In this podcast, Heidi Opinsky talks with John Maher about the division of property during a divorce. he explains what couples need to consider when dividing their property, and she outlines what happens when they can’t come to agreements on their own.
John Maher: Hi, I’m John Maher. I’m here today with Heidi Opinsky. Heidi is a Divorce and Child Custody Lawyer in Connecticut and New York with over 30 years of legal experience in mediation, collaborative law and litigation. And she represents clients in a full spectrum of family law needs. Today, we’re talking about divorce and division of property. Welcome Heidi.
Heidi Opinsky: Good afternoon, John.
John: Heidi, what is the division of property or distribution of property as it relates to divorce proceedings?
Heidi: Yes. So one of the major aspects of a divorce is how the court, or the attorneys, or the parties are going to divide up property and separate the property between the spouses.
John: Okay. And I’ve heard of two different things, equitable distribution and equal distribution. What are those and how are they different?
Heidi : So equitable distribution is the more common way a court in the various states divides the property and that’s what they deem to be equitable. It’s not necessarily equal, meaning 50/50. That would be more applicable in community property states such as… California has community property and that’s 50/50. So for instance, equitable could be that the court divides it up where one spouse may get 60% and the other 40% or 75/25, 70/30, 60/40. It could be however the court decides to do it. And it may end up that the court actually does the division. In most cases, they do do the division equally, 50/50, in most cases, but not always. So they may divide certain of the assets, 50/50 and the others differently.
And that’s where a separate property may come into effect where they might decide to divide it differently because let’s say someone inherited something from their parents when they were coming into the marriage or shortly after the marriage. And they got a large inheritance. Why should the other spouse, maybe 2, 3, 4, 5 years into the marriage get 50% of that. Now, what’s interesting is I practice in both New York and Connecticut. So New York is a separate property state. Connecticut is what’s called an all property state. So what many people don’t really understand, in the tri-state area; they just assume if they work in New York, they hear all their buddies or friends or colleagues saying, “Oh, I’m in New York, separate property. Don’t worry about it.”
You have a house in Connecticut, you’re getting divorced in Connecticut, you reside in Connecticut, it’s in all property state. There is no separate property. So this inheritance that I’m talking about in New York, by statute is separate property, unless you commingle it or transmute it and it stays separate by statute. In Connecticut, not the case, your parents die, you get your inheritance, you control it. It’s part of the marital estate that gets divided. People are shocked when I tell them that. Estate attorneys handling wills, trusts in the states, are shocked when I tell them this in New York. Estate attorneys in New York don’t realize their clients are living in Greenwich, Connecticut, and it’s an all property state.
And I have to then advise them, “Stop telling your clients that their parent’s inheritance is separate property, it’s not.” If they have it and it’s been in their possession and control, it’s part of the marital state.
John: So what other types of factors are used to determine the division of assets, again, both in New York and Connecticut.
Heidi : Certainly the part, the court will look at who earned the asset primarily, but that doesn’t mean anything if you’re in a medium to long term marriage. They’re going to divide it up. So they don’t look to hurt the spouse that decided to stay home and raise the children and forgo their career, to then let the other person go out and work every day and support the family. It’s a give and take. And therefore they’re not looking to hurt either side. And that’s why it’s equitable.
But sometimes they’ll say if you earned 50% of your 401K or your pension, before you even married this person. You could come in and say, “Okay.” And then the marriage wasn’t long, it was three years, four years, five years. “I don’t want to split half of my 401K, why should I?” So you can go in and argue and say, “This should be an equitable distribution. I shouldn’t have to split it all up because I earn 50% of it beforehand,” without any contributions by the other spouse.
John: And how is the division of property complicated when you’re talking about moderate to high net worth couples. I’m thinking, you hear a lot, all the time about celebrities getting divorced, and then maybe their spouse is not a celebrity. And you hear a lot about them getting, “Oh, they got X amount of dollars in this settlement.” Or something like that.
Heidi : Well, they actually used to value celebrity status in New York, which they don’t do anymore.
Heidi: But they used to do that and put a value in a number on it because the person so exceedingly made such…. this is like paper, funny money kind of thing, but they don’t do that anymore and put values on celebrity status in New York anymore. But they used to. They don’t do things like that and value that in Connecticut. But they will look at contributions by a spouse. So did that person assist the person in their career? Did they go to the meetings? Did they help in the business? Did they go into work every day with the other spouse?
And in New York, for instance, they make distinctions between active assets and passive assets. So did this asset go up and down because of the market, such as the house and you’re not a builder. So it just goes up and down because of the market, you have no control over it. So is that person going to share in the increase in the equity and value in the house? Or is it going up and down and the business is earning oodles of money because that person is working every day, tirelessly and sleeps three hours a night to get this start off the ground and make this happen? And the other spouse didn’t help one iota.
That’s where someone might come in and say they’re not entitled to 50/50, or maybe they should get a haircut on that. There are arguments but most of the time, the courts look at what was earned during the marriage and try to divide it up as equally as possible, even if you’re not in a community property state. They would maybe tilt it north or south, if there’s bad behavior on the part of one spouse.
So let’s say one spouse… In Connecticut, they still consider marital fault. And one spouse, let’s say that one spouse is a serial adulterer. And I say, serial, not just had a hiccup. Everyone can have a hiccup. We’re all human. Judges are human too and have had hiccups. But is that a hiccup or is this someone who’s had 10 affairs? Was it one affair and a mistake or is it 10 affairs and it’s constant? And therefore, now that they’re getting divorced, they’re going to give the other spouse 60%, not 50 because of that. Those are considerations that could be argued, along with what was the premarital component or ownership. When you do own a lot of property before the marriage and it’s the second time marriage, I highly recommend the parties get prenups.
John: So that you’re determining before you get married, you’re determining, “Hey, if in the event that we get a divorce, then this is how we’re going to divide it up.”
Heidi : And there’s a reason for that. Trials are very expensive. Legal fees are very expensive. It’s not like you’re going in for dinner and a nice dinner, even at that. Legal fees are very, very expensive and trials are very costly and time consuming. So if you are going down the aisle the second time, I know you believe that this will never happen again, but it could. And do you want to decide how you’ll divide it up by agreement in advance. And it’s usually the best time to do that because you’re in love and the person wants to be married to you. And they may say, “I don’t care what you put in the writing. I love you so much. It doesn’t matter. I’ll sign whatever you want me to sign.”
That’s not a fair prenup either, by the way, but it happens. And then there’s first time marriages also, where I say parties should consider prenups because of the division of assets. What if the one child has wealthy parents and the parents are in their eighties, they’re not going to live that much longer, they’re going to die during this marriage. So maybe you want to keep all of their assets separate because Connecticut’s an all properties state. The minute you get it’s up for grabs by the other spouse.
And that inherently, I don’t think sounds fair, it sounds a little unfair doesn’t it, to you? Any person I tell this to says that and it’s true. Why should all of your parents’ money go to a spouse that you’ve been married to for a few years, because they happen to die during the third year of your new marriage.
Heidi : But you have to protect against that in Connecticut, because the laws are that it’s an all property state and you decided to marry this person and your parents died. It’s all part of the marital pot, so you have to be careful.
John: Whereas you said in New York, it’s a separate property state, so it’s a little different.
Heidi: Yeah. By statute, inheritances and trusts are not marital property. So if you don’t do anything to make your parents’ inheritance to you during the New York marriage separate, and you keep that asset separate, then it’s separate. But you put that money that you got from your parents inheritance into a joint account, you’re now making it marital.
John: Okay. So it’s all about what you do with it and if you keep it separate or not.
Heidi: Right. It’s what you do with it.
Heidi: And it gets a little bit more blurred too, between active and passive assets and New York considers anything that’s really active, that the other spouse contributed to it and should share in it. Even if they’re there at home, because they’re not going to punish a housewife for raising a child, just because you went into work and are running your business. Does that make sense?
Heidi : So they look at the quality of the asset and who did what to it and who contributed to it? Should it be divided equally? Should it not be divided equally? And that’s where equitable comes in.
John: Okay. There are certain types of property where it might be difficult to actually determine a value like you own a business. How much is that business worth or is that business going to be worth more three years from now, five years from now than it is now? Stocks or real estate or things like art collections or whatever. How does that get determined?
Heidi: So when you have a business or an asset such as restricted stock units or vested and unvested retirement assets, that’s where you may need an actuary or an expert forensic accountant to come in and value. So actuaries generally valued retirement assets, like a pension. And forensic accountants value a business. And a real estate appraiser values real estate.
So when you’re going to court in order to put a value on something, you can stipulate to it by parties, as parties, and agree to a number. But if you can’t, then you have to hire these other parties. An expert forensic accountant to value a business, a real estate appraiser to value a house, or an expert appraiser to value jewelry or a state asset, or paintings. You may have to get an art appraiser to value a Rembrandt, for instance. You would get an actuary to do the pension valuation. So the attorneys don’t put numbers on that.
Heidi: We only put numbers on it when the parties are able to come to an agreement on a number. When they can’t come to an agreement on a number, we have to suggest to them very strongly that we retain an expert forensic accountant to value the business, or a real estate appraiser to value the real estate, or pension appraiser, actuary, to do the pension appraisal, or a pension attorney. They have attorneys that are pension attorneys that could also value a pension.
So you need that number for the court to accept it because the court will accept what the parties stipulate to. What one side says, what the other side says, what one expert says, what the other expert says, or they’ll come to their own determination of a number. But the experts’ valuation numbers on a business is what’s accepted as the best value.
And different experts can come in with widely different numbers on the same asset. And then the court can decide, “I agree with certain parts of certain reports and testimony and expert testimony, and I disagree with others.” And come up with another number or accept one expert over the other. That’s what happens.
John: Or take an average or something.
Heidi: Or an average, yes.
John: Now, does that expert or appraiser have to be a neutral third party that’s not hired by either one of the divorcing parties?
Heidi : You can actually stipulate, if you know you have to value a business for instance. But you don’t want to litigate over warring experts, so to speak, with their different numbers. The parties can stipulate that one neutral expert will come up with a fair and equitable number. And the attorneys generally will say, “Okay, let’s agree on one of the experts. We all know their names. We’ll retain X expert and we’ll call them together so they understand this will be a neutral valuation.”
So you’re not siding with the husband who works the business or the wife who wants more of it than he’s offering. You’re going to do a neutral number and split it equally between the two of them. And this is a neutral number and as attorneys, we generally agree, “We’ll contact the expert together so they understand that it’s a neutral evaluation.”
John: All right. Well, that’s really great information, Heidi. Thanks again for speaking with me today.
Heidi: Thank you.John: And for more information, visit Heidi’s website at ctnydivorcelawyer.com. Or call the law offices of Heidi E Opinsky LLC at 203 653 3542.