How are Marital Assets Divided in a Divorce When There is No Prenuptial Agreement?

In this article:

• What happens if you don’t have a prenup?
• Protection of Individual Assets
• Distinguishing Between Marital and Separate Property
• Case Example
• Conclusion

Marriage is one of the biggest commitments you’ll make in life – one that intertwines lives, assets, debts, and future plans. Many people enter this commitment with the intention of forever, avoiding any unromantic mention of a prenuptial agreement, a legal agreement outlining how assets and debts would be distributed in the event of a divorce.

However, things can change, and divorces happen. In the absence of a prenup, deciding how a couple will divide marital assets takes center stage.

This article explains how courts approach the division of assets, and the potential challenges that arise when a couple decides to part ways without the existence of a prenup.

What happens if you don’t have a prenup?

In the absence of a prenuptial agreement and an inability to reach a mutual agreement, your property and debt division will be determined based on your state’s laws. Some states use the idea of equitable distribution and others use community property.

New York is an equitable distribution state. This means that during a divorce, property will be distributed equitably – equitable, however, does not mean equal. If an agreement on dividing assets and liabilities can’t be reached amicably, it will be left to the sole discretion of a court to decide what is equitable or “fair”.   

The judge will consider many factors to determine what’s equitable, such as: the duration of the marriage; contributions made by each spouse both through financial means as well as labor and support; each spouse’s earning capacity; the spouse’s financial situation upon entering the marriage and the financial picture upon filing for dissolution.

We understand that the uncertainty of what the court deems “fair” can be a source of stress during divorce proceedings. Experienced legal advice is imperative if you have significant assets that you want to protect.

Protection of Individual Assets

Individuals who brought substantial assets into the marriage often question if those assets become marital, subjecting them to equitable distribution.

Only property that is deemed to be marital property will be subject to equitable distribution. Any assets obtained during the marriage (income, 401K distributions, houses, cars, etc.) is typically considered marital property. Without a pre-nuptial agreement, it will be up to your attorney to identify and prove any separate property claims that you may have. 

Separate property is considered to be property either spouse had prior to marriage. It also includes inheritance or gift the spouse received individually, a personal injury settlement, or property included in a pre-nuptial agreement.

This does not mean that all assets you brought into the marriage can be successfully argued as separate property. If you mixed in your assets or maintained them with marital resources, they may be determined to have been comingled and therefore subject to equitable distribution.  Further, if you changed ownership of the asset during the marriage it may be determined as transmuted and therefore subject to equitable distribution.

Distinguishing Between Marital and Separate Property

Effectively discerning between marital and separate property is pivotal in the equitable distribution of assets during divorce, especially in the absence of a prenuptial agreement.

Understanding the nuances of what constitutes marital and separate property, and presenting a compelling case to safeguard individual assets is a very complex and often emotional process which requires expertise. Even when a client feels they clearly have separate property, it can still be an incredibly complex and tedious process to prove those assets were never comingled or transmuted during the marriage.

Case Example

Consider a recent case handled by our firm where a client maintained significant personal assets in an international bank account. Despite keeping these assets separate during the marriage, the client decided to use the funds to purchase a home for the couple.

Some might argue that the assets were commingled, making them subject to equal distribution. Our legal team, however, meticulously traced the financial path throughout the marriage. By presenting a clear narrative, we successfully ensured that a specific portion of the client’s property remained exempt from the court’s equitable division.

Conclusion

In navigating the complexities of asset division during divorce, particularly without a prenuptial agreement, seeking experienced legal counsel is crucial. At Bousquet Holstein, we bring extensive experience in financial tracing to the table, ensuring our clients receive fair representation and protection of their assets during divorce proceedings.