When spouses divorce, one of the things most often fought over is the division of their marital property, which is also referred to as equitable distribution. Different states have different laws on what is considered marital property and how the marital property is divided between spouses. In New Jersey, a court will divide the marital property “equitably” between divorcing spouses, which should not be confused with “equally.” In all cases of equitable distribution, the joint efforts of the parties are considered to be contributing to marital earnings and the accumulation of assets, and each should receive his/her proper share upon divorce.
As a prerequisite to dividing marital assets, a court must first determine what assets are subject to equitable distribution – i.e., what is marital property? New Jersey's equitable distribution law gives courts the power to distribute equitably upon divorce all eligible property that spouses legally and beneficially acquire during marriage, regardless of how title to such property is held. N.J.S.A. 2A:34-23. This means that even though property may be in the name of one spouse only (e.g., a car’s title, a home, an investment account, etc.), both spouses have an equitable right to the property if it was acquired during the marriage.
But what happens if the property was acquired before the marriage? Or was inherited during the marriage? Or was acquired in anticipation of the marriage? Or was premarital, but then grew during the pendency of the marriage (e.g., retirement accounts)? How is this property divided? The general rule is that premarital assets, gifts, devises, or intestate succession are not subject to equitable distribution. But the real answer is - it depends.
There are arguments to be made on both sides regarding what is and what is not an asset that should be subject to equitable distribution. And the longer the marriage, the more difficult it can be to make that determination. Was the premarital asset comingled with marital assets? Was the premarital asset used to support the marital lifestyle? Did the premarital asset triple in value during the pendency of the marriage? Was the premarital asset an active investment (i.e., a small business) or passive investment (i.e., a stock position) that simply grew in value? These are all issues that must be considered when determining whether an asset is marital property. I could write a blog post (or have written a brief) on each of the above situations, as each situation will certainly be determined based on the specific facts of the specific case.
But once an asset is determined to be a marital asset, it is then subject to equitable distribution – again, not equal. In making the determination of the distribution of the assets, pursuant to N.J.S.A. 2A:34-23.1, a court shall consider, but not be limited to, the following factors:
a. The duration of the marriage or civil union;
b. The age and physical and emotional health of the parties;
c. The income or property brought to the marriage or civil union by each party;
d. The standard of living established during the marriage or civil union;
e. Any written agreement made by the parties before or during the marriage or civil union concerning an arrangement of property distribution;
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 or civil union;
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, or the property acquired during the civil union 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 or residence shared by the partners in a civil union, 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, partner in a civil union or children;
o. The extent to which a party deferred achieving their career goals; and
p. Any other factors which the court may deem relevant.
As you can see, given the number of factors listed above, there are many arguments that can be made for property to be divided in ways that may not be “equal,” but under the law would be equitable. That is why it is so important to have a knowledgeable, experienced attorney when a divorce involves the distribution of assets. Careful analysis of each factor and the specific facts surrounding the accumulation and maintenance of the asset can impact an argument as to how it should be distributed in the event of a divorce. Sometimes the "devil is in the details."