Property Division in New Jersey

Property Division in New Jersey: A Guide to Equitable Distribution in Divorce

Dividing property during a divorce can be one of the most complex and contentious aspects of the process. In New Jersey, like in many other states, property division is governed by state laws, and understanding these laws can help ensure that the process is as fair and efficient as possible. New Jersey follows the principle of equitable distribution, meaning that assets and debts accumulated during the marriage are divided fairly, though not necessarily equally.

In this article, we will explore how property division works in New Jersey, the factors considered by the court, and what individuals should know when navigating this aspect of divorce.

What Is Equitable Distribution?

New Jersey is one of the many states that follows equitable distribution laws when dividing marital property during a divorce. Unlike community property states, where assets and debts are typically split 50/50, equitable distribution focuses on dividing property in a way that is fair to both parties, but not necessarily equal. This means that the division depends on various factors, including each spouse’s financial and non-financial contributions to the marriage, their needs, and the overall circumstances of the divorce.

Under New Jersey law, the marital estate includes all property and assets acquired during the marriage, as well as any debts incurred during the marriage, regardless of whose name is on the title. However, property acquired before the marriage, or gifts and inheritances received by one spouse individually, are typically considered separate property and are not subject to division unless they were commingled or treated as joint property during the marriage.

Steps in Property Division in New Jersey

The process of dividing property in New Jersey is typically carried out in the following steps:

1. Identifying Marital and Separate Property

The first step in property division is determining which property is marital and which is separate. Marital property includes:

-Real estate (e.g., the family home, vacation properties, investment properties).

-Bank accounts (savings, checking, and investment accounts).

-Retirement accounts (401(k), pensions, IRAs).

-Business interests or shares in a business.

-Personal property such as cars, jewelry, and furniture.

Separate property includes assets that were owned by one spouse before the marriage or received as a gift or inheritance during the marriage. These assets are not subject to division unless they were commingled (e.g., using separate funds to improve a jointly owned property).

2. Valuing the Property

Once the marital property has been identified, the next step is to determine its value. This can be straightforward for cash or bank accounts, but more complex for real estate, retirement accounts, or businesses. In many cases, an independent appraiser or financial expert is hired to evaluate the value of real property, business interests, and other assets that are not easily assessed.

-Real estate: A professional appraisal is often used to determine the fair market value of a home or other real property.

-Business interests: If one or both spouses own a business, a forensic accountant or business valuation expert may be needed to assess the business’s worth.

-Retirement accounts: The value of retirement accounts must be determined as of the date of divorce, with consideration of the need for a Qualified Domestic Relations Order (QDRO) for 401(k)s and pensions to divide these accounts.

3. Equitable Distribution Factors

New Jersey courts consider a variety of factors when determining how to divide marital property equitably. The goal is to ensure that the division is fair, taking into account each spouse’s contributions and future needs. Factors the court will consider include:

-The length of the marriage: A longer marriage may result in a more equal division, while a shorter marriage may lead to a more unequal division.

-The age and health of both spouses: The physical and emotional health of each spouse, and their ability to support themselves post-divorce, is considered.

-The standard of living established during the marriage: If one spouse was the primary breadwinner and the other stayed home to care for children, this will be taken into account in order to ensure fairness.

-The economic circumstances of both spouses: A spouse who is financially disadvantaged or has limited earning potential may receive a larger share of the property.

-The contribution of each spouse to the acquisition of the property: This includes both financial contributions and non-financial contributions, such as homemaking or child-rearing, especially if one spouse sacrificed their career for the benefit of the family.

-The tax implications of dividing certain assets: For example, retirement accounts may have tax consequences, and the court will consider these when deciding how to divide the property.

-The value of any separate property: If one spouse has separate property, the court may take that into account in the division of marital assets.

4. Negotiation or Court Intervention

Property division can often be resolved through negotiation, with both spouses reaching an agreement outside of court with the help of their attorneys or a mediator. This approach can save time, money, and emotional strain and is certainly the preferred route for clients to pursue.

However, if the spouses cannot agree on the division of property, the case may proceed to trial. In this case, a judge will make the final decision on how the property is divided, based on the evidence presented and the factors outlined above. This is extremely time consuming and very expensive.

Types of Assets and Their Division

1. Real Property (Homes, Land, etc.)

The family home is often one of the largest and most emotionally charged assets in a divorce. In New Jersey, the court will typically divide the equity in the home based on the factors mentioned above. One spouse may be awarded the home, with the other receiving an offsetting share of other assets, or the home may be sold, and the proceeds divided.

If children are involved, the court may consider who will have primary custody when making decisions about the family home. In some cases, a spouse may be allowed to remain in the home for a period of time, especially if it benefits the children.

2. Retirement Accounts and Pensions

Retirement accounts, such as 401(k)s and pensions, are typically considered marital property, even if they were accrued during the marriage by only one spouse. Dividing retirement assets may require a Qualified Domestic Relations Order (QDRO), a legal document that allows for the division of the accounts without triggering early withdrawal penalties or taxes.

3. Business Interests

If one or both spouses own a business, determining the value of the business and deciding how to divide that interest can be very complicated. A forensic accountant or business valuation expert is often involved to assess the value of the business, and one spouse may be awarded the business or compensated with other assets.

4. Debt Division

In addition to dividing assets, New Jersey law requires that marital debts be divided equitably. This may include credit card debt, mortgages, car loans, student loans, and other liabilities. As with property division, the court will consider various factors to determine who is responsible for repaying these debts.

Conclusion

Property division in New Jersey is governed by the principle of equitable distribution, meaning that the goal is not necessarily a 50/50 split but a fair one based on the circumstances of the marriage. However, it is very common for courts to simply default to a 50/50 division. Understanding the factors that influence property division, as well as knowing what is considered marital and separate property, is crucial for anyone going through a divorce. If you are facing property division in a divorce, it is important to consult with a skilled family law attorney who can guide you through the process, help you protect your financial interests, and ensure that your rights are upheld.

Let Lawrence Law Attorneys Guide You Through the Equitable Distribution Process

Call us at (908) 645-1000 to schedule your initial consultation or complete our confidential contact form. With offices conveniently located in Watchung and Red Bank, NJ, Lawrence Law is ready to assist families across New Jersey. Take the first step toward resolving your parenting time concerns today.

The articles on this blog are for informative purposes only and are no substitute for legal advice or an attorney-client relationship. If you are seeking legal advice, please contact our law firm directly.