What Marital Assets Are Not Eligible for Equitable Distribution?

Distribution of property during a divorce case is top of mind for spouses, particularly if you have a high net worth. You want to know what you can keep. 

For couples married for a long time, most marital assets are eligible for equitable distribution. Both partners have a right to their share, often fifty-fifty. 

However, some assets don’t fall into this category and courts do not distribute them equitably. 

What are marital assets? 

Marital assets are property acquired between the date of the marriage and the filing of the summons. They can include any salary, bonus, retirement contributions, homes, cars, businesses, or possessions purchased by either party. For instance, a family home purchased after the wedding is marital property. 

The summons is a formal notification that a spouse is filing a divorce and a key event in proceedings. It is the point at which one party takes the first step to end the marriage. 

In general, the property and assets you acquire after posting a summons are yours to keep. For instance, the salary you receive after the commencement of the divorce is yours. 

However, there are some caveats. In high net worth cases, courts will often check financial records to determine whether parties acquired any new property after the summons. If they discover that you purchased assets with marital property, they will subject them to equitable distribution. 

Courts may also consider timing when determining marital assets. Suppose for instance your company pays annual bonuses. If you work six months before the summons and six months after, the court may consider half of the bonus to be a marital asset, since you laid 50 percent of the groundwork for earning it during the marriage.

Dividends from stocks obtained during the marriage are also considered marital property. Courts will ensure that couples divide stocks equitably. By contrast, dividends acquired from stocks before or after the marriage go exclusively to the party that bought them. 

In general, if you can trace any assets obtained after the summons to marital property, they are marital assets. If you earned them independently, they are not. 

What about property owned before the marriage? 

Courts usually consider pre-marital assets as separate property. Therefore, if you owned a $250,000 stock portfolio before the commencement of the marriage, the court will consider that to be separate (and, therefore, yours to keep). 

Again, though, there are caveats. If you purchased a house before your marriage but your spouse contributed to the mortgage payments, equitable distribution may kick in. 

Which assets acquired during the marriage are not eligible for equitable distribution?

There are, however, some items that fall outside of the scope of marital assets, even if one of the parties acquires them during the marriage. Therefore, this property remains separate in the event of a divorce. 

Examples of assets that are exceptions to equitable distribution include: 

  • Gifts made to either spouse by a third party (such as parents)
  • Some forms of compensation received by one of the parties in relation to a personal injury
  • A bequeathed estate from a deceased relative

Is post-summons income eligible for equitable distribution?

Once a divorce occurs, you only need to share mandated income with your spouse, such as child support. If you earn additional money, you are free to keep whatever remains after you have paid court-mandated amounts. Your ex-spouse has no claims over your savings. They are your separate property. 

Alimony, or spousal support, is another form of mandated payment. It is less common than it used to be. However, some spouses who pause their careers during marriage to care for children may claim it.

Most spouses agree privately on how much support the other party will receive, and for how long. However, if they cannot agree, a judge may make the decision on their behalf. 

Spousal support is not a marital asset. Therefore, it does not fall under equitable distribution rules. Judges define spousal needs as “reasonable” so that they cover basic living expenses. They may require high-net-worth individuals to provide ex-spouses with substantial incomes. 

How to protect your assets during a divorce

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