Splitting up property may become one of the trickiest aspects of divorce proceedings. New Jersey follows the principle of equitable distribution when distributing marital property. This means that the property will not be divided equally between the spouses.
In contrast, the courts take into account the specifics of the marriage and several factors listed in the statute when dividing the assets.
Knowing how divorce asset division works in New Jersey can help you prepare financially for divorce.
What Is Equitable Distribution in New Jersey?
In New Jersey, the equitable distribution of property means that the marital assets are divided equitably, but not necessarily 50/50.
What counts as fair or equitable distribution may depend on factors such as the length of the marriage, each spouse’s contributions to the property, financial situation, ages and health, lifestyle standards, and many others.
In general, New Jersey law allows courts to divide property that was acquired during marriage legally or through a beneficial transaction. However, there may be some exceptions to this rule when it comes to property obtained by way of gifts or through inheritance.
Which Assets Count As Marital Property?
Generally, marital property consists of assets obtained during the period of marriage. Ownership of the asset may be individual or joint. Therefore, having only one spouse’s name on an account or document doesn’t automatically mean that the asset will not be eligible for division.
Examples of marital property may include:
- Real estate: A marital house, an investment property, and any other kind of real estate acquired during the marriage can fall under equitable distribution.
- Bank accounts: Savings and checking accounts, as well as investment accounts, that were opened during the marriage may be included in the list.
- Retirement accounts: Portions of pension plans, 401(k), IRAs, and other kinds of retirement benefits.
- Business interests: The interests in businesses may become part of the marital estate in case when they were either acquired or their value increased during the marriage.
- Personal property: Cars, valuable collections, jewelry, and any other valuable possessions.
- Investment assets: Securities, stocks, bonds, and any other kind of investment that requires special attention when it comes to valuation.
How Separate Property Is Handled
Not all assets owned by either of the spouses will automatically become marital property. There are also assets that are classified as separate.
Assets acquired before the marriage can remain separate property, and, in accordance with New Jersey law, property acquired during the marriage by a gift, devise or intestate succession is not eligible for division.
Interspousal gifts are considered otherwise. However, it can sometimes be hard to distinguish whether some asset was separate or marital.
Classification of the asset becomes especially tricky when the separate asset is somehow connected to the marital estate – by way of contributions, commingling, appreciation, and other reasons.
That is why documentation becomes essential.
How New Jersey Divorce Asset Division Is Determined By The Court
In case the spouses fail to reach an agreement on distribution, the court will have to identify the property, calculate its value, and distribute the property.
These actions are known as three stages of equitable distribution and they were outlined in the law of New Jersey.
1. Identification Of Property
First, the spouses have to identify assets and liabilities that belong to the marital estate.
The identification may involve a review of bank accounts, property deeds, retirement statements, business documents, and other records.
2. Calculation Of Value Of Relevant Property
Afterwards, the next step involves determining the value of the property. Some assets are easy to value, but others can require a professional help.
The calculation of value of such assets as a business, a professional practice, an investment account, or a real estate property, can require some additional analysis.
3. Decision About Fair Distribution
At last stage, the court distributes the assets between the spouses.
Factors specified in the statute will be taken into account when deciding on what distribution will be appropriate for the circumstances of the marriage.
What Factors May Impact Equitable Distribution?
The statute lists some factors that may be considered by the court. These factors help to make a decision on how to distribute the property, taking into account the specifics of the marriage.
Factors of significance may include:
- The length of the marriage: A long marriage may differ from a short one regarding property division.
- Financial contribution: Financial contribution of each spouse to the acquisition or maintenance of marital assets can be taken into account.
- Non-financial contribution: Homemaking, childrearing, and other non-financial contributions to the marital life can also be considered.
- The standard of living: Lifestyle established during the marriage can become an element of the evaluation of circumstances.
- Age and health: Age, as well as physical and emotional health of the parties can affect equitable distribution.
- The property that was owned prior to marriage: Property owned by each of the spouses before marriage can be a factor.
- Written agreements: Prenuptial or some other agreements that regulate property division may be relevant to the distribution.
- Additional factors: New Jersey law allows courts to consider any additional factors that might assist in equitable distribution of the property.
These factors explain why two divorces cannot be compared to each other.
How Is The Marital Home Distributed?
The marital home usually becomes one of the largest assets of property division. Depending on the circumstances, there may be different options for its division.
One spouse may buy out the other’s share of the home. The spouses may also decide to sell the home and divide the money accordingly. Sometimes one spouse may temporarily remain in the marital home.
All the aspects related to mortgage payments, equity, and ownership should be considered before making a decision.
What Happens To Retirement Accounts?
Retirement accounts may become an important aspect of NJ divorce property division. Portion of the account that was acquired during the marriage can become eligible for distribution.
However, retirement assets may present some complexity when it comes to their valuation and division. Different account types may require different procedures.
The division of some employer-sponsored retirement plans, for example, may require a Qualified Domestic Relations Order. That is why it is recommended to consult a professional before making any transfers or divisions of the assets.
Are Debts Divided During Divorce?
Divorce is not just about dividing assets. Marital debts also have to be dealt with.
They may include:
- Balance of mortgage payments.
- Credit card debts.
- Vehicle loans.
- Personal loans.
- Business debts.
- Any other marital obligations.
Depending on the circumstances, these debts may be classified and distributed.
That is why it is important to create a full financial inventory of the spouses instead of focusing only on assets.
How Is The Business Split?
Business interests can complicate the process of NJ divorce asset division. Business can have been owned by one of the spouses before the marriage.
The business may have been started during the marriage. Or it may have increased in value during the marriage.
In all these cases, determining the marital and separate components may require financial analysis. Also, valuation of the business can become required.
Professional valuation of the business may help determine its value before making the decision about distribution of ownership.
Why Financial Documentation Is Important
Accurate documentation may make the process of property distribution more organized. Spouses should collect financial documents from the earliest moment.
Some useful documents may include:
- Bank statements.
- Retirement account statements.
- Investment statements.
- Property deeds.
- Mortgage documents.
- Tax returns.
- Business records.
- Loan statements.
- Credit card statements.
- Insurance records.
- Prenuptial or any other agreements.
Documentation may help identify assets and liabilities, and eliminate uncertainty.
Can Spouses Reach Agreement On Property Division?
Yes. Spouses can negotiate the division of the property instead of allowing the judge to make all decisions. A negotiated agreement may provide more control over the distribution of the assets.
For example, the spouses may agree that one of the parties takes possession of the marital home, whereas the other spouse gets larger share of investments or retirement accounts.
However, the agreement has to be thoroughly reviewed before signing. A seemingly simple trade-off can bring about some unforeseen consequences.
What If One Spouse Hides Assets?
The disclosure of all the finances is important during divorce. Unreported income, hidden accounts, transferred property, and any other incomplete information can complicate the process of equitable distribution.
Therefore, spouses should carefully review financial records. In case of any doubts, professional help may be required.
How To Prepare For Asset Distribution?
Preparation can make the financial aspect of divorce more manageable.
Consider taking these steps:
- Creating a list of assets: Listing real estate, accounts, vehicles, investments, retirement accounts, businesses, and other valuable property.
- List of debts: Listing of mortgages, credit cards, loans, and any other financial obligation of either spouse.
- Collection of financial records: Gathering statements, tax returns, deeds, and other documents establishing ownership and value of the assets.
- Separation of fact and assumptions: Not assuming that the asset is marital or separate just because it has one spouse’s name on it.
- Value determination of assets: Obtaining a professional valuation of the asset if it does not have market value.
- Reviewing existing agreements: Prenuptial and other written agreements may affect property distribution.
- Consulting lawyer: A family lawyer in New Jersey can give more detailed explanation of how the laws can be applied to particular situation.
How CynLaws Can Help With Divorce-Related Questions
Divorce asset distribution can involve some difficult financial decisions. Each divorce is unique in terms of property, debt, income, property, and other factors of family life.
That is why personalized legal advice may be helpful.
Facing questions about property division during a New Jersey divorce? Contact CynLaws at 5513100130 to discuss your situation and understand your legal options.
Frequently Asked Questions
1. Does New Jersey split marital assets 50/50?
No. New Jersey follows equitable distribution, meaning property is divided fairly based on applicable circumstances rather than automatically splitting everything equally.
2. What is equitable distribution in New Jersey?
Equitable distribution is the process of fairly allocating marital property between divorcing spouses after considering statutory factors and the circumstances of the marriage.
3. Is property owned before marriage divided in a New Jersey divorce?
Property owned before marriage may remain separate, but its treatment can depend on later contributions, commingling, appreciation, and other circumstances.
4. Are retirement accounts divided during divorce?
Certain portions of retirement benefits accumulated during the marriage may be subject to equitable distribution. The specific division process depends on the type of retirement account.
5. Is the marital home always sold during divorce?
No. Depending on the circumstances, one spouse may retain the home and compensate the other spouse, or the spouses may agree to sell the property.
6. Are business interests included in divorce asset division?
A business interest or its marital component may be considered when determining equitable distribution. Valuation and classification can become important issues.
7. Are debts divided during a New Jersey divorce?
Marital debts may be considered as part of the overall financial division. The specific allocation depends on the circumstances and applicable law.
8. Can spouses agree on how to divide their property?
Yes. Spouses may negotiate a property settlement rather than having every property issue decided by a court. Any agreement should be carefully reviewed before execution.
