NY Divorce Rule Freezes Couple's Assets Without Court Order

As of Sept. 1, 2009, divorcing couples in New York no longer need to seek a temporary restraining order prohibiting their spouse from the unauthorized spending, transfer or concealment of assets under a rule established by court administrators.

The new requirement, which mirrors a law adopted by the Legislature and Governor David A. Paterson, will automatically freeze a couple's assets upon the filing or receipt of a summons in a matrimonial action.

Assets That Can Be Frozen

The specific types of assets subject to freeze include real estate, bank accounts, mutual funds, motor vehicles, deferred funds, retirement accounts and credit lines secured by borrowing against the family residence. The rule also bars either party from removing a spouse or children from health insurance coverage or from changing the beneficiaries of life insurance policies.

Exemptions

Some assets are exempt from the rule, such as credit card charges incurred for normal household expenses or money paid for 'reasonable' attorneys' fees associated with the divorce action. Although spouses can petition judges to use marital assets enumerated in the rule, the burden will be on spouses to demonstrate the necessity of doing so. The rule is binding on plaintiffs immediately upon filing a summons and on defendants upon their receipt of the service of the summons.

What the Rule Means

The Chief Administrative Judge promulgated the rule with the approval of the Administrative Board of the Courts. Judge Sharon S. Townsend, the vice dean for family and matrimonial law at the Judicial Institute, said the rule will 'put people on notice that they cannot do anything to change the status quo' of a couple's finances as a divorce action proceeds. The contested sale or transfer of assets occurs, 'maybe not in every case, maybe not in the majority of cases, but it happens enough that it will keep everybody on an even playing field,' Judge Townsend said in an interview.

Under the new rule, a spouse improperly using assets subject to the automatic order could be held in contempt by a judge, in the same manner as those who violate a temporary restraining order, sanctioned during the final equitable distribution of marital properties.

The automatic orders are nearly identical to those approved by the Legislature and Mr. Paterson in A2574/S2970. The bill was signed on June 24 and took effect on Sept. 1. A sponsors' memo said the bill would save legal fees for parties, as well as time for judges who do not have to issue TROs in individual matrimonial cases. It was supported by the Office of Court Administration, a court task force on Family Court and Matrimonial Issues and the Committee on Matrimonial Practice within the Unified Court System.

A number of groups, including the New York State Bar Association and the American Academy of Matrimonial Lawyers, also endorsed automatic orders.

Other States

The chairwoman of the state bar's Family Law Section said the orders have worked successfully in Connecticut, and the New York court system has experimented with the orders. The change will shift the burden of justifying the spending of marital assets to those who control assets. Previously, if one party wanted to be assured that the other would not deplete marital assets or make significant changes, that party had to go to the court and make an affirmative request for injunctive relief. The party had to prove that someone had done something affirmative, that an improper transfer had been made or was going to be made. The new rule switches the burden to the party that wants to use the assets.

As of Sept. 1, 2009, divorcing couples in New York no longer need to seek a temporary restraining order prohibiting their spouse from the unauthorized spending, transfer or concealment of assets under a rule established by court administrators.

The new requirement, which mirrors a law adopted by the Legislature and Governor David A. Paterson, will automatically freeze a couple's assets upon the filing or receipt of a summons in a matrimonial action.

Assets That Can Be Frozen

The specific types of assets subject to freeze include real estate, bank accounts, mutual funds, motor vehicles, deferred funds, retirement accounts and credit lines secured by borrowing against the family residence. The rule also bars either party from removing a spouse or children from health insurance coverage or from changing the beneficiaries of life insurance policies.

Exemptions

Some assets are exempt from the rule, such as credit card charges incurred for normal household expenses or money paid for 'reasonable' attorneys' fees associated with the divorce action. Although spouses can petition judges to use marital assets enumerated in the rule, the burden will be on spouses to demonstrate the necessity of doing so. The rule is binding on plaintiffs immediately upon filing a summons and on defendants upon their receipt of the service of the summons.

What the Rule Means

The Chief Administrative Judge promulgated the rule with the approval of the Administrative Board of the Courts. Judge Sharon S. Townsend, the vice dean for family and matrimonial law at the Judicial Institute, said the rule will 'put people on notice that they cannot do anything to change the status quo' of a couple's finances as a divorce action proceeds. The contested sale or transfer of assets occurs, 'maybe not in every case, maybe not in the majority of cases, but it happens enough that it will keep everybody on an even playing field,' Judge Townsend said in an interview.

Under the new rule, a spouse improperly using assets subject to the automatic order could be held in contempt by a judge, in the same manner as those who violate a temporary restraining order, sanctioned during the final equitable distribution of marital properties.

The automatic orders are nearly identical to those approved by the Legislature and Mr. Paterson in A2574/S2970. The bill was signed on June 24 and took effect on Sept. 1. A sponsors' memo said the bill would save legal fees for parties, as well as time for judges who do not have to issue TROs in individual matrimonial cases. It was supported by the Office of Court Administration, a court task force on Family Court and Matrimonial Issues and the Committee on Matrimonial Practice within the Unified Court System.

A number of groups, including the New York State Bar Association and the American Academy of Matrimonial Lawyers, also endorsed automatic orders.

Other States

The chairwoman of the state bar's Family Law Section said the orders have worked successfully in Connecticut, and the New York court system has experimented with the orders. The change will shift the burden of justifying the spending of marital assets to those who control assets. Previously, if one party wanted to be assured that the other would not deplete marital assets or make significant changes, that party had to go to the court and make an affirmative request for injunctive relief. The party had to prove that someone had done something affirmative, that an improper transfer had been made or was going to be made. The new rule switches the burden to the party that wants to use the assets.