There are two types of marital asset distribution in the United States: 1. Equitable Distribution, 2. Community Property Distribution. New Jersey applies the Equitable Distribution law. This means that rather than splitting all marital assets 50-50, the courts look at the level of contribution each individual has put into obtaining the marital assets.
New Jersey follows a three-step procedure to distribute a couple’s assets. First, the courts determine which assets are subject to distribution, including marital home, bank accounts, debts, stocks, pensions, etc. In general, marital asset is defined as assets obtained by either spouse beginning on the date of marriage. Assets acquired prior to marriage by either spouse may not be subject to distribution in New Jersey and the individual that acquired the asset in question may keep the asset. However, if the other spouse assisted in developing and maintaining the asset in question, the court would distribute the increase in value of the asset. For example, the wife purchased a house before marriage, but the husband, a contractor, installs a better kitchen in the house that increases the value of the house. The increase in value of the house as a result of the new kitchen may be subject to distribution by a New Jersey Court.
Other property that may not be subject to distribution also include inheritance, gifts, and property gained post-filing of divorce. However, if property gained before the marriage is co-mingled with marital assets, the individual assets may be subject to equitable distribution.
Second, the court will need to evaluate the marital assets. This process may become complicated depending on the nature of the asset in question. Assets such as money in savings account may be quickly determined by bank statements, but evaluation of assets such as houses and business may require realtors and investigative accountants to appraise the value of the asset. As such, appraisal of certain marital assets can become complicated and expensive for both parties.
Next, the court will assess the marital property for purposes of distribution. This step may be as straightforward as looking at bank statements or as complicated as retaining an appraiser or accountant to value a business or to analyze business benefits, such as deferred compensation, restricted stock or stock options.
Lastly, New Jersey grants its courts wide discretion to determine the fairest and the most equitable way to split the marital assets. The New Jersey Equitable Distribution Statute, N.J.S.A. 2A: 34-23.1, directs courts to consider the following factors (the list is not exhaustive):
a. The duration of the marriage;
b. The age, physical and emotional health of the parties;
c. The income or property brought to the marriage by each party;
d. The standard of living during the marriage;
e. Any written agreement made by the parties before or during the marriage concerning an arrangement of property division;
f. The economic circumstances of each party at the time the division of property becomes effective;
g. The income and earning capacity of each party, including educational background, training, employment skills, work experience, length of absence from the job market, custodial responsibilities for children, and the time and expense necessary to acquire sufficient education or training to enable the party to become self-supporting at a standard of living reasonably comparable to that enjoyed during the marriage;
h. The contribution by each party to the education, training or earning power of the other;
i. The contribution of each party 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;
j. The tax consequences of the proposed distribution to each party;
k. The present value of the property;
l. The need of a parent who has physical custody of a child to own or occupy the marital residence and to use or own the household effects;
m. The debts and liabilities of the parties;
n. The need for creation, now or in the future, of a trust fund to secure reasonably foreseeable medical or educational costs for a spouse or children;
o. The extent to which a party deferred achieving their career goals; and
p. Any other factor which the court may deem relevant.
One important factor considered by the Statute above is the role of the homemaker. Just because one spouse stayed at home to maintain the household and raise the kids without earning an income that does not mean that courts will not consider the homemaker’s contribution towards the development of the marital assets.
In conclusion, this article is a broad overview of New Jersey’s equitable distribution law and is only intended to be an introduction into this area of family law. Having the court distribute the marital assets can be straightforward or highly complicated depending on the nature and the size of the marital assets in question. If you are considering divorce, you should consult a family law attorney to determine your course of action.
* The above is no legal advice but information. Every case must be analyzed based on an individual, case-by-case basis. Please call us for a consultation.