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A separation agreement is a written contract.

A legal separation comes about after both spouses sign this written agreement. If it’s valid, after living apart (you can still live in the same house together), for a minimum of one year, either party who signed it can apply for a ‘conversion’ divorce, which will take all the terms from the legal separation agreement and convert it into the terms of a divorce judgment.

Many states don’t allow separation agreements. With a legal separation agreement, be sure you obtain a judgment of separation, which is unique to New York State. A judgment of separation is the result of a separate lawsuit in the Supreme Court of New York that asks a judge to sign an Order making the terms of the separation agreement enforceable by way of a judgment or Order. His signature makes the terms 100% enforceable.

Now, with a judgment of separation, you have something that is going to be enforceable, both in Supreme and Family Court. Once that separation judgment is obtained, unless it’s appealed within 30 days, you have an enforceable order of the court which can’t be changed unless both parties want it to be changed, and typically is not going to be overturned in litigation if and when the time comes for a divorce.

So if you’re married and have assets that you’re looking to protect, or you’re looking to set up a basis for divorce but you’re not quite sure that you want to divorce, entering into a separation agreement might be some middle ground that you should consider. Still, always make sure that you obtain a judgment of separation that a Supreme Court Judge signs; otherwise, you’re subjecting yourself to the same potential problem that you have with a prenuptial agreement or a postnuptial agreement. The danger, of course, is that once you enter into that legal separation, either spouse has the right to convert that agreement into a divorce judgment a year down the line or more.

One of the advantages, and the reason that many couples enter into a separation agreement, even when they know they’re going to get divorced, is to allow the continuation of health insurance, which in New York State is still available. So if you have a family and the husband is carrying a family health insurance policy and covers the wife and one or more children, the likelihood is that the cost of that health insurance policy is going to be the same or significantly less costly than if the couple got divorced. With a divorce, the wife would be required to obtain her own health insurance policy, which is likely going to be a considerable expense. Some couples will remain legally separated with the terms just as if they were set out in a divorce because it talks about the potential distribution of assets and the custody and visitation and sharing of the children and support and whatever other legal obligations both spouses would have to each other. That legal separation will encompass all those terms. However, it will not necessarily be enforceable unless a judgment of separation is entered and is granted by the court.

How Does The Purchase Of Real Estate Impact Separate Property Credit?

Let’s take a situation where the husband comes into the marriage with $100,000 of separate property in a bank account before they get married. You don’t have a prenuptial agreement, and you get married, during which the cohabitation period is meaningless. As long as that $100,000 remained in a separate bank account by the husband, that’s going to be considered his separate property. Suppose that is used for the house’s down payment, and it can be traced back to him when the divorce comes about. In that case, he will be entitled to a credit for that $100,000 when the house gets sold out of the marital assets, which will be considered to be his separate property. Now, it’s interesting because if that $100,000 was his to begin with, and it goes into the house from his side of the equation, and then upon the sale, he gets that back, he is really not receiving his $100,000 back. He’s receiving $100,000 from the gross proceeds of the house; $50,000 of it was his, and $50,000 of it was hers.

As an example, if when the house is purchased, the house is purchased for $500,000 and his $100,000 is put down (20%), and the bank holds a $400,000 mortgage,. If that house were then sold for the same $500,000 without paying the mortgage down at all, he is getting his $100,000 back. Now, let’s say that the couple lives in the house together, where they have had it as an investment property for 15 years, and let’s say that mortgage of $400,000 is now paid down to $200,000. In this example, half of that mortgage has now been paid. So instead of there being $100,000 equity in the house, there’s $300,000 of equity in the home. If it were split 50/50, he would be entitled to $150,000, which is half of the $300,000, and she would be entitled to the $150,000. Instead, if he gets his separate property back (remember that $100,000), then the $300,000 of equity now loses the hundred to him, leaving $200,000 equity remaining.

So, if there’s $200,000 that’s left, the marital portion of this equity is going to be typically split evenly, and she gets 50%, or $100,000, and he gets 50% as well, or another $100,000. So the difference between splitting it 50/50 and taking his money out is not a $100,000 difference. It’s only a $50,000 difference because when his hundred comes off the top, it’s coming from the top of a marital asset. So even he’s taking his money back, he puts it in whole and takes it back as a joint number that comes out of the house.

For more information on Separation Agreements In New York, an initial consultation is your next best step. Get the information and legal answers you are seeking by calling (631) 462-3100 today.

Alan Finkel

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