New York uniquely classifies a spouse’s enhanced earning capacity (a professional degree or license) or professional practice or business as an asset for equitable distribution purposes. In order for enhanced earning capacity or interest in a business or professional practice to be considered during equitable distribution, it must be “marital property.” For example, a license or degree is marital property if the hard work and training to obtain a degree or took place during the marriage. On the other hand, if the hard work and training to obtain a degree or license were performed before the marriage, but the actual degree was not received until during the marriage, it is not marital property.
The spouse seeking to share in the enhanced earning capacity or success of a business or professional practice (e.g., veterinary business) must show that: (1) he/she made substantial and direct contributions to the other spouse’s earning of that degree, license, or business; and (2) he/she enhanced the title-holding spouse’s earning capacity or business through those contributions. If the enhanced earning capacity or success of a professional practice or business is due to the title-holding spouse’s own ability, tenacity, perseverance, and hard work, then the other spouse may not be entitled to an award during equitable distribution.
The above is not an “overall contribution to the marriage” analysis. The substantial and direct contributions must be specific economic and non-economic factors, such as quitting a job to assist at home or in the business or practice, making financial contributions to the practice or business, making career and economic sacrifices, creating a good studying environment, or taking on the majority of the housework and child care.
An enhanced earning capacity or successful business or professional practice can be a valuable marital asset, but this intangible asset can be tricky to value and establish as such.
The moral of the story is this: professional licenses, degrees and business valuations are all potential issues in a matrimonial action. If you considering getting a divorce and any of these issues may be raised with equitable distribution, it is best to seek counsel of a matrimonial attorney licensed in New York.