New York Family Law Blog
In divorce proceedings, dividing business interests can present unique challenges, particularly when family businesses are involved. In this case, the Supreme Court of Suffolk County addressed the equitable distribution of the defendant’s interests in two family businesses.
Background Facts
The parties were married in 1993, and the plaintiff filed for divorce in 2012. During the marriage, the defendant was involved in three family businesses: Unique Sanitation, U-Need-A-Roll Off, and Paragon Recycling. These businesses were originally founded by the defendant’s father, who transferred ownership interests in various ways over time.
The defendant directly held shares in Unique and Paragon, while other shares were transferred into trusts created by his parents. These trusts named the defendant and his brother as beneficiaries, with the defendant’s father serving as trustee. The defendant argued that the shares he acquired during the marriage were gifts and therefore constituted his separate property.
During the divorce proceedings, the plaintiff claimed that the defendant’s business interests were marital property and sought equitable distribution of those interests.
Question Before the Court
Whether the defendant’s interests in Unique and Paragon were marital property subject to equitable distribution or separate property that belonged solely to the defendant.
Court’s Decision
The appellate court upheld the trial court’s decision to award the plaintiff a share of the defendant’s interests in Unique and Paragon. It ruled that:
- Property acquired during a marriage is presumed to be marital property.
- The defendant did not provide sufficient evidence to rebut the presumption of marital property for the shares of Unique and Paragon.
- The defendant’s testimony that the shares were gifts was not supported by corroborating evidence, such as documentation or testimony from the alleged donor.
The court concluded that the plaintiff was entitled to a share of these business interests under the principles of equitable distribution.
Discussion
Under New York law, property acquired by either spouse during a marriage is presumed to be marital property. To claim that property is separate, the party asserting this must provide clear evidence, such as documentation or testimony, showing that the property was acquired by gift, inheritance, or other means exempting it from marital property.
In this case, the defendant claimed that his shares in Unique and Paragon were gifts from his father. However, he failed to produce evidence beyond his own testimony to support this assertion. For example, he did not present documents such as a written statement from his father or records of the transfer designating the shares as gifts.
The court emphasized that contributions made during the marriage—whether financial or non-financial—can render business interests marital property. The plaintiff argued that her contributions as a homemaker and caregiver for the parties’ children supported the defendant’s ability to focus on building and managing his business interests. The court found this argument persuasive in determining that the shares acquired during the marriage were marital property.
The defendant’s self-serving testimony that the shares were gifts did not overcome the presumption of marital property. The appellate court noted that unsupported testimony is insufficient to rebut this presumption. The court required clear and convincing evidence, such as transfer records or other documentation, which the defendant failed to provide.
Once the court determined that the business interests were marital property, it was required to distribute them equitably. In making its determination, the court considered factors such as the duration of the marriage, the plaintiff’s contributions as a homemaker, and the defendant’s role in managing the businesses. The court awarded the plaintiff a share of the defendant’s interests in Unique and Paragon, valuing her share at $14,195 for Unique and $51,000 for Paragon.
Conclusion
The appellate court’s decision highlights the importance of properly documenting claims of separate property in divorce cases, particularly when business interests are involved. Without clear evidence, courts are likely to treat property acquired during the marriage as marital property subject to equitable distribution.
If you are facing a divorce involving business assets, it is critical to work with an experienced attorney who understands the complexities of asset division. Contact Stephen Bilkis & Associates to consult with a knowledgeable New York divorce lawyer and protect your interests in divorce proceedings.