Are Marital Assets Frozen During a Divorce?

Divorce laws in every state are written to protect both sides of a divorce. Dissolving a union takes what was a former couple and divides them into two camps. The level of animosity between the two sides varies greatly from relationship to relationship.

One way New York law protects the financial rights of a divorcing couple is by placing an automatic temporary restraining order (ATRO) on marital assets once the divorce lawsuit is filed. In neighboring New Jersey, a spouse must request that the court issue a TRO to freeze bank accounts while the divorce is pending.

Automatic Temporary Restraining Order Protections

Not too long ago, one spouse could file for a TRO in New York if they believed their spouse might improperly spend or move money during the divorce. The law changed in 2009, making the freeze automatic without the requirement to submit a separate filing.

An ATRO is now effective immediately upon the service and filing of the summons and petition for divorce, separation, annulment, or other matrimonial action.

The ATRO provides for the following protections:

  • Restricts how money can be moved in and out of accounts
  • Prohibits modifying a life insurance policy or borrowing against it
  • Bans dropping a spouse or children from health, dental, and other insurance coverage
  • Stops the sale of major assets
  • Bars one spouse from giving away property
  • Precludes one spouse from taking the other spouse’s name off bank accounts, property titles, and credit cards
  • Cannot begin drawing from a pension
  • Cannot transfer business interests to a friend or relative

The 2009 law also prohibited either party from incurring unreasonable debts or engaging in unusual credit card purchases or cash advances.

The financial restraining order does more than protect spouses while the divorce is ongoing. The order also helps a judge better understand the financial condition of the couple for equitable distribution decisions.

A spouse who violates the ATRO can be held in contempt of court. ATRO infractions should be reported right away. Any prohibited action can affect the divorce proceedings, especially if a spouse is attempting to alter, destroy, or hide assets. The divorce case will be put on hold while the courts settle the contempt case.

Allowable Actions Under an ATRO

The ATRO does not completely freeze accounts but limits expenditures to only specific necessities. The order does not stop either spouse from buying groceries, paying bills, and any other typical financial transaction. What is “typical” depends on the couple.

Other allowable actions under an ATRO include the following (notifying spouse is often required):

  • End a right of survivorship to property
  • Sever a joint tenancy
  • Make changes to a will
  • Secure legal counsel

Don’t take any actions that could be misconstrued as a violation. Check with an attorney when there is uncertainty. Temporary restraining orders can be modified if both parties agree to the change and the modification is approved by the court.

Opening New Accounts During a Divorce

The court can only freeze marital accounts and other assets that existed during the marriage. Any income a spouse makes after filing for divorce remains their income and is not subject to equitable distribution. New York law does not preclude either spouse from opening a new, individual account after filing.

Existing account servers will not be told by the courts about the ATRO and the impending divorce. The spouses notify the agencies that serve their affected policies, portfolios, and accounts.

Seasoned Legal Counsel for New York Divorces

When a marriage cannot be repaired, couples look to divorce as a way to start again. Many want everything finalized as soon as possible. At Samuelson Hause PLLC, we are empathetic to the desire to put the marriage in the rearview mirror. Yet we also want to ensure that what is fair is not sidelined for speed.

Untangling finances is integral to a fair divorce settlement. Our more than 100 years of collective experience has provided us with deep insight into even the most complex divorces.

Schedule a consultation to discuss your divorce options with an attorney at Samuelson Hause PLLC. Contact us online or call (516) 584-4685.