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DIVIDING PROPERTY IN NEW JERSEY
TABLE OF CONTENTS
TABLE OF CONTENTS
- Three steps to equitable distribution: (1) define marital property; (2) value marital property; and (3) divide marital property.
- All property acquired during marriage must be divided.
- Property defined very broadly and includes all assets and debts, including intangibles like patents or copyrights.
- Marriage begins on date of ceremony and ends on date Complaint for Divorce filed.
- Marital home acquired “in anticipation of marriage” may be divided too.
- Under equitable theories (not technically “equitable distribution”), other premarital property may be divided if non-owner spouse make significant contributions.
- Premarital property may be divided if combined with marital assets and cannot be traced.
- Increase to value of premarital property may be divided if due to spouse’s active efforts (e.g., paydown of mortgage on premarital home; growth of premarital business).
- Valuation of property often requires expert testimony.
- Court is not required to divide property 50/50, but will do so in most cases.
- Unlike custody and support, equitable distribution not generally subject to modification based on “changed circumstances.”
DIVIDING PROPERTY, ALSO KNOWN AS “EQUITABLE DISTRIBUTION”
The process of dividing property between spouses during a divorce in New Jersey is known as “equitable distribution.”
EQUITABLE DISTRIBUTION OCCURS AT FINAL JUDGMENT
“Some New Jersey courts have recognized that in highly unusual circumstances some aspects of statutory equitable distribution and related forms of relief may precede a divorce judgment or survive a spouse’s death before divorce.” [Carr v. Carr, 120 N.J. 336 (1990).]
Nevertheless, “the rule [is] that, ordinarily, equitable distribution of marital assets arises only with the adjudication of divorce.” [Carr v. Carr, 120 N.J. 336 (1990).]
PUBLIC POLICY OF EQUITABLE DISTRIBUTION
Equitable distribution reflects a public policy that is “at least in part an acknowledgment that marriage is a shared enterprise, a joint undertaking, that in many ways it is akin to a partnership.” [Smith v. Smith, 72 N.J. 350, 361 (1977).]
THREE-PART PROCESS FOR DIVIDING PROPERTY
The Court will engage in a three-part inquiry during equitable distribution: (1) identifying eligible property; (2) assigning a value to eligible property; and (3) equitable distributing eligible property between the spouses. [N.J.S.A. 2A:34-23.1.]
The Court “must first decide what specific property of each spouse is eligible for distribution. Secondly, he must determine its value for purposes of such distribution. Thirdly, he must decide how such allocation can most equitably be made.” [Rothman v. Rothman, 65 N.J. 219, 232 (1974).]
WHAT IS “PROPERTY” IN A NEW JERSEY DIVORCE?
“[I]n all actions where a judgment of divorce … is entered the court may make such award or awards to the parties … to effectuate an equitable distribution of the property, both real and personal, which was legally and beneficially acquired by them or either of them during the marriage[.]” [N.J.S.A. 2A:34-23.]
The New Jersey Supreme Court has frequently held that an “expansive interpretation [is] to be given to the word ‘property'” in a New Jersey divorce. [Gauger v. Gauger, 73 N.J. 538, 544 (1977).] Thus, virtually every conceivable asset and debt is included under the definition of property.
For example, New Jersey Courts have subjected a broad range of assets and interests to equitable distribution, including:
- vested but unmatured private pensions; [Kikkert v. Kikkert, 88 N.J. 4 (1981).]
- military retirement pay and disability benefits; [Kruger v. Kruger, 73 N.J. 464, 468 (1977); Painter v. Painter, 65 N.J. 196, 217 (1974).]
- unliquidated claims for benefits under workers’ compensation; [Hughes v. Hughes, 132 N.J. Super. 559 (Ch.Div. 1975).]
- certain portions of the damages from a personal injury claim; [DiTolvo v. DiTolvo, 131 N.J. Super. 72, 80-82 (App.Div. 1974).] and
- lottery winnings. [DeVane v. DeVane, 260 N.J. Super. 501, 503 (Ch. Div. 1992).]
DETERMINING ELIGIBLE PROPERTY
The Court may distribute all property legally and beneficially acquired by the parties “during the marriage.” [N.J.S.A. 2A:34-23(h).]
It does not matter which spouse purchased the property, or in whose name the property is legally titled. The Courts are “empowered to allocate marital assets between the spouses, regardless of ownership.” [Painter v. Painter, 65 N.J. 196, 213 (1974).]
The general rule is that all property acquired from the date of the marriage ceremony through the date on which a Complaint for Divorce was filed is eligible for equitable distribution. [Painter v. Painter, 65 N.J. 196, 218 (1974).]
Thus, generally, property owned by a spouse “at the time of a marriage will remain [his or her] separate property.” [Painter v. Painter, 65 N.J. 196, 214 (1974).]
Premarital property, even if sold or converted during the marriage, will nevertheless remain separate if the proceeds of those funds are traceable. As stated by the New Jersey Supreme Court, property “for which the original property may be exchanged or into which it, or the proceeds of its sale, may be traceable shall similarly be considered the separate property of the particular spouse.” [Painter v. Painter, 65 N.J. 196, 214 (1974).]
Similarly, property acquired by a spouse after a Complaint for Divorce was filed will typically remain his or her separate assets: “[T]he date a complaint for divorce is filed will fix the termination date of a marriage for purposes of equitable distribution.” [Brandenburg v. Brandenburg, 83 N.J. 198, 209 (1980).] “[A]ssets acquired after [the marital] enterprise or partnership no longer exists should not be so included” in equitable distribution. [Portner v. Portner, 93 N.J. 215, 219 (1983).]
Of course, the rule is flexible enough to address individual problems that occur within that context. [Painter v. Painter, 65 N.J. 196, 218, n.7 (1974).] Indeed, there are a number of exceptions.
For example, assets acquired by gift from a third party or by inheritance will not be divided. [N.J.S.A. 2A:34-23(h).] Gifts between spouses, however, remain subject to equitable distribution. [N.J.S.A. 2A:34-23(h).]
Where the husband acquired stock options as incentive to accept new employment three days prior to filing a Complaint for Divorce, those stock options were deemed exempt from equitable distribution despite technically being acquired during the marriage. [Robertson v. Robertson, 381 N.J. Super. 199, 204 (App. Div. 2005).]
Further, “[i]f the parties have entered into a written separation agreement accompanied by actual physical separation, the date of the agreement will terminate the period of acquisition of distributable assets. If the parties have separated in fact and divided their property pursuant to an oral agreement, assets acquired afterwards are not eligible for equitable distribution.” [Brandenburg v. Brandenburg, 83 N.J. 198, 209-10 (1980).]
Further, even assets acquired before the marriage might be subject to equitable distribution. “[F]or the purpose of triggering a right of equitable distribution 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.” [Weiss v. Weiss, 226 N.J. Super. 281 (App. Div. 1988).] Such a situation might occur “through the purchase of a major marital asset such as a house and substantial improvements to that asset.” [Weiss v. Weiss, 226 N.J. Super. 281 (App. Div. 1988).] “Therefore, where the evidence shows that an asset was purchased in specific contemplation of marriage, that asset will be subject to equitable distribution.” [Winer v. Winer, 241 N.J. Super. 510, 527 (App. Div. 1990).]
In some circumstances, the “commingling” of separate property with marital property may convert that separate property into marital property and make it subject to equitable distribution. [Ryan v. Ryan, 283 N.J. Super. 21, 25 (Ch. Div. 1993).] That is not, however, always the case. Even where funds were commingled and can no longer be traced, the parties’ intent should control. [Wadlow v. Wadlow, 200 N.J. Super. 372 (App. Div. 1985).]
Even when an asset is exempt, Courts distinguish between “active” exempt assets and “passive” exempt assets. [Scavone v. Scavone, 230 N.J. Super. 482 (Ch. Div. 1988).] Passive assets are those “whose value fluctuations are based exclusively on market conditions. Passive, immune assets, in one name, and their incremental values are viewed as separate property and are thus not subject to distribution.” [Scavone v. Scavone, 230 N.J. Super. 482, 486 (Ch. Div. 1988).] In contrast, active assets are those that involve “contributions and efforts towards their growth and development which directly increase their value.” [Scavone v. Scavone, 230 N.J. Super. 482, 487 (Ch. Div. 1988).] When dealing with active assets, Courts have stated that “when such value is derived, in part or in whole, from the efforts of the non-owner, it is subject to [equitable] distribution.” [Scavone v. Scavone, 230 N.J. Super. 482, 487-88 (Ch. Div. 1988).] The contribution requirement may be satisfied by the non-owning party’s efforts as a homemaker and parent that allowed the owning spouse to devote his time to the active immune asset. [Valentino v. Valentino, 309 N.J. Super. 334, 340 (App. Div. 1998).]
DECIDING THE VALUE OF PROPERTY
For the most part, the value of marital property is clear. For example, a bank account has an obvious value that can be easily determined. In other cases, determining value may require an appraisal. For example, the marital home is almost always subject to appraisal during a divorce.
When valuation is more complex, it becomes necessary to retain financial experts to assist in the process. Neither judges nor attorneys are financial experts, and therefore, expert testimony on the value of certain property can be absolutely critical during the divorce process.
EQUITABLY DISTRIBUTING PROPERTY
Once the Court has determined eligible property and assigned a value to all such property, the Court must decide who gets what.
Although many Courts will presume an equal division between spouses, there is no legal requirement that property acquired during the marriage be divided 50/50. Instead, the Court is required to consider the facts and circumstances in deciding a fair (i.e., “equitable”) distribution.
“Upon death the survivor usually receives whatever has been accumulated but, if a divorce ensues, in the usual case they share all marital assets equally.” [DeLorean v. DeLorean, 211 N.J. Super. 432, 434 (Ch. Div. 1986).]
The trial judge should apply the statutory factors and “distribute the marital assets consistent with the unique needs of the parties.” [DeVane v. DeVane, 280 N.J. Super. 488, 493 (App. Div. 1995).]
Property need not be equally allocated if the “sole ownership or allocation of a major share to one of [the parties] is warranted by all the financial and personal considerations underlying the equitable distribution plan.” [Daeschler v. Daeschler, 214 N.J. Super. 545, 553 (App. Div. 1986).]
The New Jersey Legislature has required Courts to consider the following factors in deciding how to divide marital property:
- The duration of the marriage or civil union;
- The age and physical and emotional health of the parties;
- The income or property brought to the marriage or civil union by each party;
- The standard of living established during the marriage or civil union;
- Any written agreement made by the parties before or during the marriage or civil union concerning an arrangement of property distribution;
- The economic circumstances of each party at the time the division of property becomes effective;
- 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 acquire sufficient education or training to enable the party to become self-supporting at a standard of living reasonably comparable to that enjoyed during the marriage or civil union;
- The contribution by each party to the education, training or earning power of the other;
- The contribution of each party to the acquisition, dissipation, preservation, depreciation or appreciation in the amount or value of the marital property, or the property acquired during the civil union as well as the contribution of a party as a homemaker;
- The tax consequences of the proposed distribution to each party;
- The present value of the property;
- The need of a parent who has physical custody of a child to own or occupy the marital residence or residence shared by the partners in a civil union couple and to use or own the household effects;
- The debts and liabilities of the parties;
- The need for creation, now or in the future, of a trust fund to secure reasonably foreseeable medical or educational costs for a spouse, partner in a civil union couple or children;
- The extent to which a party deferred achieving their career goals; and
- Any other factors which the court may deem relevant. [N.J.S.A. 2A:34-23.1.]
MODIFYING EQUITABLE DISTRIBUTION
“Unlike an award of alimony which can be adjusted after divorce to reflect unanticipated changes in the parties’ circumstances, a property division or equitable distribution may not be adjusted.” [Monte v. Monte, 212 N.J. Super. 557, 561 (App. Div. 1986).]
“[A]pplications for relief from equitable distribution provisions contained in a judgment of divorce are subject to R. 4:50-1 and not, as in the case of alimony, support, custody, and other matters of continuing jurisdiction of the court, subject to a ‘changed circumstances’ standard.” [Eaton v. Grau, 368 N.J. Super. 215, 222 (App. Div. 2004).]
DIVIDING PROPERTY NOT SUBJECT TO EQUITABLE DISTRIBUTION
Even when property is not subject to equitable distribution, it may nevertheless be divided by the Court in a divorce proceeding if certain equitable doctrines apply.
One doctrine that may be applied to divide assets exempt from equitable distribution is “unjust enrichment.” For example, the New Jersey Supreme Court recently required the division of the premarital portion of a $2.25 million closing bonus acquired prior to the parties’ marriage based on unjust enrichment. [Thieme v. Aucoin-Thieme, ___ N.J. ___ (2016).]
The Trial Court and the Appellate Division both declined to divide the premarital portion of the closing bonus because it had not been acquired “during the marriage” as required under the equitable distribution statute, N.J.S.A. 2A:34-23(h). The Supreme Court reversed those decisions, concluding that although equitable distribution did not strictly apply, the husband would have been unjustly enriched if allowed to keep the premarital portion in light of the parties’ long period of premarital cohabitation and the wife having sacrificed her career to care for the parties’ daughter, home, and rental properties in order to permit the husband’s grueling work schedule. Accordingly, the Court imposed a constructive trust on the closing bonus and remanded for the Trial Court to determine how much of the closing bonus to which the wife should be entitled. In making that determination, the Supreme Court noted that some of the equitable distributions factors may be relevant to the Trial Court’s determination. [Thieme v. Aucoin-Thieme, ___ N.J. ___ (2016).]
To prove a claim for unjust enrichment, a party must demonstrate that the opposing party “received a benefit and that retention of that benefit without payment would be unjust.” [Iliadis v. Wal-Mart Stores, Inc., 191 N.J. 88, 110 (2007).] Unjust enrichment is a form of quasi-contract and “also requires that plaintiff show that it expected remuneration from the defendant at the time it performed or conferred a benefit on defendant and that the failure of remuneration enriched defendant beyond its contractual rights.” [VRG Corp. v. GKN Realty Corp., 135 N.J. 539, 554 (1994).]
Other equitable doctrines may be available as well, including but not limited to quantum meruit, breach of implied contract, and detrimental reliance. [Thieme v. Aucoin-Thieme, ___ N.J. ___ (2016).]
DAMAGES FROM PERSONAL INJURY CLAIM
Dividing the payment from a personal injury claim can be complex. Generally, “the portion of the settlement that is intended to compensate for lost earnings and the medical expenses of the injured spouse is subject to distribution, but the remainder of the settlement, which is intended to compensate for personal pain, suffering, and the mental and physical disabilities of the injured spouse or for the loss of consortium or services suffered by the uninjured spouse, are not distributable.” [Landwehr v. Landwehr, 111 N.J. 491, 493 (1988).]
ENGAGEMENT RING IF ENGAGEMENT IS BROKEN
One of the most common questions asked of divorce attorneys is whether you need to give back the engagement ring if the engagement is broken. In short, the answer is “yes.”
Generally, “[a]n engagement ring is a conditional gift. The condition [of the gift] is marriage and the ring is returnable only if the engagement is broken.” [Winer v. Winer, 241 N.J. Super. 510, 528 (App. Div. 1982).]
Further, “[i]t does not matter who broke the engagement. A person may have the best reasons in the world for so doing. The important thing is that the gift was conditional and the condition was not fulfilled.” [Aronow v. Silver, 223 N.J. Super. 344, 249 (Ch. Div. 1987).]
Nevertheless, in unusual circumstances, the recipient of the engagement ring may be able to establish that it was in truth an unconditional gift. If the ring was really a normal gift, rather than an engagement ring, there is no need to return it.
In the 2013 case of Sipko v. Koger, Inc., the New Jersey Supreme Court held that the recipient of the gift must prove four elements by “clear, cogent and persuasive evidence” to establish that a gift was unconditional: “First, the donor must perform some act constituting the actual or symbolic delivery of the subject matter of the gift. Second, the donor must possess the intent to give. Third, the donee must accept the gift. Our cases also recognize an additional element, the relinquishment by the donor ‘of ownership and dominion over the subject matter of the gift.’”[Sipko v. Koger, 214 N.J. 364, 376 (2013).] Our Supreme Court went on to state, if the gift is “absolute and made voluntarily with a full understanding of its effect[, it] cannot be revoked by the donor, either by his act alone or with the aid of a judicial tribunal.” [Sipko v. Koger, 214 N.J. 364, 377 (2013).]
So, in all but the most unusual circumstances, you will be required to return the ring if the engagement is broken.
ENGAGEMENT RING IF MARRIAGE TOOK PLACE
Upon marriage, the ring becomes the unconditional property of its recipient and is not subject to equitable distribution during a New Jersey divorce. [Winer v. Winer, 241 N.J. Super. 510, 528 (App. Div. 1990).]
EFFECT OF DISSIPATION OF MARITAL ASSETS
One factor among many the Court must consider during equitable distribution is “the contribution of each party to the acquisition, dissipation, preservation, depreciation, or appreciation in the amount or value of the marital property.” [N.J.S.A. 2A:34-23.1(i).]
Where one spouse intentionally dissipates marital assets, the Court may add those assets back to the marital estate for purposes of equitable distribution. “The value of the marital estate [may] include the assets [a spouse] has spent down or otherwise dissipated. In the matrimonial context, dissipated funds are subject to equitable distribution, as if the funds were not dissipated at all.” [Wasserman v. Schwartz, 364 N.J. Super. 399, 414 (Law Div. 2001).]
“The Legislature did not define ‘dissipation’ of marital property. It is clear, however, that the concept is a plastic one, suited to fit the demands of the individual case.” [Kothari v. Kothari, 255 N.J. Super. 500, 506 (App. Div. 1992).]
“Dissipation may be found where a spouse uses marital property for his or her own benefit and for a purpose unrelated to the marriage at a time when the marriage relationship was in serious jeopardy. … [However, w]hen one party to a divorce proceeding spends marital funds extravagantly, or merely for his or her own benefit, that obviously diminishes the amount of property which is available for distribution by the divorce court. On the other hand, until such time as the parties are contemplating a divorce, they are generally vested with the authority to spend marital funds for their own enjoyment, such as movies, dinners, vacations, and the like. The question of dissipation of marital assets thus involves an attempt to accommodate these two conflicting interests in the marital estate.” [Kothari v. Kothari, 255 N.J. Super. 500, 506-07 (App. Div. 1992).]
“In resolving this issue, courts have considered a variety of factors, including, ‘most commonly,’ the following:
(1) the proximity of the expenditure to the parties’ separation, (2) whether the expenditure was typical of expenditures made by the parties prior to the breakdown of the marriage, (3) whether the expenditure benefitted the ‘joint’ marital enterprise or was for the benefit of one spouse to the exclusion of the other, and (4) the need for, and amount of, the expenditure.
The question ultimately to be answered by a weighing of these considerations is whether the assets were expended by one spouse with the intent of diminishing the other spouse’s share of the marital estate. We leave for future cases the question of whether the dissipation concept also includes expenditures of marital assets, even where the parties are not considering separation, where the expenditures are made for purposes inimical to the marriage and in association with some form of matrimonial misconduct.” [Kothari v. Kothari, 255 N.J. Super. 500, 507 (App. Div. 1992).]
Andrew M. Shaw is the author of My New Jersey Divorce and a divorce and family attorney with the DeTommaso Law Group in Somerville, New Jersey. CLICK HERE to schedule a consultation.
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