High-asset divorce in New York: valuation and tracing

A high-asset New York divorce is not a bigger version of an ordinary one. The percentages stop applying at $241,000 of income for maintenance and $193,000 of combined income for child support, and above those lines the formulas run out and discretion takes over.

What replaces them is documents. Whoever can show where the money came from and what it is worth on a given day wins the argument.

What makes a New York divorce complicated?

Not the size of the estate, but the number of seams in it.

• A business or professional practice that has to be valued, with no market price to point at.

• Separate property that got mixed with marital money, so a single asset has two characters and someone has to prove where the line is.

• Deferred compensation: restricted stock, options, carried interest, or a bonus that vests over years and straddles the commencement date.

• Real estate held through entities, which turns a property question into an ownership question.

• Income that is not salary. Distributions, K-1 income, and perks that reduce personal spending are all income for support purposes and none of them appear on a pay stub.

• Assets nobody disclosed, which is the case this chapter is really about.

When is a business valued in a New York divorce?

Whenever the court decides, and New York gives more flexibility here than most states. Section 236(B)(4)(b) requires the court to set the valuation date or dates as soon as practicable after commencement, and permits any date from commencement to trial.

Dates, plural. The court can value different assets as of different days, and the convention that has developed is worth understanding:

• Passive assets, like a brokerage account or a rental property whose value just moves with the market, are commonly valued near trial, so both spouses share the gain or loss.

• Active assets, like a business one spouse has been running alone since separation, are commonly valued near commencement, so the operating spouse keeps the value their post-separation work created.

In a year when a market or a business moves sharply, the date chosen can be worth more than most of the sixteen distribution factors put together. It is one of the first things to argue about, not one of the last.

Is a professional practice marital property in New York?

The practice is. The license is not.

Factor seven of section 236(B)(5)(d) says the court shall not consider as marital property the value of a spouse's enhanced earning capacity arising from a license, degree, celebrity goodwill, or career enhancement. So the value of being a surgeon is off the table.

The surgical practice, its receivables, its equipment, and its goodwill as a going concern are marital property to the extent they were built during the marriage. And the same factor tells the court to weigh the other spouse's direct and indirect contributions to developing that enhanced earning capacity when dividing what does exist. The equitable distribution chapter covers how those two instructions fit together.

How do you trace separate property in a New York divorce?

With records, and the burden sits on whoever claims the separate character.

The recurring pattern: money that started as separate, an inheritance or a pre-marriage account, went into something marital, and years of joint income went in after it. Section 236(B)(1)(d) keeps property acquired in exchange for separate property separate, and keeps the appreciation of separate property separate too, except to the extent that appreciation is due in part to the contributions or efforts of the other spouse.

So a tracing case has two halves. The first is arithmetic: which dollars went where, and when. The second is a question about effort: did the other spouse's work cause the growth, or did the market?

Neither half can be argued from memory. Both come out of statements, closing documents, and returns, which is why the three year transfer disclosure in the statement of net worth is the first place a tracing case gets built.

How does support work above the New York income caps?

Discretion, with a writing requirement.

For maintenance, section 236(B)(6)(d) has the court run the formula on income up to $241,000 and then decide any additional amount on income above the cap by reference to the fifteen statutory factors. It must set out the factors it considered and its reasons in writing or on the record, and neither party nor counsel can waive that decision.

For child support, section 240(1-b)(c)(3) lets the court decide support on combined income above $193,000 using the statutory factors, the child support percentage, or both. Two parents earning $700,000 between them are arguing about roughly half a million dollars of combined income that no formula reaches, and the arguments run to the standard of living the children actually had.

Above the caps, the case becomes evidentiary. What did this family actually spend, on what, and out of which account? A budget assembled from testimony is weak. A budget assembled from three years of statements is very hard to answer.

How do you find hidden assets in a New York divorce?

Not by looking for a secret offshore account. By reading what has already been produced.

The common patterns are ordinary:

• Income that never reaches a personal account. Distributions retained in a business, or paid to an entity, or deferred until after the judgment.

• Personal spending inside a business. A company paying the car, the travel, and the phone understates income on the return and on the statement of net worth. New York adds back excess depreciation and entertainment and travel allowances to income for support purposes precisely because of this.

• Transfers to family. A loan to a sibling, a car signed over, a wire described as repaying an old debt. The three year transfer lookback exists for these.

• Timed moves. Delayed bonuses, accelerated expenses, or a sale postponed until after the valuation date.

• Accounts that only appear once. An account that shows up on a single loan application from two years ago and on nothing since.

The way you catch all of them is the same: reconcile every deposit against a declared source of income, and every significant outflow against a declared purpose. In a case with a dozen accounts and several years of statements, that is tens of thousands of transactions, and doing it by hand is slow and easy to get wrong. CounselPro builds one categorized transaction history across every account, with each figure linked to the statement page it came from, so the discrepancy becomes an exhibit rather than an accusation.

What experts does a high-asset New York divorce need?

• A business appraiser, where there is a company or a practice. Both sides usually retain one, and the reports become the trial.

• A forensic accountant, where income is disputed or assets may be missing. Their job is tracing and reconstruction rather than valuation.

• A real estate appraiser for each significant property.

• An actuary or pension valuator for defined benefit plans, and a QDRO drafter to divide retirement accounts without triggering tax.

• A tax advisor, because tax consequences to each party are an express distribution factor and the after-tax value of two nominally equal assets is often not equal.

The preliminary conference is where these get authorized and scheduled, which is why the contested divorce chapter treats that appearance as the one that shapes the case.

What should you do first in a high-asset New York divorce?

Read the automatic orders, because they bind you from the day the summons is filed and a routine rollover or refinance is a violation.

Then start collecting, because everything below is going to be asked for eventually:

• Statements for every account, several years back

• Tax returns with every schedule and K-1

• Loan applications, which describe your household's finances at a moment when everyone had an incentive to look wealthy

• Partnership and operating agreements for any entity either of you has an interest in

• Vesting schedules for any equity or deferred compensation

The person who arrives at the preliminary conference with the complete financial picture sets the terms of the case. The other one spends a year catching up.