1. Why is the terminal date for equitable distribution so important?
In many divorce cases a critical important issue is when is the “cut off” date for equitable distribution. This basically means at what point in time are the marital assets counted to determine equitable distribution. In many marriages the parties stay separated for a very long time before one spouse eventually files for a divorce. In other divorces the case may take years to finalize. In many cases the value of the marital assets may increase or decrease substantially from the date of separation or date when the complaint is filed until the divorce is finalized. The value of mutual funds or stocks may increase or decrease substantially once the parties separate or when the divorce complaint is filed. Moreover, the value of real estate also may fluctuate substantially. Finally, credit card debts are also accumulated during the separation period or the time period when the divorce is being litigated. Given these considerations the terminal date or “cut off” to determine equitable distribution is critically important.
2. What is the bright line rule to determine the “cut off” date for equitable distribution purposes?
The bright line rule is that date when the divorce complaint is filed is the “cut off” date to determine what marital assets will be eligible for equitable distribution. The seminal case on this area is Painter v. Painter, 65 N.J. 196 (1974). In this New Jersey Supreme Court case the court adopted a bright line rule. The Painter court held that property will be eligible for equitable distribution only up until the date of the complaint is filed. Therefore, any property obtained after the “cut off” is exempt from equitable distribution.
3. Are there any exceptions to the bright line rule established by the Painter decision?
Yes. Perhaps the most annoying aspect of family law to many people is that it is so confusing. There are very few areas of family law where there are hard fast answers. In my view the answers to many family law issues are constantly in the “grey area.” There are exceptions to every rule and to every case. Many clients are utterly baffled as to how inconsistent the field of family law can be. It is important to note that the Painter decision does indicate that there can be some deviations from the bright line rule that the “cut off” date is when the complaint is filed. An important section of the Painter holding provides as follows:
We are under no illusion that what we have said above will provide certain and ready answers to all questions which may arise as to whether particular property is eligible for distribution. We have sought only to implement the legislative intent, as we discern it, by settling forth what we believe should be the general governing rules. Individual problems must be solved as they arise within the context of particular cases. Id. at 218.
4. What are some other important cases that have addressed the issue of the terminal date to determine equitable distribution?
A. Brandenburg v. Brandenburg, 83 N.J. 198 (1980).
Here, the Brandenburg’s separated in 1966. In February 1976, some ten years after the parties separated, Mr. Brandenburg filed for divorce. The court held that “The cases following Painter recognize that there can be reliable indicia of an end of the marital partnership other than the filing of a complaint for divorce.” The court ultimately denied Mr. Brandenburg’s request for a deviation from the bright line rule. However, the court did acknowledge that if there is a “reliable indicia of an end to the marital partnership,” then a deviation may be appropriate.
B. Genovese v. Genovese, 392 N.J. Super. 215 (App. Div. 2007).
Here, the husband filed for a complaint for divorce in New York in 1994. A divorce was granted in New York in 1994. The husband eventually got remarried. In May 1999, the New York Appellate Court reversed the case and dismissed it. The court found that there was insufficient evidence to establish the cause of action for divorce. The husband finally started another divorce case in New Jersey in February 2005. The parties were eventually divorced in New Jersey. The New Jersey court found that the filing of the New York complaint was the incontrovertible “cut off” date. The court held that this was the date when the marriage had irretrievably broken down.
C. Pascale v. Pascale, 140 N.J. 583 (1995).
Here, the wife filed a complaint for divorce on October 28, 1990. The wife received two separate stock option grants on November 7, 1990. The court found that the stock option awards were a form of deferred compensation of her efforts expended during the marriage. Therefore, the stock options were deemed marital assets subject to equitable distribution.
D. Portner v. Portner, 93 N.J. 215 (1983).
Here the court held that the “cut off” was the date when the wife amended her complaint. The court refused to hold that filing of the original complaint as the “cut off” date.
E. Robertson v. Robertson, 381 N.J. Super. 1999 (App. Div. 2005).
The parties separated in July 2001. The husband started his employment with a new employer on September 17, 2001, for which he received an award of stock options. The complaint for divorce was filed on September 20, 2001. The Appellate Division held that the stock options was not an asset subject to equitable distribution. The court noted that the stock option award was “an inducement to commence employment, not as a recognition for past performance with a company.” Therefore, the Robertson case was distinguished from the Pascale case. Accordingly, the options were not subject to equitable distribution.
F. Smith v. Smith, N.J. 350 (1977).
Here, the parties entered into a written separation agreement. Moreover, the parties separated from each other. The court determined that the “cut off” date to determine and value assets eligible for equitable distribution was the date of the agreement. The court did not use the date of the complaint for divorce as the “cut off” date.
The Smith court held that:
Neither Painter nor Rothman involved a situation in which the parties had entered into a formal agreement accompanied by an actual separation. The execution and delivery of such an agreement, or its inclusion in a judgment, would appear to be incontrovertible evidence that the marital enterprise is no longer viable. Id.
G. Zappala v. Zappala, 222 N.J. Super 169 (App. Div. 1988).
Here, the court held that the bright line rule is that marriage deemed ended upon the filing of the divorce complaint. The court further held that any deviation from that rule has only been permitted where there is incontrovertible evidence establishing some other date.