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Divorce can be an emotional and financially complex process, especially when it comes to protecting assets. Questions about what will happen to their finances—home, savings, retirement accounts—become a top priority for many people facing a split.
A fair division of assets is about protecting what is yours and securing a stable financial future. At Lawrence Law, we recognize that safeguarding assets in a divorce will help you maintain financial independence and peace of mind. Read on for steps New Jersey residents who want to retain their financial security can take during the divorce process.
Dividing assets in a divorce is often complicated, especially when understanding what belongs solely to each spouse versus what you as a couple own together. In New Jersey, marital assets refer to any property or income acquired by either spouse during the marriage. This can include wages you earned, investments you made, or property you bought while married. Marital property is subject to “equitable distribution” in a divorce, meaning it is divided in a way considered fair, though not necessarily equal. When making this division, the court considers factors like each spouse’s financial circumstances, contributions to the marriage, and future earning capacity, aiming to create a balanced outcome based on each spouse’s needs. More often than not, however, courts are dividing assets equally. Regardless, it is important to know your rights and potential arguments available to secure a disproportionate division of assets.
On the other hand, separate assets are typically those that one spouse owned before the marriage or acquired individually through an inheritance or as a gift during the marriage. However, for an asset to be considered separate, it must be kept apart from marital funds. For example, if you inherit money from a relative and keep it in a personal account, it may remain separate. But if you transfer the funds into a joint account or use it for marital purposes, like buying a family home, they may become “commingled,” which can complicate their classification as separate property.
Commingling assets is one of the most frequent issues distinguishing marital assets from separate property. When you mix separate property with marital property, it can lose its classification as separate and become subject to division. For example, if you and your spouse use premarital savings to make payments on a jointly owned home, that could create a claim that those funds are now marital property. Document these transactions if you want to protect separate assets in a divorce.
In New Jersey, judges look at each asset’s origin and handling to determine whether it should be divided. This review may involve analyzing bank statements, appraisals, and other financial documentation to verify an asset’s classification. For example, if your spouse owned a vacation property before your marriage but used joint funds for renovations, a portion of the property’s value could be deemed marital and subject to division. An attorney can guide you in identifying assets that may be blended and work with you to gather records that could help maintain their separate status.
Several tools, from prenuptial agreements to trusts and sound financial planning, can safeguard your assets and set the stage for a more stable future.
1. Prenuptial Agreements: A prenup is one of the most direct ways to protect your assets before marriage. This legal document allows you as a couple to outline how assets will be divided if the marriage ends in divorce. In New Jersey, prenuptial agreements can cover property division, spousal support, and even debt responsibilities, clarifying both partners’ financial rights and obligations. Prenups are not solely for high-net-worth individuals because they can benefit anyone looking to protect specific assets, such as family inheritances or business interests. Setting these terms in advance can reduce the risk of contentious financial disputes should the marriage end.
2. Establishing Trusts: Trusts offer another valuable option for protecting assets. A trust is a legal arrangement where assets are transferred into a separate entity managed by a trustee. This setup allows individuals to shield specific assets from division in the event of a divorce, as trust-held property is generally excluded from marital assets. Common types include revocable living trusts, which can be adjusted during one’s lifetime, and irrevocable trusts, which are more permanent and offer additional protection from creditors and legal claims.
In New Jersey, trusts can be particularly beneficial to protect inheritances, family businesses, or other assets you want to pass down to future generations. If structured correctly, a trust can ensure that these assets remain separate from marital property, offering greater control and security. Trusts are also useful if you want to provide for your children but retain control over how and when funds are distributed.
3. Smart Financial Planning: Whether or not you are currently married, taking proactive steps to organize and manage your finances can help you secure your assets over the long term. This includes keeping a detailed record of significant assets you owned before marriage, such as savings, property, or investments, and maintaining separate accounts for these funds. Documenting the source of these assets helps demonstrate their classification as separate property should any questions arise in the future.
Additionally, budgeting and managing debt wisely can significantly impact your financial well-being. Avoid mixing personal assets with joint marital funds, and keep detailed records of financial transactions that involve separate assets. This clear boundary between individual and marital finances can protect your separate property status and prevent unintentional commingling, which could complicate matters if you later face asset division in a divorce. You can also consult a financial planner to help you make sound decisions.
4. Regularly Updating Estate Plans: Estate plans are often overlooked but can effectively protect your financial future. Life changes like marriage, divorce, or children’s birth may alter your priorities and how you want your assets distributed. By updating your estate plan regularly, you can keep it aligned with your current financial and personal situation. This may involve revising wills, trusts, or powers of attorney to reflect new beneficiaries or add provisions for minor children.
For many, asset division is one of the most significant concerns in a divorce. As we mentioned, in New Jersey, the process follows a standard called “equitable distribution,” meaning assets are divided fairly, though not equally. Understanding how this principle works—and the factors that influence it—can help you better prepare for what to expect in your own case. This approach considers various elements to ensure each spouse receives a fair share based on their financial situation and contributions to the marriage.
The goal of equitable distribution is to divide marital property in a way that is fair and just. Unlike community property states, which split marital property 50/50, New Jersey courts consider numerous factors to determine what constitutes a fair division. These factors include the duration of the marriage, each spouse’s financial and non-financial contributions, age and health, and future earning potential. For example, if one spouse stayed home to care for children while the other worked, the court will consider the non-working spouse’s contributions to the household as a valid part of the asset division process.
One of the most influential factors in the equitable distribution process is each spouse’s economic circumstances at the time of the divorce. This includes both current earnings and future earning capacity. If one spouse earns significantly more or has greater income potential, the court may award a larger share of the marital assets to the lower-earning spouse. The aim is to ensure that both parties maintain a reasonably comparable standard of living after the divorce.
In addition to income and earning capacity, the court also looks at the lifestyle and standard of living established during the marriage. If one spouse is accustomed to a higher standard of living due to the marital income, the court may attempt to preserve this lifestyle for both parties as closely as possible. This is often a factor when determining asset distribution and spousal support. The court tries to avoid dramatic changes to either spouse’s financial situation, particularly when you share minor children.
Debt, too, is taken into account in equitable distribution. Marital debts—such as credit card balances, loans, or mortgage debt—are also subject to division. Like assets, debts you and your spouse have incurred during the marriage are generally considered shared responsibilities. The court will assess the nature and purpose of each debt and each spouse’s ability to repay it to determine a fair way to allocate these financial obligations. Sometimes, debt division may be adjusted based on one spouse’s ability to manage it without financial hardship.
Divorce can raise challenging questions about asset protection for business owners and those with significant investments. In New Jersey, marital property—including business interests and investments acquired or grown during the marriage—is subject to equitable distribution.
One of the most effective ways to protect business interests during divorce is through a pre-nuptial agreement. A prenup, created before marriage, can outline specific terms for business and investment assets in case of divorce. This agreement allows both parties to decide in advance how assets should be divided, limiting disputes and protecting the business owner’s interests. If you do not have a prenuptial, work with an attorney to negotiate a settlement that honors business contributions.
If you have a business, get a proper business valuation since the court requires an accurate value of any business considered marital property to determine a fair distribution of assets. A neutral, qualified appraiser who considers the business’s financial performance, market value, and future earning potential should conduct the valuation. An accurate valuation can prevent overvaluation or undervaluation, helping you and your spouse reach a more balanced settlement. Your attorney can help you coordinate with financial professionals to ensure fair and thorough valuation.
If you want to keep your business fully intact, offering alternative assets in exchange for sole ownership can be an option that works for you. This approach lets you retain complete control over the business while your spouse receives a fair trade-off, such as real estate, retirement accounts, or other high-value assets. For instance, if you own the company, you could agree to transfer a greater share of your retirement funds to your spouse, providing a balanced settlement without having to sell or split the business.
Another protective measure for business owners is to limit their spouse’s involvement in business operations. If a business remains separate from marital finances and the non-owner spouse has minimal involvement in its operations, it’s often easier to argue that the business should be classified as separate property. Keeping personal and business finances distinct—through individual bank accounts, investments, and financial records—can help support this argument in court. However, if marital funds were invested in the business, the court may consider it a marital asset, making proper documentation essential.
If you or your spouse have investment portfolios, tracking the origin and growth of investments can help clarify which assets should be subject to division. Investments that you acquired or that significantly increased in value during the marriage may be viewed as marital property, while premarital investments that have remained separate are often treated as individual assets. Accurate records showing each investment’s date and source of funds can help distinguish between marital and separate property. Using a trust to manage certain investments may also offer protection by limiting direct ownership.
In some divorce cases, one spouse may attempt to hide or deplete shared assets, a tactic known as asset dissipation. Identifying the warning signs of asset dissipation early—and taking swift legal action—can help protect your financial rights. Here, we’ll look at common red flags for asset dissipation and recommend steps you can take to safeguard your financial interests during divorce.
1. Unusual or unexplained financial activity: If your spouse begins withdrawing large sums of money from joint accounts, frequently transferring funds to unknown accounts, or making unexpected changes to investments, it may indicate an attempt to deplete or hide assets. Significant or repeated withdrawals warrant a closer look, especially close to the start of divorce proceedings. Reviewing bank and credit card statements for unusual patterns or large purchases unrelated to household needs can provide critical insights into potential asset dissipation.
2. Sudden changes in spending habits: If your spouse starts spending large amounts of money on luxury items, vacations, or gifts, especially for someone outside the family, it may be a way to reduce the assets that could be divided in the divorce. Purchases that seem excessive or out of character are often designed to benefit one spouse at the other’s expense, diminishing the pool of assets available for fair distribution. Keeping a detailed record of these transactions provides documentation if you need to prove dissipation later.
3. Attempts to transfer ownership of assets to friends, family members, or businesses: For example, a spouse may “sell” property at a reduced price to a close relative, intending to reclaim it once the divorce is finalized. They might also list assets under a business or use a family member as a third party to hold the asset temporarily. If you notice assets are suddenly listed under someone else’s name or transferred to an entity with no clear reason, this may be a warning sign of asset hiding.
4. Acting secretive about finances or restricting your access to financial records: A spouse engaged in asset dissipation might remove shared access to bank accounts, investment portfolios, or other financial documents, making it harder for you to track what is happening with joint finances. If you are excluded from accessing statements, passwords, or financial summaries you previously had access to, consult your attorney, who can help you legally obtain the information you need.
By understanding asset division in New Jersey, recognizing red flags, and securing professional support, you can take meaningful steps to ensure a fair division of marital assets and safeguard your financial stability as you move forward into this new phase of your life.
Protecting your financial future during a divorce can be challenging, but Lawrence Law’s experienced attorneys are here to help you confidently navigate asset protection strategies. From identifying and valuing marital assets to negotiating equitable settlements, we provide the legal support you need to safeguard your interests.
If you are concerned about dividing complex assets, shielding inherited property, or addressing hidden financial issues, contact our attorneys for guidance and peace of mind.
Contact 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. Contact Lawrence Law today to take the first step toward resolving your asset division concerns during a divorce.
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.
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