A client asked me this in a consultation last week, and I get asked it constantly. He is a finance professional. His bonus lands in March. He is going to file, and he wants to know one thing: does she get half of that too?
Here is the short answer. It depends! It is all about timing,
In New York, the assets you earn after the date of commencement of the divorce action are generally not marital property. The date of commencement of your divorce action is the day the action is filed with the Court, and the date most often functions as the cutoff line for what goes into the marital estate.However, the key word is “earn.” When did you “earn” the bonus? If the bonus is for past performance, then the point at which you file for divorce in a given year matters. Further, if your bonus comprises cash and equity, the answer may be different for cash versus equity. And if the equity is basically an incentive to keep you employed in your current position, then it may be subject to a coverture formula known as the DeJesus formula.
These are not hard and fast rules, and the exceptions to it are exactly where high earners lose money they assumed was theirs. When you file matters and that bonus that lands in March may be mostly marital if you file close to the end of the year. That is why filing sooner rather than later may be advantageous.
The Cutoff Is the Filing Date, Not the Day You Moved Out
People come in convinced the clock stopped when the marriage did. It did not. Sleeping in the guest room for two years, moving into your new apartment, opening your own account, telling your friends it is over, none of that stops the accumulation of marital property in New York.
What stops it is the commencement of the action. Until that filing happens, the income you are earning, the equity you are vesting, and the assets you are buying are still going into the pot to be divided under equitable distribution. Even then the equity that you are vesting into may still be partially marital.
That single fact changes the strategy for a lot of people. If you are the higher earning spouse and a significant amount of compensation is about to hit, the timing of a filing is not a small procedural detail. It is a financial decision with a number attached to it.
Before You Move a Dollar, Understand the Automatic Orders
This is the part I want to be careful about, because it is where people get themselves in trouble reading articles like this one.
The moment a divorce action is commenced in New York, automatic orders go into effect and bind both parties. They restrict transferring, selling, encumbering, or otherwise disposing of assets, changing beneficiaries, and altering insurance coverage without either the other side’s written consent or a court order.
So no, the answer is not that you file and then go buy a house with your next paycheck. The answer is that you file, you understand what the automatic orders permit, and you make decisions with your attorney before you make them with your bank.
Ask the question first. That conversation costs a fraction of what it costs to unwind a transfer that a court later decides you should not have made.
Open the New Accounts, and Then Actually Keep Them Separate
Once the action is commenced, income you earn going forward is generally your separate property. Bonuses and equity may be an exception depending on when they are earned. To keep it that way, it has to be identifiable.
That means a new bank account and, if you invest, a new investment account. Post-commencement earnings go there, and marital money does not. Every deposit that mixes the two makes the eventual tracing of separate property harder, more expensive, and less certain, because the burden of proving what is separate falls on the person claiming it.
Two things people get wrong here. First, keeping money separate does not mean you stop paying the household bills or otherwise disrupt the status quo. That is a different question, and there may be reasons to change it, but you do not get there by unilaterally shutting off the accounts your family lives on. That will usually just bring on expensive motion practice, which is something to try to avoid.
Second, if you invest regularly, make the new investments with post-commencement funds. Investments funded out of what is now separate property stay much cleaner than investments made out of an account that has marital money sitting in it.
Passive Appreciation Is Where This Rule Bends
Here is the exception that surprises even sophisticated clients.
Suppose I hold a limited partnership interest in a real estate entity. I identified the investment during the marriage, I made the investment during the marriage, and I am a limited partner, meaning I have no voting rights and I am not managing the property. I am an investor. Distributions come in.
Those distributions can be marital, and for the most part they will be, even after the filing, because the asset itself was acquired during the marriage and I am not actively doing anything to generate the return. It is passive appreciation on a marital asset, not new separate income.
Which means the distribution shows up on my tax return as income, but it is not income I should be sweeping into my new separate account. Getting that wrong is how a person who thought they were being careful ends up commingling the exact thing they were trying to protect.
Bonuses, RSUs, and Deferred Compensation Are Split Down the Middle of the Calendar
We are past the halfway point of the year, which means bonus season is coming. For the financial industry, that is usually December, or March and April.
A bonus paid after commencement is frequently part marital and part separate, because it compensates work performed on both sides of the filing date. The same logic applies to restricted stock units that vest after the action is commenced but that were granted for services during the marriage, and to deferred compensation generally.
So when equity vests into stock, the segregation has to be careful and it has to be documented. What was earned during the marriage is treated differently from what was earned after. Dumping the whole vest into one account and sorting it out later is not a plan.
One More Thing: This Is New York Law, Not the Law Everywhere
The commencement cutoff is specific to New York, and my clients who have lived or held assets elsewhere need to hear this.
Connecticut, for example, looks at what you have accumulated all the way through the judgment of divorce, not the date of filing. That is a meaningful difference. A contested matter can run for years, and in that model every one of those years is still building the estate to be divided.
If your case has any connection to another state, do not assume the New York rule travels with you.
The Bottom Line
In New York, the date of commencement generally draws the line between marital and separate property. What you earn after it is usually yours. The exceptions, passive appreciation on marital assets, bonuses and equity straddling the filing date, and anything you commingle, are where real money is won and lost.
None of this is a reason to start moving assets on your own. It is a reason to have the conversation before you file rather than after, with an attorney and, where the compensation is complicated, a forensic accountant who understands vesting schedules and deferred comp.
If you are approaching a filing and there is a bonus, a vest, or a partnership distribution anywhere in the next twelve months, contact an experienced attorney and ask the question before the money moves. More on how these issues play out in larger estates is in my high net worth divorce FAQ.