New York – New Law Protects Assets During Divorce

New York – The mere mention or even the thought of divorce often sets off a race to the bank with each spouse trying to get hold of assets ahead of the other — and before either one appears before a judge.

But effective this month, as soon as an action for divorce is commenced, the parties cannot take any steps to change their financial situation. Under a bill passed by the state legislature this year, the minute a husband or wife sues for divorce by filing a summons in New York State Supreme Court, he or she is barred from altering the economic status quo of the marriage. As soon as the other spouse receives that summons and a form order, it is too late for him or her to move money or other property to shield it from claims by the plaintiff.

Until the recent enactment of the new statute and implementing court rule, the less wealthy spouse, usually the wife, had to seek an injunction from a state Supreme Court justice, to bar the richer partner from removal, sale or other disposition of assets.

This meant she had to seek a court order, incurring legal fees and losing time, before getting any financial protection.  During that time, stocks, bonds and cash could vanish.

By maintaining the status quo until the divorce case is actually heard by a judge, and evidence of entitlement and equity can be presented, the new statute avoids costly motions at the beginning of the case. The race to the courthouse, like the race to the bank, may no longer be an emergency.

The change does not affect applications for spousal support, child support or eventual equitable distribution of marital property; it simply means that there is an automatic stay to prevent hiding or liquidation of assets.

As the state Judicial Committee on Women in the Courts explains it, “Both parties are prohibited from selling property, mortgaging real estate, depleting bank accounts, invading pension funds, running up credit card debt, or removing a spouse or child from life insurance and medical plans.”

For judges it will be a relief to have litigants’ assets preserved without court intervention and court orders, especially since most matrimonial judges in New York City have hundreds of cases on their calendars. Ultimately the judges still will order the division of property, but it need not be at the start of the case.

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