Equitable Distribution in New Jersey
The Division of Property and Assets
The State of New Jersey recognizes that a marriage is a shared enterprise and a joint understanding that in many ways is similar to that of a business partnership. This joint venture results in the creation of wealth or assets, which will have to be distributed among the parties when that partnership is ending. When a marriage is being dissolved, the Family Division is authorized to distribute property and assets amongst the parties in a fair and equitable manner. The ability of the Family Division to effectuate the distribution of assets is codified in the statute.
NJSA § 2A:34-23.1.
Although the term “marriage,” is used throughout this article, please be aware that the equitable distribution statute also includes civil unions. Therefore, the principles of equitable distribution explained below are also applicable to civil unions in the State of New Jersey.
The legislature has limited the property subject to equitable distribution to “property, both real and personal, which was legally and beneficially acquired by them or either of them during the marriage or civil union.” NJSA § 2A:34-23(h). In other words, the property to be divided is what was earned or acquired during the period of the shared enterprise.
When equitable distribution is performed, it is important to remember that equitable distribution does not presume an equal split of all property. Instead, the Court must assess the facts associated with each asset in order to determine how to best distribute the property in a fair and equitable manner.
There is a rebuttable presumption that each party made a substantial financial or nonfinancial contribution to the acquisition of income and property while the parties were married. Therefore, the efforts of raising children, making a home, and providing physical and emotional support are entitled to substantial recognition. In order to give proper recognition to the contributions made by each party, a Court assesses the factors enumerated in NJSA § 2A:34-23.1. The factors listed are not exhaustive, but include the length of the marriage, the income or property brought to the marriage by each party, the income and earning capacity of each party, the contribution of each party, the value of the property, and the debts and liabilities of the parties. The last factor listed in the statute is “any other factor which the Court may deem relevant.” This catch-all provision gives the Court broad discretion to assess facts and evidence that could be relevant to the case at hand.
For property to be distributed among parties, there is a three-step process that starts with (1) identifying the specific property that is eligible for distribution. Then the (2) value of the property must be determined before (3) a decision can be made on how allocation of that property can be most equitably made.
Step 1: Identifying Property Eligible for Distribution
The New Jersey equitable distribution statute defines property that should be excluded from an equitable distribution analysis (i.e. immune from equitable distribution.) For the most part, property acquired prior to the marriage by a party shall remain the property of that party. In other words, you usually get to leave the marriage with the item that you brought to the marriage, but only if that asset or piece of property does not become a marital asset.
For example, if a party has an investment account prior to the marriage and that investment account remains a separate account in one person’s name then it is pre-marital property that is immune from equitable distribution. However, if the party starts depositing marital funds (i.e. his/her income or the spouse’s income) into that account, then the account will be considered marital property. Once the funds in the account are commingled with marital assets, the funds in the account would be considered marital.
In addition to pre-marital assets, other assets immune from equitable distribution are funds/property received through inheritance or through a gift from a non-spouse. (Gifts exchanged between spouses are subject to equitable distribution.)
Step 2: Determining the Value of an Asset
Once the assets that are subject to equitable distribution are identified, the value of each asset and piece of property must be determined. Although the Court is tasked with determining the value of assets, there are various resources utilized to determine the value of an asset. Just as an appraiser is utilized to determine the value of a home, appraisers can be utilized to determine the value of a retirement account, a vehicle, a business interest, a stock option, a piece of furniture, a piece of jewelry, etc. The valuation of assets is usually performed by the parties and their lawyers during the process called discovery. During the discovery process, parties are obligated to provide financial documentation, including tax returns, inventory of safe deposit boxes and bank statements to the other party. It is extremely important to be as transparent as possible during this process. Failure to meet discovery deadlines will not be looked at favorably by the Court and will often lead to unnecessary legal fees.
Step 3: Distribution
Once the value of assets has been determined, the Court will determine the best way to allocate the property between the parties based on the factors enumerated in NJSA § 2A:34-23.1. Courts are tasked with engaging in a fact sensitive analysis of the assets that were acquired during a marriage or civil union. The determinations made by a Court will revolve around the particular facts of each individual case. In order to better understand how equitable distribution could affect your personal assets, it is important to speak to an attorney who is well-versed in this area of law.