Maybe you bought a fixer-upper and transformed it into an HGTV-worthy home. Perhaps you recently received a sizable inheritance from a beloved family member. Maybe you’ve been steadily stashing away funds in an IRA since you graduated college.
All of these assets represent important—and valuable—investments. But what happens to them when you get divorced? Do they remain yours or will they be divided between you and your soon-to-be ex?
What factors can affect asset division during divorce
Unlike community property states, where assets are generally split down the middle, New Jersey relies on equitable distribution to guide asset divisions. This means that marital assets are split in a way the court deems fair—but what’s considered “fair” is highly fact-specific.
The courts will look closely at your unique circumstances and weigh the relevant factors before making decisions. These include:
- Duration of the marriage: The longer the marriage, the more likely your assets will be treated as marital property. In long-term unions, courts often see finances as deeply intertwined, which means more of your assets could be up for grabs. There are exceptions, but they rely heavily on the particular circumstances of your case.
- Marital contributions: Your paycheck isn’t the only thing that matters. The court also considers non-financial contributions like staying home to raise kids or manage the household.
- Income disparities: If one spouse earns significantly more, the court may determine balancing the scales is necessary. For example, if one spouse stayed home to care for children while the other worked full-time, the lower-earning spouse might receive a larger share of the assets to help ensure their financial stability post-divorce.
- Future financial needs: Courts aren’t just focused on the here and now. They also look at how each spouse will fare in the future when deciding who gets what. It’s not just about what you have today—it’s about your future financial stability.
If you have a prenuptial agreement, this document will likely define but will definitely influence the distribution of marital assets. A well-drafted prenup details how you and your soon-to-be ex should divide property in the event of divorce and will generally guide all discussions regarding assets during your divorce.
What is considered marital property?
It’s also necessary to consider what is viewed as marital property. Marital property typically encompasses any asset that was acquired during the marriage. This can include (but isn’t limited to):
- Property and real estate
- Automobiles
- Furniture and furnishings
- Collections
- Retirement assets
- Financial assets
- Airline miles and hotel points
- Family-owned and private businesses
- Pet custody
Debts, such as credit card balances, home equity loans, and student loans, can also be considered marital property if they were incurred during the marriage.
However, there are exceptions to this list. Some assets can be protected from division if shown to be separate property and some debts may be the sole responsibility of one spouse depending on how the debt was acquired and what it was utilized for.
During your initial meeting with a divorce lawyer, it’s helpful to bring a detailed list of your assets and your liabilities. This information helps your attorney get a better picture of your situation so they can advise you on the next steps.
What assets can be protected from division during divorce?
Understanding what can be protected from division increases your peace of mind and helps you plan ahead. By identifying which assets are shielded from the divorce process, you can create a strategic approach to negotiations and settlements with your attorney.
Pre-marital property
Any assets you brought into the marriage generally remain yours unless you commingled them with marital property. For instance, if you have a savings account solely in your name, it might be viewed as your property—unless you used it to pay for a joint home, invest in shared ventures, or even pay for ongoing bills or expenses.
In short, the more you’ve blended assets, the harder it becomes to argue that certain ones are exclusively yours.
Gifts, inheritances, and trusts
Unless they are intentionally given to both parties, gifts, and inheritances received during the marriage are usually safe from division. The catch? You need to keep them separate from marital assets.
If you inherit a sum of money or receive a valuable gift and deposit it into a joint account or use it for shared expenses like renovating the marital home, it loses protected status and could be considered fair game in asset division. So, while that family heirloom or cash windfall might seem safe, clear boundaries are crucial to keeping it off the negotiating table.
Additionally, if you’re a beneficiary of a trust established before the marriage, that money is usually yours to keep. Just make sure it’s not tangled in joint finances. If you’ve dipped into the trust to cover shared costs or transferred funds into joint accounts, it can complicate your claim to those assets.
Personal injury settlements
Settlements for injuries typically belong to the injured spouse because compensation for pain, suffering, or medical expenses is meant to help the injured party. However, like many aspects of divorce, there are exceptions. For example, if marital assets were spent on medical expenses, settlement funds could potentially be subject to equitable distribution.
The key here is understanding how the settlement is structured. Funds earmarked for personal suffering usually stay with the injured spouse, while anything tied to marital finances, such as lost wages or medical bills that impacted the household might end up in the mix.
Retirement accounts
Whether it’s a 401(k), 403(b), or an IRA, things can get a little complicated when it comes to retirement funds. You’ll need to draw a clear line between the marital portion (what you’ve built during the marriage) and the separate portion (what you brought in or earned pre-marriage)—and that can be easier said than done.
One acronym to know is QDRO (Qualified Domestic Relations Order). These orders are essential for splitting most retirement accounts without triggering tax penalties. But the real challenge is accurately valuing these accounts and navigating the complex web of distribution rules.
This is why working with an experienced, collaborative attorney is essential. Along with knowledgeable financial professionals, they can help you fairly value your assets while structuring a settlement that protects them and avoids tax implications.
Business interests
If you own a business independently or jointly with your former spouse, brace yourself for a thorough examination. Valuation is the first hurdle. Determining your business’s worth often requires appraisals and financial assessments.
Next, you’ll need to differentiate between marital and separate property. Even if the business predated your marriage, if your former spouse invested in it or supported you in non-monetary ways (e.g., leaving their job to run the household so you could focus on your business), they might be able to argue that part of the business value is marital property.
Regarding division, you have options: you can buy out your spouse, continue co-owning the business post-divorce, or sell it outright. Each choice brings challenges, so weigh them carefully with the guidance of your attorney. With some foresight and preparation, you can be better positioned to protect your interests.
Safeguard your assets with the help of a trusted divorce lawyer
Protecting your assets during a divorce requires more than understanding what’s at stake; it involves thoroughly reviewing critical documents to build a solid legal strategy. This helps you make informed decisions, prioritizing what matters most—ensuring you retain the resources necessary to rebuild and thrive post-divorce.
Let’s work together to develop a plan that safeguards your assets and sets you up for success after divorce. Contact us today for a strategy session.
