Robin Vaccai Yess, LTD Contributor
New York is an equitable distribution state, which means everything that comes into a marriage during the marriage is considered marital property with few exceptions.
This includes assets, liabilities and income. If you work at a job and accrue pension benefits to be paid in the future and contribute to your 401k, both of these are considered marital property and are subject to equitable distribution in divorce.
Exceptions to the marital property rule are gifts, inheritance and settlements for personal injuries. If one spouse receives a direct gift from any other person, that gift would ordinarily be considered separate property. Ideally the gift, if money, should have been kept separate from marital money, but not necessarily. Same is true for inheritances received by one spouse during the marriage. It is recommended to keep gifts and inheritances separate if possible.
Separate property includes things owned prior to the marriage. If you worked at your employer for ten years prior to your marriage and during that time you contributed to the 401k plan, the 401k balance at the time of your marriage would be considered separate property. You should be prepared to document what the balance was at the time of the marriage if you are going to claim a portion of the 401k as separate property. If you owned a residence prior to your marriage which was subsequently sold and the proceeds used to purchase a marital residence, you may claim a separate property credit for the money you put into the marital residence purchase, but again – be prepared to document this.
Most people are very attached to their pensions and those considering or going through separation or divorce are often shocked to find that they have to divide these assets and give a portion to their soon-to-be ex-spouse. Trading off other assets with your spouse to retain the pension is possible, but needs to be done with the help of a trained financial professional.