Marital Property vs Separate Property as defined by the Appellate Division 2nd. Dept:

Domestic Relations Law § 236 defines “marital property” as “all property acquired by either or both spouses during the marriage and before the execution of a separation agreement or the commencement of a matrimonial action, regardless of the{**15 NY3d at 162} form in which title is held” (Domestic Relations Law § 236 [B] [1] [c] [emphasis supplied]), and the definition of marital property includes a “wide range” of tangible and intangible interests (DeJesus, 90 NY2d at 647). It is telling that the Legislature chose to initially categorize all property, of whatever nature, acquired after parties marry as marital property. As we have repeatedly emphasized, the Equitable Distribution Law “recognizes that spouses have an equitable claim to things of value arising out of the marital relationship and classifies them as subject to distribution by focusing on the marital status of the parties at the time of acquisition” (O’Brien v O’Brien, 66 NY2d 576, 583 [1985]). This marital property designation is in keeping with the fundamental purpose of the Equitable Distribution Law—the recognition of marriage as an economic partnership (see Governor’s Approval Mem, L 1980, ch 281, reprinted in 1980 McKinney’s Session Laws of NY, at 1863), in which “both parties contribute as spouse, parent, wage earner or homemaker” (O’Brien, 66 NY2d at 585).

The Legislature did provide for several exceptions to this general classification. Section 236 specifies that marital property does not include “separate property” and the statute sets forth four categories of property that constitute separate property:

“(1) property acquired before marriage or property acquired by bequest, devise, or descent, or gift from a party other than the spouse;

“(2) compensation for personal injuries;

“(3) property acquired in exchange for or the increase in value of separate property, except to the extent that such appreciation is due in part to the contributions or efforts of the other spouse;

“(4) property described as separate property by written agreement of the parties pursuant to subdivision three of this part” (Domestic Relations Law § 236 [B] [1] [d]).

[*3]

When the Legislature enacted Domestic Relations Law § 236, it sought “to recognize the direct and indirect contributions of each spouse” (Hartog v Hartog, 85 NY2d 36, 47 [1995], citing Governor’s Approval Mem, L 1980, ch 281, and Assembly Mem, 1980 NY Legis Ann, at 129-130). Hence, we have stressed that marital property should be “construed broadly in order to give effect to the ‘economic partnership’ concept of the marriage {**15 NY3d at 163}relationship” (Price v Price, 69 NY2d 8, 15 [1986] [emphasis omitted]). By contrast, separate property—denoted as an exception to marital property—should be construed “narrowly” (id. [emphasis omitted]; see Majauskas v Majauskas, 61 NY2d 481, 489 [1984]). The structure of section 236 therefore creates a statutory presumption that “all property, unless clearly separate, is deemed marital property” and the burden rests with the titled spouse to rebut that presumption (DeJesus, 90 NY2d at 652).

There is no single template that directs how courts are to distribute a marital asset that was acquired, in part or in whole, with separate property funds. In these situations, courts have usually given the spouse who made the separate property contribution a credit for such payment before determining how to equitably distribute the remaining value of the asset (see e.g.{**15 NY3d at 168}Zurner v Zurner, 213 AD2d 906, 908 [3d Dept 1995], lv denied 87 NY2d 802 [1995]; Burns v Burns, 193 AD2d 1104, 1106 [4th Dept 1993], mod on other grounds 84 NY2d 369 [1994]). In distributing any appreciation in value, courts may consider any of the factors listed in Domestic Relations Law § 236 (B) (5) (d) or any other relevant considerations (see e.g. Butler v Butler, 171 AD2d 89, 93-94 [2d Dept 1991]; Woodson v Woodson, 178 AD2d 642, 642-643 [2d Dept 1991]), including the respective contributions of each spouse and the effect of market forces.

 

“[t]he term separate property shall{**15 NY3d at 172} mean . . . the increase in value of separate property, except to the extent that such appreciation is due in part to the contributions or efforts of the other spouse.” (Domestic Relations Law § 236 [B] [1] [d] [3].) Read carefully, the italicized words may be puzzling. “[T]o the extent that” and “in part” seem contradictory: Is the appreciation marital only “to the extent” that the other [*11]spouse contributes to it, or is it wholly marital if the other spouse contributes even “in part”? I think this riddle can be answered by considering an important premise of the law of equitable distribution: that marriage is an economic partnership, in which both spouses may contribute to the wealth accumulated during the marriage, either through direct efforts to earn money or indirect efforts as a parent and homemaker (see Price v Price, 69 NY2d 8, 13-15 [1986]). The statutory words “in part” refer to the possibility that the partnership of which the untitled spouse is “part” may contribute to the appreciation; “to the extent” that it does so, the resulting appreciation will be deemed marital, and the “part” of that marital appreciation due to the untitled spouse’s efforts will be recognized when the marital property is divided.

==============================================

ATTORNEY ADVERTISING: Information herein is not legal advice. You should consult an attorney for individual advice.

Advertisements