Contemplating a divorce can raise a lot of questions. What does the future look like? Will I be okay? Will my children be okay? How will I support myself? Will I need to move?
The idea of divorce often brings up lots of big-picture, overarching concerns—questions like those mentioned above—but it’s just as common to be concerned about how a divorce will affect more tangible day-to-day issues.
At Jacobs Berger, LLC, one question our clients frequently ask is what they’ll be able to keep from the marriage. In New Jersey, marital assets are divided according to a principle known as equitable distribution.
What is Equitable Distribution in NJ?
The state of New Jersey is an equitable distribution state, meaning that the New Jersey courts aim to divide assets fairly, though not necessarily equally.
In determining the equitable distribution of assets, the court will consider, among other factors, the needs of each party, their unique circumstances, particularly their financial circumstances, and the nature of their assets, including tax consequences and liquidity.
Marital vs. Non-Marital Property
Under New Jersey law, not all assets and liabilities are subject to equitable distribution.
Generally speaking, assets or liabilities, such as debts, that are acquired or accumulated during the course of the marriage are considered “marital property” and are subject to equitable distribution during a divorce. By contrast, non-marital property may include assets and debts held or incurred independently by only one spouse. These assets and liabilities may be exempt from the equitable distribution process.
Knowing which of your assets fall into each category can help you plan a financially secure future. The analysis of whether an asset or liability is subject to equitable distribution or not can be extremely fact-sensitive.
Marital property generally includes assets and liabilities (debts) acquired or accumulated during a marriage by either spouse.
As long as the asset was acquired during the marriage and purchased using the income of either spouse or funds that can be considered marital, it is regarded as a marital asset for the purposes of equitable distribution. Liabilities, if incurred during the marriage, even if the liabilities or debts are in one party’s name, can be considered marital if they benefited the family. Even gifts exchanged between spouses during the marriage are treated as the marital property of both.
All of the following may be considered marital property:
- Property and real estate, including the family home
- Cars and furniture
- Family-owned and private businesses
- Retirement assets
- Debts, including mortgages
Non-marital property includes assets and debts that are considered separate and are not subject to equitable distribution.
Common types of non-marital property can include:
- Assets or debts acquired by an individual spouse before the marriage and which were not paid down or managed during the marriage with marital funds
- Gifts to one spouse by a third party before or during the marriage
- Assets inherited by a spouse before or during the marriage
- Assets bought or received by a spouse that was a clear and direct result of income or efforts made by that same spouse before marriage
As in any situation dealing with divorce, these definitions are strictly concepts and don’t reflect the many nuances of a marriage or marital finances. How these concepts are handled in real-life is fact-sensitive and subject to challenge.
Many people assume that all assets or debts acquired before the start of a marriage will automatically be considered non-marital property, but the reality is a bit more complicated.
For example, if an asset significantly increases in value throughout a marriage due to the active efforts of either spouse, it can sometimes be considered marital property, even if one spouse acquired the asset before marriage.
Also, if you inherited monies before the marriage, but co-mingled them with marital assets, or drew down on them significantly to support goals or projects of the marriage, those assets could be subject to equitable distribution.
The rules governing marital and non-marital property can be complex. It may be helpful to speak with an experienced New Jersey divorce attorney as you plan for your next steps during the equitable distribution process.
What Factors are Considered in Equitable Distribution?
New Jersey judges have wide discretion when determining how assets will be divided in a divorce.
Some of the factors that the court considers include:
- Length of the marriage
- Age, health, and special needs of both parties
- Property or income each party brought to the marriage
- Standard of living during the marriage
- The education and earning power of both spouses
- Prenuptial and other marital agreements
- The need for child support, including for children from a previous relationship
- And more
After weighing your specific circumstances and the nature of your assets, the court will aim to divide assets fairly, although this does not necessarily mean an equal split.
Alternatives to Equitable Distribution
Although equitable distribution is the principle used by the New Jersey courts, you may be able to exercise greater control over the distribution of your assets by seeking a Marital Settlement Agreement through mediation or other forms of Alternative Dispute Resolution (ADR).
As an alternative to a litigated divorce, ADR methods aim to help both parties reach a fair Marital Settlement Agreement in collaboration with an experienced, neutral third party.
Since they aren’t created by the New Jersey courts, Marital Settlement Agreements made through mediation and other ADR methods aren’t bound by the laws governing equitable distribution—and this may allow you greater freedom in determining how your assets are divided.
With that said, it may not always be possible for both parties to come to a collaborative and fair agreement, and it can be wise to work with an experienced attorney regardless of how your divorce proceeds.
Need Help Understanding Equitable Distribution in NJ? We Can Help
The team of experienced equitable distribution attorneys at Jacobs Berger, LLC can help you navigate the equitable distribution process and plan for your next steps after divorce.
We take a collaborative and communicative approach to our work and apply years of experience in NJ divorce law to help you understand and fairly resolve asset and liability distribution matters.
If you have further questions or need trusted legal support, contact us today to book a strategic planning session.