Everyone has heard someone say “I’m going to get half of everything!” but most people don’t know what that means; half of what? Marriages have assets, marriages have debts, and in some cases, there is property that belongs to one spouse only. What this means is that it’s not as simple as most people think.

The first step is to identify all of the assets and all of the debts. This includes everything from the “big ticket” items like a house, an investment account, and retirement accounts, to the less obvious assets like a baseball card collection, a painting on the wall, or a vintage car. It is also important to remember that there will most likely be debts in a marriage, such as a mortgage and credit card debt.

Once you identify the assets and the debts are identified, the next step is to classify them as either marital or separate. Any property or debt that is acquired during your marriage is presumed to “belong to the marriage” which means that both you and your spouse have an ownership interest in that asset or a responsibility to repay that debt. What most people don’t know is that it doesn’t matter whose name is on the title of the house or whose name is on the receipt for the designer handbag; it just matters whether the asset in question was purchased or acquired during the marriage, and unless you can prove that the asset in dispute is separate property, your spouse will be entitled to some portion of its value.  The same holds true for debts, and if a debt was incurred during the marriage for marital purposes, i.e., marital living expenses or a marital investment, it will be considered a marital debt and each party will be responsible for some portion of repayment of the debt.

Logically, the next question is: what is “separate property”? The Domestic Relations Law defines separate property to include: (1) property that was acquired before the marriage or property that was acquired by inheritance or gift from a person other than the spouse; (2) compensation for personal injuries; (3) property acquired in exchange for separate property, or the increase in value of separate property; and (4) property that the parties specifically agreed would be separate property.

Sometimes it’s very hard to prove that something is separate property, especially in longer marriages. For example, if you had a 401(k) before your marriage, and then 25 years later get divorced, most people will not have an account statement showing that the retirement account existed at the time of the marriage, and many banks do not save statements going that far back either. This makes it difficult to keep your spouse from getting a portion of your pre-marital 401(k), and it is one of the reasons why having a skilled lawyer is so important.

A common question I get asked is: what happens with my engagement ring? The good news is, you get to keep it. Because the ring was gifted to you before the marriage, and therefore something that you owned prior to the marriage, it is your separate property. On the other hand, jewelry gifted to one spouse by the other during the marriage is considered marital property and both spouses have an interest in the value of those items.

After you identify and classify the assets, you then need to value them. This could be easy, such as in the case of a bank account, or it could be complicated and require an expert to appraise a house, business, jewelry, or even a wine collection.

While the Domestic Relations Law is clear about the definition of separate property versus marital property, there are intricacies and exceptions to the law that can only be fully explained after full financial disclosure and discussions with your lawyer so that he or she can determine whether a particular asset is marital, separate, or a combination of both. That is why you need to be forthcoming with your lawyer so that you can better understand what to expect when going through a divorce.

The last thing to keep in mind is that while most people believe that they automatically “get half”, New York is actually not a 50/50 state, and instead divides the assets based on what is “equitable”. What does that mean? Stay tuned for next week’s blog post to find out.