Equitable Distribution of Assets

Equitable Distribution of Assets in a New Jersey Divorce

“Equitable distribution” refers to the process by which assets and liabilities are identified, quantified, and divided between the two parties in a divorce case. With some exceptions, only those assets and liabilities acquired during the marriage are subject to equitable distribution. It is important to note than under New Jersey law, assets acquired by way of inheritance or gift from someone other than one’s spouse are not subject to equitable distribution so long as the asset received is not commingled i.e. placed in the name of the other party, or placed into a joint bank account. Typically, divorcing parties enter into a “Property Settlement Agreement” or “Marital Settlement Agreement” which specifies in great detail how assets and liabilities of the marriage are to be divided. Remember that New Jersey is NOT a community property state, which means that assets are not automatically evenly divided between the parties, although this is most frequently the case, barring unusual circumstances.

Typical assets to be divided in a divorce include the following:

Marital Home. Oftentimes, the marital home may be the most significant asset a couple owns. In a divorce, equitable distribution will usually be effectuated by either (1) a sale of the home, with the parties dividing the proceeds evenly subject to any other credits to be exchanged between them or (2) one party buying out the other’s equitable interest, usually through a mortgage refinance. In the event of a buyout, the parties need to agree upon the value of the home, or they may jointly agree to appraise the home and be bound by the opinion of the appraiser. In order to avoid the expense of an appraisal, which can range anywhere from $350.00 to $500.00, the parties may wish to obtain a Comparative Market Analysis (“CMA”) from a realtor, which is often provided at no charge.

Automobiles. It is important to remember that leases vehicles have no value and are not considered assets in a divorce as they are in fact liabilities. However, assuming the car is not leased, and assuming any finance payments remaining are less than the actual value of the car, then the car is an asset. Typically, the value of a vehicle would be determined using either the Kelley Blue Book or National Automobile Dealers Association used car guides, both of which can be accessed online. When both parties have cars of approximately the same age and mileage, they may each agree to retain their own car without any further equalization of value. If there is more than a nominal disparity in value between the parties cars, they will usually agree to an equalization, or credit, to the party retaining the car with a lesser value.

Bank Accounts, Stocks, Bonds, Mutual Funds, Stock Options

Retirement Accounts including Pensions, IRA’s, 401(K)’s. Along with the marital home, retirement accounts are usually one of a couple’s most significant assets to be divided. Almost all pensions and 401(K)s will require a special Court Order, called a Qualified Domestic Relations Order (QDRO) in order to protect the other party’s interest in it. The QDRO is usually prepared and finalized after the divorce, although there will be provisions in the parties’ Marital Settlement Agreement pertaining to it.

Personal Property and Home Furnishings. Every divorce attorney has at least one horror story involving the division of marital furnishings and personal property as part of a divorce. (Most have more than one.) Thankfully, for both the lawyer and the litigants, in the vast majority of divorce cases, the parties can amicably agree upon the division of personal property without much assistance from either the lawyers or the Court. Parties should be mindful of the fact that the value of the personal property they may be fighting over is often minimal in relation to the counsel fees they may be paying to address the issue. The “value” of most personal property in a divorce case (unless we are talking about works of art, antiques, special collections, etc.) is not the purchase price one may have paid for an item, but essentially “garage sale” value.

Whole Life Insurance Polices. A whole life insurance policy is a policy which has a cash surrender value. This should not be confused with a death benefit. A term life insurance policy, by contrast, has no cash surrender value and is not an asset in a divorce case. Litigants are sometimes unsure as to what type of coverage they have and are advised to check directly with the life insurance company. Life insurance benefits provided through one’s employer are also almost always term life polices.

Businesses, Partnerships, Professional Practices

Contingent Assets and Loan Receivables. A “contingent asset” is something which may, or may not, have value in the future. For example, a personal injury case which is pending might have some value in a divorce case, even though the non-injured party’s entitlement to any future settlement might be very small. Another example might be a novel which has been written during the marriage, but not yet published as of the date of divorce. Loans receivable, if ultimately collected, are another example of an asset which would need to be accounted for in a Property Settlement Agreement.

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