  • Reinvesting dividends or profits from separate investments into joint accounts or toward purchasing jointly owned property.
  • Improving or renovating a property owned by one spouse before the marriage with marital funds, increasing the property's value with contributions from both spouses.

This intertwining of assets requires careful analysis and, often, professional guidance from a financial expert to ensure a fair division under New York's equitable distribution laws.

Navigating Divorce with Commingled Assets

When facing a divorce with significant commingled assets, the approach to division can become highly complex. The primary goal is to reach a resolution that honors the principles of equitable distribution as espoused by New York state law. However, to achieve this, you must also recognize the legal complexities and emotional challenges of untangling commingled assets.

Given the intricacies involved, couples are encouraged to engage legal and financial professionals to help them navigate this process, helping both parties emerge with a mutually agreed upon settlement.

Methods for dividing commingled assets can include:

  • Tracing: Financial experts may employ tracing strategies to determine the origin of assets, distinguishing between marital and separate property. This often involves meticulous examination of financial records and transaction histories, going back years.
  • Agreement: Couples may agree on a division that considers the commingled nature of their assets, sometimes opting for a buy-out of one spouse's interest in an asset or agreeing on a larger share of a different asset to offset the balance.
  • Valuation and distribution: Once clearly identified as commingled, some assets need to be valuated by a professional to determine their current worth. Subsequently, these assets can be equitably divided according to their value, with adjustments made to ensure a fair distribution.

Existing marital and prenuptial agreements also play a crucial role in dividing commingled assets, as these documents often outline the terms for categorizing and distributing assets. For example, a couple may have agreed in a prenuptial agreement that a formerly separate asset would be considered community property in the event of a divorce.

Resolving Disagreements on the Separation of Commingled Assets

When disagreements arise over how commingled assets should be separated and divided, it's crucial to approach the issue with a combination of legal insight and negotiation strategies. The first step is to ensure that you fully understand the implications of New York's equitable distribution laws and how they apply to commingled assets.

If an agreement cannot be reached through direct discussion, the following steps can be instrumental in finding a resolution:

  • Mediation: Engaging in mediation can offer a less adversarial environment to discuss and resolve disputes over asset division.
  • Collaborative divorce: In a collaborative divorce, both parties hire attorneys who agree to work together to negotiate a settlement without going to court. This process focuses on open communication and cooperative problem-solving.
  • Arbitration: If mediation and collaborative efforts fail, arbitration may be a viable alternative. In this process, a private arbitrator acts as a judge, making decisions on asset division.
  • Court Litigation: Unresolved disputes over commingled assets may need to be settled in court. This process can be lengthy and expensive, but it may be the best option for couples who struggle to communicate effectively.

You are not alone if you are struggling with property division due to commingled assets and disputes with your soon-to-be ex-spouse—contact Law Office of Tzvi Y. Hagler, P.C. for help. Our attorneys are highly experienced and ready to represent you.