Separation/Divorce: Waddya Mean It’s Joint Money??!

“Waddya mean it’s joint money??!” exclaimed Joe* during a particularly challenging mediation session. We were looking at the bank accounts, credit card debts and retirement plans, discussing how Joe and Jackie* were going to divide their assets and debts in a “fair and equitable” way. New York State is an equitable distribution state, and although “equitable” doesn’t necessarily mean 50/50 in a long term marriage, it usually does mean that unless the couple agrees to do otherwise. Joe and Jackie’s marriage fell under this latter category. They were married for over twenty four years and had three children together. Jackie had been a stay at home mom for most of their marriage and only recently had gone “back to work” after being out of the work force since their first child came onto the scene. Her earning capacity was not nearly what Joe’s was and could never hope to be.

This brings up an interesting phenomenon. I would venture to say that, in general, most of us have no idea, nor care, what the laws are with respect to marriage (and divorce) during the first blush of our impending marriage. How unromantic! When we get married, we’re so busy with all the excitement, hoopla and preparation for the wedding that the long term consequences of the marriage itself are not even on the radar.

For example, did you know that in New York, when we get married, personal injury awards and inheritances that may be received during our marriage are considered separate property as long as we keep them in a separate individual account and/or do not use them for marital expenses like paying the mortgage or making household improvements? Who knew? When I received a personal injury award ten years into my marriage, I put the money into our joint account and never thought anything about it.

So when Joe cried: “Waddya mean it’s joint money?” – he articulated what for many is a common confusion about what is and what is not joint property. There are nuances to be sure and we explore all of them during the mediation, but in general everything that was accrued during the marriage is considered joint property regardless of who earned it and whose name it’s in. Everything is on the table for discussion. Joe’s incredulous exclamation shows where he falls on this matter and the mediation was more challenging for it.

Contrast that with another couple, Sam* and Janet*. They, too, had been married for a long time – almost fifteen years and had two children. Janet had given up her career when their oldest child was born, and both Sam and Janet believed that she should stay home until their children reached a certain age. When they came to see me, that time had not yet come and they were both in agreement that Janet would most likely not enter the work force for at least a few more years. AND they both knew that she would take a financial hit, having to work her way back to where she had been prior to stepping off the “work train.” She certainly would never recoup the earnings she would have received nor any contributions she could have made to a retirement plan.

When we discussed equitable distribution and Sam’s pension was brought up, he said something that I had never heard in the years that I have been mediating. To give you some context, what is generally agreed to is that the parties determine the marital portion of the pension (assuming there may be some premarital contributions) and the spouse (in this case the wife) would be entitled to 50% of that marital portion. On a specific cutoff date, anything going forward would be the husband’s separate property.

What Sam said to me was the following: “I want Janet to have 50% of my entire pension – whatever that amount will be when I retire because she gave up her career and any possibility of contributing to a retirement account all those years in order to raise our children. It was our decision that she stay at home with the children. She’s been a wonderful mother and I don’t want to penalize her for a decision we made together.” I was stunned and, I have to say, delighted to hear that. What an incredibly transformed way of seeing their marriage and their impending separation.

So in the world of “Waddya mean it’s joint money?!” – there are two ways of looking at the decisions we make and taking responsibility for them. Ladies and gentlemen, I give you Sam and Janet.

* names changed

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