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Marital property" is property acquired during the marriage which is equitably distributed (but not always equally) between the husband and wife in a divorce or separation regardless of which spouse has title.

"Separate property" is property owned prior to the marriage or acquired by one spouse during the marriage as a gift or inheritance. It is not subject to equitable distribution. The courts have ruled that the following is marital property:

If a couple divorces after selling their home, each spouse is treated as having received one-half of the sale price and one-half of the capital gain. Each spouse can then roll over his or her share of the gain into a new home within two years. However, in a recent tax court case, when the wife failed to roll over her gain, the husband was required to pay the capital gains tax. The decision was based on the fact that spouses are jointly and severally liable for any tax deficiency arising out of a joint return.

In this court case, a couple realized a $180,000.00 gain from the sale of their home and separated shortly afterward. The husband bought a new home within two years. The wife failed to purchase another home. Therefore, she was taxable on her $90,000.00 share of the gain. However, the IRS went after the husband to collect the tax, arguing that he was jointly and severally liable for the tax because he had signed a joint return for the year in which the sale occurred.

Although a husband who is forced to pay his wife's tax could attempt to recoup the money from her, she may no longer have sufficient assets to cover the tax.

To prevent the above problems, if a divorced couple sells their home, they should file separate returns for the year that the sale occurred. If they have already sold a home within the past two years, the money to cover the tax should be put in escrow until each of the spouses buys the replacement home. The divorce agreement should contain a "hold harmless clause" in the event that one spouse does not buy a new home or buys a home that is not expensive enough to roll over the entire capital gain and the IRS goes after the other spouse for the tax.

Selling a House Divided By Divorce

Q:		I was divorced ten years ago. My ex-wife stayed in our home to raise our children. My two children have now reached adulthood. I would like to sell the home and divide the proceeds equally, but my ex-wife refuses to sell the home and claims she will remain there forever. Are there any legal avenues that can be implemented to sell the home or does my ex-wife have the right to remain in the home forever?
A:		If your ex-wife refuses to sell the home or deed her interest to you and the real estate is not mentioned in your divorce decree, the only way you can sell it is to start a court proceeding known as a "partition" action. When a husband and wife buy a home together, they own it as "tenants by the entirety". Upon the death of one spouse, the surviving spouse automatically becomes sole owner of the property. This is known as the "right of survivorship". When there is a divorce, the tenancy by the entirety is dissolved into a "tenancy-in-common", whereby each spouse has a one-half interest in the property without the right of survivorship. The tenancy-in-common differs from the "joint tenancy", which is common ownership with the right of survivorship. Generally, tenants-in-common and joint tenants "in possession of real property" have the right to partition of the property. But if the separation agreement or divorce decree grants exclusive possession of the home to the wife, the husband usually is denied his right to partition. In a partition action, real estate is either divided into distinct portions or sold at a public auction and the proceeds distributed among the co-owners (if it is not possible to divide the property). Before the court orders an auction sale, it appoints a court referee to: ascertain the rights, shares and interests of the parties; determine if any creditors have liens against the property; and determine whether a sale instead of a division of the property is necessary. After the referee makes his report to the court, the court orders the property to be sold at a public auction under the guidance of a court referee. After the auction sale, the referee reports to the court and transfers the property to the highest bidder by means of a referee's deed. Court costs, expenses of the sale and liens are paid first from the proceeds of the sale. The remaining balance is divided between the co-owners. If your ex-wife lived in the home, she will be given credit for one-half of the expenses of preserving and maintaining it from the day of your divorce. These expenses include mortgage payments, real estate taxes, homeowners' insurance and improvements to the property. The court has the option of ordering that court costs to be paid out of one of the co-owners portion rather than out of the total proceeds. If your spouse cannot be found in order to be paid her portion, the money will be paid to the court and invested in permanent securities at interest until it is claimed by her or her legal representative.

New York State Grounds for Divorce

Q:		What are the grounds for divorce in New York State?
A:		There are five grounds for a divorce: cruel and inhuman treatment, abandonment, imprisonment for more than three years, adultery and separation agreement. Cruel and inhuman treatment occurs where the conduct of the spouse so endangers the physical or mental well being of the spouse as to render it unsafe or improper for the parties to continue to cohabit as husband and wife. Physical violence is not required. There can be verbal abuse/harassment, falsely accusing a spouse of an affair, telling the spouse that he or she no longer loves him or her or continuous intoxication. The major factor in determining whether conduct by a spouse is sufficiently cruel and inhuman is the length of the marriage. What might be sufficient in a short marriage such as arguing or name calling, may not be sufficient in a longer term marriage of ten or more years. Abandonment occurs where the spouse voluntarily and without consent or justification leaves the other spouse with the intent of not returning and resuming living together and the abandonment continues for one or more years. A defense to abandonment is where a spouse justifiably departs such as to prevent being beaten or where the other party consents to the spouse leaving. Imprisonment occurs if a spouse is incarcerated for a period of three or more consecutive years after the marriage. Incarceration also includes confinement in a state hospital after the determination that the spouse is not competent to stand trial. Adultery. Defenses to an adultery claim are forgiving the unfaithful spouse or if both spouse are guilty of adultery. Separation agreement or no-fault divorce where the parties live separate and apart pursuant to a separation agreement for a period of one year or more and the Plaintiff has substantially complied with its provisions. Separation agreements outline the parties' rights and obligations during the period of separation, including custody, visitation, child support, maintenance, debts and distribution of property acquired during the course of the marriage.

There are grounds for an "annulment" where a party was less than 18 at the time of marriage or fraud or intentional misrepresentation of a material fact substantially affects the marriage, e.g. a promise to have children when the spouse has no intention of having children or a promise to convert to the other spouse's religion or to raise the children in a particular religion.