While every couple is different, and therefore every divorce is different, there are a few constants in every proceeding. Once you have retained an attorney and decided to commence a divorce proceeding, your lawyer will file and serve a summons for divorce upon your spouse (or the attorney). At that point, there are certain actions that every party in every New York divorce proceeding is prohibited from taking.
A list of these prohibited actions is set forth in Section 236 of the Domestic Relations Law and are called the “Automatic Orders.” These Automatic Orders must be served upon your spouse along with the summons. The failure to do so will result in your case being tossed out of court.
Failure to comply with the Automatic Orders can have even harsher consequences, as they are not mere suggestions or recommendations, but orders of the court. So, despite your urge to do so, you must refrain from taking the following actions once you or your spouse has commenced a divorce action:
1. Making Changes to Property
The first of these automatic orders states that neither party shall transfer, encumber, assign, remove, withdraw or in any way dispose of any property without the consent of the other party in writing, or by order of the court. The goal of this prohibition is to ensure that one party does not sell or transfer away assets that are “marital,” meaning those earned during the marriage. Importantly, the clock stops on what is determined a “marital asset” the date an action is filed.
More specifically, this order means that you cannot just sell the marital home or transfer the title of your car to your brother without an agreement from your soon to be ex-spouse or the court issuing an order that allows you to do so. While this prohibition includes real estate, cars, boats, and other personal property, it also extends to financial property. Specifically, you cannot change the nature of any bank accounts or stocks unless you have the approval of your spouse or the court.
Importantly, this prohibition applies to property/accounts held either individually or jointly between you and your spouse. There is one exception. This automatic order does not apply to changes in property that take place in the usual course of business, are made for customary and usual household expenses, or for reasonable attorney’s fees in connection with the divorce action. If, for example, your spouse makes a living renovating and flipping houses, this prohibition against transferring real estate would not apply to those properties if selling them is in his or her usual course of business.
2. Making Changes to Non-Liquid Accounts
The second automatic order states that neither party shall transfer, encumber, assign, remove, withdraw, or in any way dispose of any of a number of different non-liquid accounts held in the name of either party. Specifically, this prohibition refers to tax deferred funds, assets held in any individual retirement accounts, 401K accounts, profit sharing plans, Keogh accounts, or any other pension or retirement account.
This means that you cannot cash out your 401k plan or request a loan against your plan without the consent of your spouse in writing, or a court order. Just as above, the idea is to keep the status quo and allow for marital property to remain where it is held until it can be equitably divided by the parties either by settlement or trial.
There is also one exception with respect to non-liquid accounts. If your plan is already in payout status, you may continue to receive such payments. However, these payments received may be subject to reallocation or redistribution between you and your spouse, if you agree or the court decides that your spouse is entitled to a portion of the distribution from the plan.
3. Incurring Unreasonable Debts
While related to the first automatic order regarding changing the nature of property, this prohibition against incurring unreasonable debts is much further reaching. The statute specifically bars borrowing against any credit line secured by the family residence, unreasonably using credit cards or cash advances against credit cards, and incurring further debts against any asset. Specifically, this means that once you file for divorce you cannot take out another mortgage on the martial home, start racking up the credit card bills, or take a loan out against the family car.
Just as above, there is an exception that allows you to continue to incur debts in the usual course of business, for customary or usual household expenses, or for reasonable attorney’s fees in connection with this action. This exception language is added so that, again, you can maintain the status quo. If you frequently spend a certain amount on your credit card, you may continue doing so. However, a bill that is double the norm, without agreement or a valid explanation, could be a violation of these orders.
4. Removing Your Spouse or Children from Medical Insurance
As part of maintaining the status quo, the automatic orders attempt to ensure that no one will experience a lapse in medical coverage. As such, the orders clearly state that neither party may cause the other party or the children of the marriage (if there are any) to be removed from any existing medical, hospital, and dental insurance coverage. More specifically, each party must maintain the insurance coverage that existed prior to commencing the proceeding in full force and effect.
5. Changing Beneficiaries from Insurance Policies
The final automatic order prohibits either spouse from changing the beneficiaries of any existing life insurance policies. Further, it mandates that each spouse maintain any existing life, automobile, and homeowners/renter’s insurance policies such that they remain in full force and effect.
If your spouse is the beneficiary of your life insurance policy, he or she must remain the beneficiary until your divorce is finalized. By maintaining car and home insurance policies, you can ensure that if an accident were to occur, the marital wealth will be preserved.
While navigating the “dos” and “do nots” during a divorce proceeding may be difficult, Berkman Bottger Newman & Schein LLP can help you through these challenges. To schedule a consultation with a New York City matrimonial law attorney, please call us at 866-521-6653, or reach out to us through our contact form today. We maintain offices on 5th Avenue in Manhattan, in White Plains, and in Bergen County, New Jersey.