Many married couples in New York have joint investments to build wealth and prepare for retirement. Although couples get married with the expectation of spending the rest of their lives together, many couples unfortunately divorce, forcing them to figure out how to divide their joint investments. How do New York’s divorce laws affect the disposition of a couple’s joint investments?
Classifying Joint Investments
In a New York divorce, a couple must divide their marital assets. New York defines marital property as property acquired by spouses during their marriage. Conversely, assets may qualify as separate property, which New York defines as all property that a spouse owned before marriage. Furthermore, some assets acquired during marriage, such as inheritances or exclusive gifts, may qualify as separate property. However, part of a spouse’s separate assets can become marital property, such as the growth in the value of retirement accounts during marriage. Couples can also agree to treat various assets as marital or separate property by designating them as such in a pre- or post-nuptial agreement.
A couple’s joint investments can include assets such as:
- Stocks and other tradeable securities
- Treasury and municipal bonds
- Mutual funds
- Retirement accounts (IRAs, 401ks, annuities, etc.)
- Real estate, including commercial and other income properties
- Business ownership interests
New York’s Equitable Distribution Rules
New York uses an equitable distribution system for dividing marital assets in divorce. Equitable distribution requires a court tasked with dividing a couple’s marital property to divide assets between the spouses fairly, though not necessarily evenly. Courts consider various circumstances to determine what split of the marital estate will treat both spouses fairly. Factors considered in equitable distribution include:
- The length of the marriage
- The age and health of each spouse
- Each spouse’s financial contributions in acquiring a specific asset and each spouse’s contributions to the marriage and family, including a spouse’s contributions to homemaking or childcare and foregoing educational or professional opportunities to support their spouse’s education, business, or professional development
- Each spouse’s income, earning potential, and separate assets
- The marital debts and liabilities and each spouse’s separate liabilities
- Each spouse’s future financial needs
- Whether either spouse transferred, encumbered, or wasted marital assets in contemplation of divorce
- The couple’s child custody arrangement and any child or spousal support arrangements
What Happens to Different Types of Investments
Dividing joint investments that constitute marital property in a divorce may involve various legal procedures, depending on the type of investment. For example, dividing retirement assets like IRAs, 401ks, or pensions may require a Qualified Domestic Relations Order, which directs the financial institution managing the retirement account to pay an equitably divided portion of the account’s benefits to the non-account holder spouse.
Couples have other options for dividing joint investments, such as brokerage accounts, real estate, or business interests. For example, a couple may agree to sell their joint investments and split the proceeds per the equitable distribution arrangements. Alternatively, spouses may buy each other out of investments with cash payments or turn over other marital assets to achieve the desired overall split of the marital estate. Finally, a couple may choose to continue co-owning joint investments. However, each option may have financial implications, such as capital gains taxes from selling investments or tax penalties caused by early withdrawals from retirement accounts.
Contact a Divorce Attorney Today
When you get divorced, splitting your investment accounts may become complex and create intense disputes. Contact Lisa Zeiderman, Esq. today for a confidential consultation with a knowledgeable divorce attorney to learn what happens to your joint investment accounts in a divorce in New York.