Equitable Distribution FAQ’s

Posted on Thursday, January 29th, 2009
Admin

1. How does property get divided in divorce?

New Jersey is an “equitable distribution state.” This means that in a divorce in New Jersey, any property that is acquired during the marriage must be divided in an equitable manner. Therefore, any marital property must be distributed either by a voluntary agreement of the parties or by an order of the divorce court.

2. What does equitable distribution mean?

Equitable distribution basically is the process as to how marital assets will be distributed. The distribution of marital assets is always very hotly contested and emotionally charged. In many cases, the parties actually become violent when they try to reach an agreement as to how to split up the marital assets. The main theory of equitable distribution is that a marriage is an economic partnership. Therefore, each spouse is entitled to a share of the marital property.

3. What are the factors that a court uses to determine the equitable distribution of the marital assets?

There are many factors that a court takes into consideration when it determines how to equitably distribute the marital assets. The factors are the following:

  1. The duration of the marriage;
  2. The age, physical and emotional health of the parties;
  3. The income of property brought to the marriage by each party;
  4. The standard of living established during the marriage;
  5. The existence of any written agreements made by the parties before or during the marriage concerning an arrangement of property distribution.
  6. The economic circumstances of each party at the time the division of property becomes effective.
  7. 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 acquired sufficient educational training to enable the party to become self-supporting at a standard of living reasonably comparable to that enjoyed during the marriage.
  8. The contribution by each party to the education, training or earning power of the other.
  9. The contribution of each party to the acquisition, dissipation, preservation depreciation or appreciation of the account or value of the marital property, as well as the contribution of the party as a home make.
  10. The tax consequences of the property distribution to each party.
  11. The present value of the property.
  12. 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.
  13. The debts and liability of the parties.
  14. The need for creation, now or in the future, of a trust fund to secure reasonable foreseeable medical or education costs for a spouse or child.
  15. The extent to which a party deferred achieving their career goals.
  16. Any other factors which the court may deem relevant.

4. How does a court determine how to apportion all of the marital assets in a marriage?

Equitable distribution calls for a judge to apportion the marital assets in such a manner that will be equitable and just to both parties under all circumstances. “Equitable distribution” states that each spouse is entitled to a portion of the marital property in relation to his/her contributions during the marriage. Equitable distribution does not mean an equal division of the marital assets. The court cannot mechanically divide the assets on a 50/50 basis. When determining equitable distribution, the extent of each parties’ contribution to the marriage is not measured only by the amount of money that was contributed during the marriage. The court will also evaluate all of the financial and non-financial components of the marriage. Therefore, the efforts of raising the children, making a home and providing emotional support is as essential to the maintenance of the marriage as the economic factors. The trial judge also considers the factors above to help determine how much or how many of the assets should be allotted to each party.

5. For equitable distribution purposes, does the court take into consideration if only one of the spouses worked during the marriage?

The fact that one spouse may not have worked during the marriage is not particularly important. The whole concept of a marriage in New Jersey is that it is an economic partnership. Unless proven otherwise, the court will presume that both the husband and wife both made substantial financial and/or non-financial contributions to the acquisition of income and property during the marriage.

In a traditional marriage, if the wife did not work during the marriage, the court will then emphasize her marital duties and homemaking chores that she contributed to the marriage. The court will not try to put an economic value on the wife’s contributions to the marriage. The most important aspect in an equitable distribution case is to determine what assets were acquired during the marriage. The court will not try to put a value on each person’s individual contribution to the marriage.

6. What assets are considered part of the marital estate for equitable distribution purposes?

Only assets that are “acquired during the marriage” are considered to be part of the marital estate. Any property that was acquired before the marriage is considered to be premarital property, and it is not subject to equitable distribution. “during the marriage,” is frequently interpreted as beginning the day the marriage ceremony took place, and ending the day when the divorce complaint was filed.

The concept of a marriage is that it is an economic partnership. Therefore, if the parties have a separation agreement before the complaint for divorce is filed, then the partnership died on the date of the separation agreement, rather than the date when the complaint was filed. Any assets acquired during the marriage would be considered under equitable distribution up to the date of the separation.

In summary, only property that is acquired during the marriage is subject to equitable distribution. However, property that is acquired by one party in contemplation of their marriage before the marriage is also still subject to equitable distribution. The courts recognize that the “partnership” of marriage may begin even before the actual marriage ceremony through the purchase of an assets, such as a home. The spouse who does not have his/her name on the deed may be required to show that they were actively involved in making improvements to the home before and after the marriage.

Additionally, all property that is acquired during the course of the marriage is subject to equitable distribution. This includes real estate, homes, pension proceeds, and any other tangible or real property assets. Even if the property was acquired in one spouse’s name, it is subject to equitable distribution as long as it was acquired during the marriage.

7. How will the marital property be distributed?

All property acquired by the parties during their marriage is subject to “equitable distribution.” The purpose of equitable distribution is to achieve a fair distribution of what the parties acquired during their marriage. “Equitable” does not necessarily mean that the property will be divided one-half to each of the parties. New Jersey is not a so-called “community property” State, where this would necessarily be the case. In New Jersey there is no initial presumption in favor of an equal division.

The theory is based upon viewing the marriage as a partnership or joint enterprise, so that even if one party technically acquired all of the assets through earned income, while the other was at home and not working outside the home, the court would still recognize that the marriage was, in fact, a partnership and that, but for the fact that the unemployed spouse was at home keeping the household for the family, the employed spouse would not have had the opportunity to earn the income for the marital partnership. Thus, the identity of the person who actually earned the money becomes largely immaterial and, unless the parties can agree upon a fair distribution, the court would distribute all property in a manner that it deems “equitable.”

8. What property is not subject to equitable distribution?

There are several categories of property not subject to distribution. The major type of asset(s) that is not subject to equitable distribution is property that was acquired before the marriage. Moreover, any property that was acquired by way of an inheritance is not subject to equitable distribution. In summary, any property that was acquired before the marriage, and any property that was acquired by an inheritance is not part of the marital estate.

Unless there is a pre-nuptial agreement, if property is acquired prior to a marriage, it must be kept separately, and it must not be commingled with other marital assets. It is very important to keep premarital assets separate from the marital property. If real property was purchased or inherited prior to marriage – while it may start out immune to claims of equitable distribution – should the property be maintained, improved or prepared with money earned or otherwise received during the marriage, that property might slowly find its way onto the bargaining table.

A very common issue in many divorces is that premarital assets become commingled with marital assets. In many cases it is not a realistic option to have a person sign a pre-nuptial agreement. However, it is not too overbearing to insist that premarital monies be kept separately and commingled. My philosophy about marriage is to hope for the best but expect the worst. Don’t commingle premarital assets with other marital property. During a divorce case people become ruthless animals! Protect yourself as best as you can.

9. If certain assets are titled in my name alone, does this insulate me from any equitable distribution claims by my spouse?

No. This is a widely held misconception. There may or may not be an equitable entitlement to the titled property by the untitled spouse, but keeping the title in one party’s name alone accomplishes very little. Buying property in one’s own name during marriage accomplishes nothing in terms of immunizing it from any claims of equitable distribution.

10. How are the marital assets distributed pursuant to a divorce judgment?

After a divorce is over the parties have to distribute the marital assets according to the terms of the judgment of divorce. In most cases, this is almost as hard to accomplish as it is to reach a divorce settlement. The bottom line is that after a divorce is over the parties are full of rage and hate for each other. Divorcing people is not an easy way to make a living! The parties and the lawyers should try to work out a reasonable plan to liquidate the marital estate, and to distribute the assets in an orderly and fair manner. However, this goal is rarely accomplished. Liens and judgments are filed. Mortgage payments are missed. Automobiles are smashed in accidents. If the parties can’t reach an accord as to how to distribute the marital assets, then a party may have to file an application for post-judgment relief. Many people are very naive and they believe that once the divorce is complete then their problems are over. In many cases, there is more work in the post-judgment aspects of the case than there is in the divorce case.

Homes have to be sold. Pensions must be split via a QDRO order. Stocks must be sold. Credit card bills must be paid off. It is my advice to my clients to liquidate the marital assets, and to pay off all of the joint debts ASAP. Moreover, I always advise my clients to insist that they be taken off any joint mortgage within six months of the marriage. I have had countless cases wherein a person’s credit has been ruined because their ex-spouse did not pay for the mortgage on the former marital home. Thereafter, the home goes into foreclosure. As a result of this disaster, the spouse who does not even live in the marital home any more has his credit ruined. The aggrieved spouse did not even “see it coming” that is credit would be nuked. Sometimes awful things that happen to people hits them when they don’t even expect it. Once your credit is ruined your chances of buying a new home are slim to none.

In summary, don’t expect that your problems will be over once your divorce case is over. In most cases, the distribution of marital assets is never an easy process. It is always a very good idea to keep track if your former spouse is paying the mortgage if you are still listed as a borrower. Don’t let your ex-spouse ruin your credit. I have seen this occur countless of times. Don’t let yourself become a victim.

11. What happens to a divorce judgment if the parties reconcile?

In some of my cases the parties reconcile after the divorce is over. If the parties reconcile this can be interpreted as revocation of the prior divorce judgment. Reconciliation occurs when spouses resume living together for a sufficient period of time, which leaves the court to conclude that the parties resolved their differences and agree to resume their marital relationship. In many cases, a court may view a reconciliation as voiding the executory sections of the divorce judgment. However, the executed portions of the divorce judgment will remain unaffected. The concept of reconciliation can be very important if one spouse has obtained unfavorable terms in their divorce. Sometimes real estate market conditions change, or stock values plummet. If a devious spouse convinces a lovelorn ex-spouse to reconcile, it may very well be a ploy to try to have the remaining executory terms of the divorce judgment declared null and void.

12. What if I purchased a house prior to marriage, and I used nothing but my own premarital funds to purchase the house. The property was titled in my name alone. After we married, I agreed to re-deed the home over to the both of us as tenants by the entireties. What then?

In most cases, the deeding over would be regarded as evidence of an inter-marital gift of one-half of the property to the previously non-titled spouse.

13. Can a spouse recover a down payment for the purchase of the marital home, if the marriage is a “quickie”?

In many cases one spouse who is usually the husband comes into the marriage with the money. Quite frequently, one spouse pays for the deposit to purchase the marital home. In some cases, the marriage is a disaster, and the marriage only lasts a year or two. A frequent issue is whether the richer spouse can recover his deposit monies that were used to purchase the home. Unfortunately, even though only one spouse paid for most of the deposit, the courts will view this as an implied gift to the other spouse. Therefore, the court will view the entire down-deposit as a marital asset. The court will consider that the down-payment was a gift to the other spouse, and it was made in contemplation of marriage. In summary, once a spouse makes a down-payment on a marital home, then this money is immediately converted into a marital assets, and it must be equally split in a divorce.

14. How is the marital debt distributed during the marriage?

In many divorce cases the issue really is not the distribution of marital assets. Instead it is the distribution of credit card debt, car-repo debt, tax debt, and paying off mortgage arrears. The bottom line is New Jersey is a very expensive state to survive in. Property taxes are sickening. Tolls are high. Food is expensive. Even just going to the beach will cost you almost $10. What a rip off! Jersey is the only state besides New York to charge to get onto the beach. Let’s face it, many aspects of living in New Jersey stink.

In about one half of my cases, the primary issue is how can the parties split up the debt that was accumulated during the marriage. The basic rule is that any debts that were accumulated during the marriage must be allocated between the parties. However, a court may consider who has a greater income and proportion the debts accordingly.

I always recommend that marital assets be sold, and that as much of the marital debt be paid off. In many cases I recommend that the marital home be sold, and that any outstanding credit cards be paid off from the proceeds of the closing. I also counsel my clients that they should not pay full value to the credit card companies.

I always recommend that my services be retained to obtain a “work out agreements” of the credit card debt. In many cases, I can work out a deal with the credit card company to settle their claims for 40% to 50% of the outstanding credit card bill(s). However, the credit card company must be paid the full amount of the settlement from the closing. In return, the credit card company will waive the remaining balance, and they will mark the debt as a “paid settlement in full” on the parties credit reports. This is a great service that I can provide to recently divorced couples, who are in financial trouble.

It is never a good idea to just split up the credit card debts. In many cases, the parties just do not honor the terms of the judgment of divorce. In many cases, one spouse will eventually declare bankruptcy, and he/she will not honor the terms of the judgment of divorce to pay off certain credit card debts. Once the credit card debt is discharged by one spouse, then the credit card company will pursue the collection of this debt against the other spouse. If the other spouse co-signed on the credit card application, then he/she could be liable for this consumer debt even if the judgment of divorce specified otherwise.

In summary, the issue of outstanding credit card debts is very common in most divorces. Great care should be given to insuring that the debts are paid off as soon as possible with the liquidation of some marital assets. If this is not possible, then great care should be given to determining if both spouses are listed on the credit card application as co-debtors. A litigant must always be mindful that if their spouse files for bankruptcy, then the credit card company may go hunting for you if your beloved ex-spouse filed for a bankruptcy.

I also always advise my clients to get their names removed from any car loans as soon as the divorce is over. I have heard many horror stories as to how a person has had his credit ruined because he co-signed on his ex-wife’s auto loan, and how she failed to make the payments. Please also be mindful that deficiency judgments for defaulted auto loans are also outrageously high.

Finally, it is also imperative that a person remove their name from any mortgage ASAP after the divorce. It is very common for the spouse who still lives in the marital home to default on the mortgage. Guess what? If your name is still on the mortgage, even if you are no longer on the deed, you will still be named as a defendant in a foreclosure suit if one is filed. This will nuke your credit, and you won’t be able to purchase a new home, because you will not be able to obtain a mortgage.

In summary, in many cases the distribution of debts is as equally important or more important than the distribution of assets. Don’t trust your ex-spouse. Follow up on him or her. Make sure that the mortgage is refinanced and your name is taken off. Call the auto finance company and make sure that your ex-spouse is paying the monthly car bill if you can’t get your name off as a co-signer. Finally, try to separate the credit card bills, and try to pay off as much of them as possible. Don’t let joint credit card bills linger. They will ultimately haunt you!

15. Can I blow off my obligations to my ex-spouse by filing for bankruptcy?

Child support and alimony can’t be discharged in bankruptcy. A spouse can’t wipe off his child support and alimony obligations by filing for bankruptcy. However, a devious ex-spouse may have a small opening to try to discharge some of the debts to his/her spouse that were created by the equitable distribution aspects of the divorce. If a person files for bankruptcy, and if he tries to discharge debts to his spouse, then there is a possibility that this debt could be discharged in bankruptcy. The dependent spouse must object to the discharge of a non-support debt in bankruptcy court. The bankruptcy court will then hold a hearing to determine the dischargeability of the debts. It will consider whether the debtor has the ability to cover the debt with income or property which is not necessary for his or her support or for the support of the dependent, such as a spouse or child. Furthermore, the bankruptcy court will balance the benefit of paying the debt with the detrimental consequences of not paying the debt.

16. What is an ante-nuptial agreement?

An ante-nuptial agreement is one made prior to the parties’ marriage. It disposes of property and alimony rights to a spouse in the event that a marriage should fail. Normally, the intent of an ante-nuptial agreement is to deny a spouse an interest in assets held in the full name of the other at the time of the marriage. By executing an agreement, the parties have agreed not to allow the court to resolve questions of alimony and equitable. Distribution. These agreements are enforceable provided that there is full disclosure both parties as to their financial conditions, including assets and income. The agreement is null and void if one spouse is left destitute. An agreement which leaves one souse with a standard of living far below which was enjoyed during the marriage may not be upheld by the court. The courts will also make sure that there is no fraud or duress in the execution of the agreement.

17. Are professional degrees subject to equitable distribution?

In many cases, a very valuable assets is a professional degree. In many cases, a devoted wife or husband helps pay for a law degree or a medical degree for their husband. I am certain that many people have heard of the common case wherein the devoted wife spouse is a nurse, and she works her tail off to pay for her husband to go to medical school. Once the wife’s looks wear off, it is not uncommon for the husband/doctor to become a playboy.

A medical degree and a license or other professional degree is not an asset that is subject to equitable distribution. Instead, the courts deal with this issue in the context of alimony rather than in equitable distribution. The courts realize that there are too many problems associated with value and worth of a professional degree. A professional degree, for purposes of property distribution, are nothing more than a possibility of enhanced earnings. It is not considered property because it cannot be sold. Its value cannot be readily determined. Instead, the court will consider the needs of the spouse who does not hold a degree, and the ability of the other spouse to pay alimony.

18. Are pensions subject to equitable distribution in a divorce?

Pensions are absolutely subject to equitable distribution. A pension is usually one of the most valuable asset that a couple has. The funds from a pension that are acquired during the marriage are subject to equitable distribution regardless of when they vest. Public policy states that to insure the support of a financially depended spouse, a statute prohibiting attachments should not intervene in providing support for a dependent spouse.

The issue of whether the pension constitutes property acquired during the marriage is highly relevant issue to equitable distribution. Both parties contribute to earnings of one spouse’s pension by their participation in the marriage and both expect to share in the future enjoyment of that pension benefit.

19. How are pensions divided and split up in a divorce?

There are essentially two methods of distribution of a pension in a divorce case. The two methods to split up a pension is a (1) deferred benefit share and (2) immediate offset distribution against the other assets. A deferred benefit share postpones distribution until a pension comes into pay status. An offset distribution trades off the present value of the pension interest against a current asset which is given to him/her in satisfaction of his/her share of a pension.

Basically, in a divorce case the parties must hire an actuary to value the pensions, and to prepare the necessary court orders to split up the pension. The two most commonly used actuaries that are used are called Troyan, Inc. and Pension Appraisers. These companies charge about $300 to value the marital portion of the pension. They also charge about $700 to prepare the necessary court orders to split up the pensions.

Most pensions are split up by a very complicated procedure. In summary, a Qualified Domestic Relations Order, commonly called a QDRO must be prepared to split up the pension. All of the pension information must be given either to Troyan, Inc. or to Pension Appraisers, and they will prepare the QDRO. In most cases, the parties equally split the costs to prepare the QDRO’s. Once the proposed QDRO order is obtained, then is it sent to the court. The court will then sign the order and certify it as well. Once the order is certified, then the order must be sent to the plan administrator of the pension. The pension administrator will the distribute the pension according to the terms of the QDRO. It is very important to have either Troyan, Inc. or Pension Appraisers prepare the QDRO. A poorly drafted QDRO can be a disaster. If a QDRO is not prepared correctly, then there can be some tremendous adverse income tax consequences.

20. Is a severance package subject to equitable distribution?

A pre-retirement benefit package received by a spouse after a divorce complaint was filed, but representing in whole or in part a deferred compensation for services provided during the course of the marriage, is subject to equitable distribution. The key question is whether the “benefit” represented deferred compensation based upon the spouses previous endeavors during the marriage. For example, severance pay may be determined by an employee’s skills during his/her employment at a company. This, then would be subject to equitable distribution because both parties would have contributed to the employed spouse success in his or her care. Severance pay may also be considered for past labor. Payment for vacation day may accrue during the marriage and it must also be considered under equitable distribution. Finally, commissions upon departure from a company are also considered deferred compensation for previous endeavors.

21. If my case goes to trial, and if I disagree with the Judge’s decision regarding the equitable distribution of property, do I have any rights?

Yes. In every case, the court is required to make specific findings of fact on the evidence relative to all issues pertaining to asset eligibility or ineligibility, asset valuation, and equitable distribution, including the factors listed above. If you have a good faith belief that the judge either didn’t consider a specific factor that is important, or misapplied a factor to the facts of your case, and you might consider filing an appeal to the Appellate Division.

Please keep in mind that the odds of winning your appeal are only about one in four. Moreover, appeals can be very expensive. The filing fees are very high. Moreover, a person who appeals also has to pay for the transcripts of the divorce proceedings. The cost of transcripts are very high. Finally, if your appeal is not strong, then you may be required to pay for your ex-spouse’s legal fees to contest the appeal. In summary, before anyone appeals, he or she must carefully consider that there is a downside to an appeal. Moreover, the odds of winning an appeal are only about 25%.

22. Is property owned before marriage subject to equitable distribution ?

In New Jersey any property that is  owned by a spouse prior to the marriage remains their own property, and it is exempt from equitable distribution. See, Painter v. Painter, 65 N.J. 196, 214 (1974): (Holding that the increase in value during the marriage of pre-owned property may be subject to equitable distribution if the non-owner contributed to its appreciation). However, if a home is purchased in contemplation of marriage then even though it was purchased by one spouse individually before the marriage, it may still be subject to equitable distribution. Weiss v. Weiss, 266 N.J. Super. 281 (App. Div. 1988).  In the Weiss case the court held that “A marital partnership may be found to have commenced prior to the marriage ceremony, where the parties have adequately expressed that intention and have acquired assets in specific contemplation of their marriage.” Id. at 287.

This same type of scenario was recently illustrated in the case of Shine v. Shine.  Here, the parties began dating in April 1997; became engaged in April 1998; and they were married on September 11, 1999. The husband purchased the home solely in his own name on  February 3, 1999.  The couple made the home a marital home. In the Weiss case, at the time of purchase the parties were engaged, and they were married 7 months later, and went on to live in the home while married. At the divorce trial, the family court judge concluded that the home was purchased in the contemplation of marriage. Therefore, the family court further ruled that the home was subject to equitable distribution. Thereafter, the case was then appealed. The Appellate Division affirmed, and it held that“the judge’s determinations concerning the marital home were primarily based on findings of credibility. On the issue of whether the home had been purchased in contemplation of marriage, the judge determined that plaintiff was not credible, and defendant was.”

In summary, if you are planning on getting married and have some savings, then it is advisable to have a prenuptial agreement. In many new marriages, one spouse will pay for the entire deposit to purchase the family home. In scenarios such as this, it is advisable to at least have a basic agreement that specifies that the spouse who paid the initial deposit will get it back at any closing in the event of a divorce.

Previous Article: Emancipation 1. My son just reached the age of 18. Does my child support payments now automatically end? No they don't. Emancipation only occurs when a child reaches 18 years and/or becomes [ more ] Next Article: Extending the Length of Alimony 1. Can alimony be modified? Alimony can be changed. However, it is not easy to convince a court to increase the amount or the length of an alimony award. Alimony [ more ]
Posted under Divorce FAQ's
Tagged as
Top