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New York is considered a community property state, which means that both spouses own their separate property and their property acquired during the marriage. Any debts are the responsibility of each spouse alone, even those incurred during the marriage. It’s important to understand how this affects your finances and your relationship with your spouse, especially if you’re considering filing for divorce in New York and would like to do so in community property states like New York and California.
What is Community Property?
When you get married, some states may consider your property—and debts—to be community property; when you divorce, community property will be divided between you and your spouse in a way decided by a judge. However, New York is not one of those states; it follows equitable distribution law when dividing assets between ex-spouses.
In other words, New York courts first consider whether or not an asset is a marital property before deciding how to divide it (if at all). So why does community property matter? Because whether or not a state’s divorce laws are based on community property has important implications for what happens to money and assets during divorce proceedings.
Is New York a Community Property State?
Yes, New York is a community property state, meaning that everything you and your spouse (or domestic partner) earn or acquire during your marriage is shared.
All assets, debts, income, and expenses accumulated by either spouse (and their respective dependents) in New York during a marriage are considered community property unless explicitly listed as separate property on an asset/debt separation form (such as with real estate).
It is important to note that only acquired property is shared–gifts from family members are not automatically split in half between spouses. This also means that if you move to New York from another state and bring any assets or debts, those items will not be treated as community property until they have been acquired while residing in New York.
Who owns personal belongings in a marriage?
If you’re getting married, do you and your spouse have items that are just yours? Do you share a car? A phone! These personal property issues can be complicated in marriage. When your spouse passes away, who is entitled to what?
Personal property is generally awarded through inheritance rules or community property laws. These laws deal with equitable distribution, which means that things should be divided fairly between spouses.
When does this Take effect?
You’re already in a community property state! Technically, all states are married-filing-jointly states, but there is an exception for community property states—you can file as single if you want to. If you decide to file as a single, be prepared for more paperwork and a more intensive process; filing as separate returns means making two sets of calculations, at least two separate tax payments (due dates too!), and two sets of forms.
How does this affect taxes?
In most states, married couples split their income on tax returns—in other words, if one spouse earns $100,000 and her husband makes $50,000, they each file taxes as single people and only have to pay tax on half of their total earnings.
But community property states (such as California) split assets differently: Spouses are responsible for all debts and taxes incurred during a marriage (even if only one person was working). As a result, couples in these states can owe more in taxes than if they lived in a non-community property state.
Are there any exceptions?
Married couples in New York will own all property acquired during their marriage as community property. This means that any inheritance, stocks, and/or real estate received during a marriage belong to both parties unless there is an agreement or an extenuating circumstance.
The same concept applies to debt: When a couple files for bankruptcy, they are jointly liable for everything they owe during their marriage. Fortunately, community property rules don’t apply to debts incurred before getting married, but those should be disclosed anyway (you don’t want your spouse surprised at your family history).
If you have questions about how New York law will impact your finances as a married couple, an experienced attorney can help guide you through it.
What about divorce?
If you’re thinking about getting married, it’s a good idea to check out your state’s community property laws. These laws determine what happens to assets like real estate, cars, and bank accounts acquired during a marriage and can significantly impact how divorce proceedings are handled.
For example, in Louisiana—one of seven states that follow pure community property rules—all income and gains from marital assets are distributed equally between spouses (except for inheritances).
In Alaska, however, which follows modified community property rules, marital assets are distributed equitably but not necessarily equally. In most cases, half is split evenly and half awarded based on what each spouse contributed to earning that asset or income stream.
How should Married Couples Handle Debts?
In New York and most other states, all property (including debt) acquired during a marriage is considered community property, which means that both spouses are financially responsible for any debt incurred while they’re married. You should always work with your spouse to address joint debts before filing for divorce or dissolving your domestic partnership.
In most cases, it will make sense to pay off your debts together; conversely. If one party has substantially more income than another, that person may be responsible for more of a debt load than his or her fair share (this will often depend on agreements between partners).
When in doubt about how to proceed with resolving community debts, consulting an attorney is advisable.
How can you protect your credit score when getting married?
Many consumers may not realize that their financial fates become much more entwined with their spouses once they tie the knot. Marital status can have a big impact on your credit score—and that means it’s important to understand how to protect your credit score when getting married.
We explore some helpful tips in today’s post, so keep reading for a guide on how to start building a healthy marriage and helping each other grow your credit scores at the same time!
Frequently Asked Questions
Should I get married under community property or common law rules in my state?
Most married couples live together and earn money in community property states. Anything either spouse makes or earns is considered joint property, owned by both spouses equally unless there is a prenuptial agreement to share ownership otherwise.
This can make it harder for an individual spouse to hide assets during divorce since all assets acquired during the marriage are considered joint assets subject to division between divorcing spouses (although some non-community property states may divide marital debts equally as well).
The benefit of community property is that both spouses usually have easy access to each other’s salaries and financial statements since everything they own is jointly owned by both parties. There’s no need for lawyers and lengthy court battles over who owns what when you get divorced.
In New York, what is deemed marital property?
The Law defines “marital property” as all property obtained by both or either partner during the relationship, irrespective of form title held: before completing a divorce decree or the start of a marital lawsuit.
New York is a state that does not recognize common property. Like a dozen other states in the US, NY adopts the equitable distribution philosophy. And, though each partner owns the income earned during the marital union and the ability to administer the asset in their name, one spouse does not automatically receive 50% of the assets upon a divorce.
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