Equitable Distribution

Cutting the pie

New Jersey has rejected the fifty/fifty formulaic division of marital assets and liabilities in favor of the division of marital property based on the application of equitable principles.

The goal of equitable distribution is to bring about a fair and just division of marital assets and liabilities.

Those assets and liabilities need to be listed on the Family Part Case Information Statement that is required to be filed with the court. (See N.J. Court Rule 5:5-2).

Equitable distribution determinations are intended to be in addition to, and not as substitutes for, alimony awards.

When distributing marital assets and liabilities, a court must:

(1) identify the property subject to equitable distribution;

(2) determine the value of each asset; and

(3) decide how to allocate each asset most equitably.

In distributing marital assets and liabilities consistent with the parties’ unique needs, a court should consider, but not be limited to, the following factors:

a. The duration of the marriage or civil union;

b. The age and physical and emotional health of the parties;

c. The income or property brought to the marriage or civil union by each party;

d. The standard of living established during the marriage or civil union;

e. Any written agreement made by the parties before or during the marriage or civil union concerning an arrangement of property distribution;

f. The economic circumstances of each party at the time the division of property becomes effective;

g. 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;

h. The contribution by each party to the education, training or earning power of the other;

i. 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;

j. The tax consequences of the proposed distribution to each party;

k. The present value of the property;

l. 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;

m. The debts and liabilities of the parties;

n. 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;

o. The extent to which a party deferred achieving their career goals; and

p. Any other factors which the court may deem relevant.

Courts generally view marriage as a partnership, giving recognition to the contributions of each party; subject to the rebuttable presumption that each party made a substantial financial or nonfinancial contribution to the acquisition of income and property while the party was married.

In making an equitable distribution of marital property, the court must consider, among other things, the contribution of each party to the acquisition, dissipation, preservation, depreciation or appreciation in the amount or value of the marital property.

An intentional dissipation of marital assets by one spouse constitutes a fraud on the marital rights of the other spouse; and dissipated funds are subject to equitable distribution, as if the funds were not dissipated at all.

Generally, real and personal property legally and beneficially acquired by one spouse or both during the marriage is subject to equitable distribution. This division of marital property is responsive to the concept that marriage is a shared enterprise, a joint undertaking, that in many ways is akin to a partnership

The property that is subject to equitable distribution is the property acquired during the marriage, prior to the date that the complaint for divorce was filed. While post-complaint enhancements of the value of an asset that are attributable to market forces are subject to equitable distribution, a post-complaint enhancement attributable to investment of post-complaint income or efforts of one spouse are not.

The value of the marital home for purposes of equitable distribution is the present fair market value of the house less any outstanding encumbrances. The trial judge should not give either party credit for the original investment in the property. In the absence of contrary evidence, the valuation date for the sale of the former marital home should be the date of sale, not the date of the Judgment Of Divorce.

Even if property is not subject to statutory equitable division, a trial court may apply equitable remedies in distributing assets incidental to a divorce. For example, a constructive trust is available to prevent unjust enrichment. Quantum meruit and quasi-contractual theories also allow for recovery where one party has conferred a benefit upon another and not to distribute would result in unjust enrichment. A third equitable remedy is the theory of transmutation. Under this theory, property that was once classified as separate or non-marital property can be transmuted into marital property when the spouse with title represents to the other spouse that the property will be shared.

The right to receive a pension, even if not vested, is an asset that is a result of direct or indirect efforts expended by one or both parties to the marriage and a right acquired during the marriage. Each spouse has an expectation of future enjoyment in the pension payments, with the understanding that the pensioner must survive in order to receive it. Therefore, pension benefits that are not vested may be included in an equitable distribution award.

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To discuss your specific situation, please call me, Paul G. Kostro, Esq., to schedule an appointment: 908-232-6500 or Paul@Kostro.com

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