How Are Assets and Property Divided in New Jersey During Divorce?
One of the most misunderstood concepts during New Jersey divorces is the issue of property division. Indeed, many people continue to hold the mistaken belief that, upon divorce, property and assets must be divided equally – as in an absolute 50/50 split – and that is simply not the case.
In fact, New Jersey is an equitable division state, which means that property is apportioned fairly during divorce, not necessarily equally. While it is true that an even split of assets may be the equitable solution in some instances, it is certainly not guaranteed to always be that way.
However, the crucial first step in fully understanding how equitable distribution works in New Jersey is to examine which assets are actually subject to division in the first place.
What is Marital Property in New Jersey?
New Jersey law states that, upon divorce, a court “may make such award or awards to the parties […] to effectuate an equitable distribution of property […] which is legally and beneficially acquired by them or either of them during the marriage.” Essentially, this means that a New Jersey court can only divide property or assets that were acquired by a couple during their marriage, which is more commonly known as marital property.
In many cases, marital property may include the marital residence, any vacation homes, cash, checking and savings accounts, stock, bonds, retirement accounts and pensions, investment properties or even businesses.
However, it is important to point out that any property owned by either of the spouses prior to marriage is immune from division, and thus continues to be owned by the spouse that originally possessed it. Additionally, New Jersey statutory authority expressly states that when one of the spouses acquires property by “gift, devise, or intestate succession,” it is also not subject to division, regardless of whether it was acquired during the marriage or not. Consequently, an inheritance may be protected from division during divorce.
New Jersey Law Regarding the Division of Marital Property
Once all marital property has been identified, it must then be apportioned between the splitting spouses. Accordingly, when making its determination regarding the equitable distribution of marital assets, a New Jersey court may consider several factors, including, but not limited to:
- The length of the marriage
- The age, as well as the physical and emotional health, of the parties
- The economic circumstances of each party
- The current value of the property to be divided
- The tax implications of the proposed distribution to each party
- The debts of the parties
- The income and property brought into the marriage by each party
- The established standard of living during the marriage
- The contribution of each party to the acquisition, depreciation or appreciation of marital property, as well as the contribution of one of the parties as a homemaker
- The contribution of each party to the training, education or earning capacity of the other
- The income and earning capacity of each party, taking into account their education, skills, work experience, training, custodial responsibilities as well as the time and expense that would be required to obtain sufficient training in order to be self-supporting at a standard of living similar to that of during the marriage
- Any written agreement entered into by the parties before or during the marriage concerning property division
After examining all relevant factors, the court can then proceed to fairly allocate the marital assets between the spouses.
Dividing a Pre-owned Business During a New Jersey Divorce
While the concept of equitable distribution may appear straightforward at first glance, it can actually become increasingly complex when married couples work together to build businesses that were originally owned by only one of the spouses prior to marriage. Indeed, the process of resolving business disputes during New Jersey divorces can be quite complicated.
As mentioned above, any property owned by a husband or wife before their wedding day remains separate property upon divorce, and thus is immune from division. However, what happens if one of the spouses owns a business prior to marriage, and this asset significantly appreciates in value while married? Is the amount of appreciation considered marital property in New Jersey, and consequently subject to division? Well, the short answer is, it depends.
In one New Jersey case, Valentino v. Valentino, the court determined that once a spouse proves that a particular asset — such as a business — is separate and immune from division, any increase in value of that asset during marriage is also immune, unless the non-owner spouse can show that the increase was at least partially attributable to his or her efforts.
For instance, is the value of business increases solely through the efforts of the owner spouse, the increase is not distributable during divorce. Conversely, when such value is obtained, in whole or part, from the efforts of the non-owner spouse, the appreciation may be subject to division — although often only to the extent of the non-owner’s efforts or expenditures.
New Jersey Prenuptial Agreements
Interestingly, many of the disputes related to divorce and asset division can be preemptively addressed through the execution of a well-drafted prenuptial agreement. Basically, a prenuptial agreement — which is also known as premarital agreement — is a contract made in contemplation of marriage that outline the rights, interests and obligations of prospective spouses.
While these types of agreements can help address several issues that may arise during divorce, such as the modification or elimination of spousal support, they are often used to dictate property and asset division. However, it is important to note that one of the few divorce-related issues that New Jersey premarital agreements cannot influence or adversely impact is child support.
Since New Jersey’s adoption of the Uniform Premarital Agreement Act in 1988, the enforceability of prenups has been governed by statute. For instance, they must be in writing and signed by both prospective spouses. Additionally, the Act states that premarital agreements may be invalid if entered into involuntarily or if they are unconscionable and executed without adequate disclosure of premarital assets.
The main point to take away is that prenuptial agreements can, if drafted effectively, resolve disputes before they ever occur and give the spouses peace of mind in knowing their assets are secure and protected. Moreover, they can even be amended after marriage as long as the modified agreements comply with the same formalities required for the execution of the original agreement.
Legal Guidance is Often Required
As this article illustrates, the law regarding property division during divorce can be quite complicated in New Jersey — involving many intricate statutes and rules. Accordingly, if you are currently considering divorce, it is typically best to seek the advice of an experienced divorce attorney. A skilled attorney will not only be well versed as to any applicable laws but can help explain how these laws may affect you.
When entangled in a divorce-related dispute, it is important to keep in mind both your short-term and long-term needs. The attorney you choose can have a direct impact on how these needs are ultimately met following divorce, which is why obtaining a creative and knowledgeable attorney can be so very important.