Equitable Distribution in New Jersey Divorces

Saturday, September 10, 2016

During a divorce the parties need to split up their lives. This includes, with some exceptions, the property that they own. During a marriage both party’s income and wealth are usually joined together and they obtain property. It can be as inconsequential as a toaster oven or as important as a home or retirement savings. The trick is to pull apart the property without destroying it or long term good will that’s needed if the marriage includes children and ongoing parental responsibilities.

There is rarely a clean line marking off who owns what and there is no mathematical formula where attorneys and judges fill in the variables in order to come up with a number. The only think that’s certain is that if the parties can’t work out an agreement as to who is entitled to what share of property a judge can do that for them. If a couple wants to roll the dice and risk that uncertainty the results may or may not be what they expected.

What gets divided is marital property. Each spouse should retain their own separate property. If a person owned a home or investments before the marriage that may be determined as separate property not subject to distribution but the increase in their value may be considered marital property. Depending on the circumstances there can be disputes between spouses on which property is separate and marital and for the marital property whether it should be divided and if so, how.

If it the issue goes to court a judge deciding who is entitled to what property will do so based on equitable distribution which is a division based on what the judge thinks is fair under the circumstances. That decision needs to result in specific findings of fact based on evidence presented using sixteen factors spelled out under New Jersey law N.J.S.A. 2A:34-23.1. Appellate courts, when they review these decisions, understand that valuation is not an exact science but a judge assigned a case needs to make an effort to evaluate all assets subject to equitable distribution.

A judge must look at the factors spelled out in the statute,

  • How long the marriage lasted,
  • The age, physical and emotional health of the parties,
  • The income earned and the property brought to the marriage by each spouse,
  • The standard of living during the marriage,
  • The language of any written agreement by the parties before or during the marriage about how property should be distributed,
  • The economic circumstances of each party when the division of property becomes effective,
  • The income and earning capacity of each party, including their: educational background, training, employment skills, work experience, time away from the job market, responsibilities for childcare and the time and expense needed to obtain enough education or training to enable the spouse to be self-supporting at a standard of living reasonably comparable to that was enjoyed during the marriage,
  • The contribution each made to the education, training or earning ability of the other,
  • The contribution each side made to the acquisition, dissipation, preservation, depreciation or appreciation in the amount or value of the marital property, as well as the contribution of a party as a homemaker,
  • Tax consequences of the proposed distribution to each party,
  • The present value of the property,
  • The need of the spouse with physical custody of a child to own or occupy the marital residence and to use or own the household effects,
  • The debts and liabilities of the parties,
  • The need to create, now or in the future, a trust fund to pay for reasonably foreseeable medical or educational costs for a spouse or child,
  • How much a party delayed achieving career goals to help the spouse or family, and
  • Any other factors which the court may deem relevant.

There’s a presumption that each party made a substantial financial or nonfinancial contributions to the acquisition of income and property while the marriage lasted, but that presumption can be rebutted by the other spouse.

The general rule is that the filing of the complaint for divorce is the cut-off date to establish what is and is not in the marital property and debt bucket, except the parties may contractually agree to an earlier or later date.  Market experience, plus or minus, will continue to apply until the assets/debts are actually divided, so the parties need not fear being “stuck” with an artificially low or high value.

Normally fault is not an issue when property is divided with some exceptions. One spouse may be given a larger share of assets than the other,

  • If a spouse “dissipated” (or wasted) marital assets by misusing property (by gambling or to support substance abuse), or
  • In cases of domestic violence or crimes committed by one spouse against another a judge may find behavior that’s “egregious” or extremely shocking.

If there’s a family owned business or real estate involved often appraisers and accountants are used to evaluate and put a value on these assets. Accountants can be especially useful if the property at issue is substantial and complex and one spouse believes the other is trying to secretly drain away assets to hide them before the divorce proceedings in order to keep as much as possible.

One way to avoid the uncertainty of equitable distribution is to execute a prenuptial agreement which spells out which person is entitled to what property in case of a divorce. Such an agreement can also be created after the parties marry, known as a postnuptial agreement. They can be particularly helpful if one or both spouses have substantial assets or business interests before the marriage takes place.

If you have any questions about equitable distribution or believe your marriage is heading towards a divorce, contact our office we so we can talk about your situation, how the law may be applied and how you can protect your legal rights and interests during divorce proceedings.