Divorce Myth #10* – All assets are divided fifty-fifty.
Put simply – there is no single statute or case that stands for the proposition that all assets are to be divided fifty-fifty. The idea of your soon-to-be ex-spouse "getting half" is a product of television shows, movies and stand up comedian routines. Instead, what assets are to be divided and how they are divided is the product of reviewing statutory factors and interpreting relevant case law. In divorce cases it is called equitable distribution.
By its common definition, equitable distribution is the division of joint assets and liabilities. With some exceptions as will be discussed below, joint marital assets and debts are those acquired from the date of the marriage until such time that someone files a complaint for divorce. Although it is heard quite a bit, the law does not see it as "his/her money" or "your/my money." Instead, absent an appropriate agreement to the contrary, typically everything acquired during the marriage, regardless of who’s name is on it, will be subject to equitable distribution.
Of course, there are exceptions. The first major exception involves inherited property. If one spouse receives an inheritance and subsequently keeps that property separate from any joint marital assets, there is a solid argument to be had that this inherited property should be exempt from equitable distribution. However, if the property received is somehow commingled with joint marital assets, there is a risk that it could lose its exempt status. In short, one must be careful about what they do with the inherited property.
The second major exception concerns one spouse’s pre-marital property (in other words, something that they had separately prior to the marriage). An argument can be made that this pre-marital property could be exempt from equitable distribution. However, there are a number of considerations. Lets say for the sake of argument that you have an old 401(k) retirement account from a former employment that is just sitting there waiting for you to reach the age in which you can make distributions. If you leave that account alone throughout the marriage and its growth is based upon market conditions only there is a better chance of retaining that asset free and clear as opposed to someone who has continued to make deposits to this account during the marriage. Again, you must be mindful of the theory of co-mingling pre-marital assets with marital assets.
As a separate example, what if there is a house that was acquired prior to the marriage. First, if the house was bought in contemplation of marriage the fact that the purchase was made by one spouse prior to the marriage may not be enough to treat the house as an exempt asset. Second, even if the idea of contemplations is not an issue, the non-titled spouse could make an argument that the appreciated value of the otherwise pre-marital house over the course of the marriage could be considered as part of equitable distribution. These are fact sensitive inquiries.
Once the parties determine what assets and liabilities are indeed joint marital and subject to equitable distribution, the next question is how to divide same. For this, there is a statute – N.J.S.A. 2A:34-23.1 that lists the relevant factors to consider. As there about fifteen factors I am not going to list them here. Figuring out who gets what is the product of negotiation with these factors in mind. And, as a quick aside, New Jersey is a "no fault" state so, for example, the fact that one spouse cheated on the other in amongst itself does equate to a financial advantage.
When approaching these issues the first point to consider is that not all assets are treated the same. As I stated in the beginning of this article, there is no legal provision that a marital asset is to be divided fifty-fifty. But, what tends to happen is that assets such as the marital home and retirement accounts ultimately wind up being divided fifty-fifty as a matter of custom. However, if one spouse owns a business which has been valued, and the other spouse has no direct involvement in same, an argument can be made that the non-owner has less than a fifty percent interest in the business. There is no cookie cutter formula for these issues. Everything is taken on a case by case basis.
A second point to consider is that, rather than dividing all the assets, parties can offset their respective interests in assets in order to effectuate equitable distribution. As an example, lets say that one spouse wants to retain the marital home that has equity of $100,000 and the other spouse wishes to retain their 401(k) account which has a balance of $100,000. One option would be for the one spouse to keep the house and the other to keep the 401(k) without contribution to the other, thus offsetting their respective interests in these assets. In fact, the courts generally prefer that parties offset their interests if there are sufficient assets to do so.
*This is the tenth article in a ten part series exploring the most common myths concerning divorce law in New Jersey.
All of the attorneys at Domers & Bonamassa are well versed and have years of experience addressing family law issues, no matter how complicated. Contact us today at (856) 596-2888 for a private consultation. We appear in the following counties: Burlington, Camden, Gloucester, Cumberland, Salem, Mercer, Ocean, Atlantic and Cape May. Our practice areas include: divorce, custody, parenting time, child support, alimony, domestic violence, college expenses, equitable distribution, name changes, step parent adoptions, paternity issues, child abuse and neglect, prenuptial agreements, mediation and arbitration.
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