Equitable Distribution in a New Jersey Divorce
Learn how property is divided in a New Jersey divorce.
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If you are contemplating divorce in New Jersey, you'll need to know how your property will be divided. New Jersey considers the assets and debts a married couple acquires either individually or together during marriage to be “marital property,” regardless of how the property is titled. Equitable distribution rules in New Jersey require a fair, but not necessarily equal, division of all marital property in a divorce.
What are the Equitable Distribution Factors in New Jersey?
A court may consider many factors in dividing a divorcing couple's property, including:
- the length of the marriage
- each spouse’s physical health, emotional health, and age
- any income or property either spouse brought into the marriage
- the standard of living the couple established during the marriage
- any written prenuptial or post-nuptial agreements covering property division
- each spouse’s overall economic circumstances
- each spouse’s income and earning capacity (ability to earn income based on education, training, experience, length of any absence from the job market, and custodial responsibilities for the couple’s children)
- the extent to which either spouse may have delayed pursuing career goals during the marriage
- any time and expense required for a spouse to acquire the education or training necessary to achieve a standard of living comparable to the marital standard
- any contributions either spouse made to the education or earning power of the other spouse
- any contribution by either spouse to acquiring, preserving, improving, or wasting marital property, including contributions as a homemaker
- the tax consequences of a proposed distribution
- the present value of all property
- the need of a parent with physical custody of a child to own or occupy the marital residence or use household effects
- each spouse’s debts and liabilities
- any present or future need for a medical or educational trust for either spouse or a child, and
- any other relevant factors.
See N.J.S.A. 2A:34-23.1.
Is Marital Fault or Misconduct a Factor?
For the most part, judges dividing marital property in New Jersey are not interested in fault, but there are a few rare exceptions. Where one spouse has “dissipated” (wasted) marital assets by misusing property (by gambling, for example), a court may assign the other spouse a larger part of the remaining assets to help compensate for the loss of marital funds. A judge might also make an exception where one spouse’s behavior was “egregious” or extremely shocking: for example, if one spouse tried to murder the other.
Are Some Factors More Important Than Others?
A judge can decide how much weight to give any particular factor. Judges generally put the greatest importance on the length of the marriage and the marital lifestyle. For example, spouses ending longer marriages have usually contributed more significantly to a joint standard of living and given up more individual opportunities.
How Does the Equitable Distribution Process Work?
Couples can negotiate their own property divisions either independently or with a mediator’s help. New Jersey courts also provide various programs for divorcing couples to help them resolve property disputes. If all else fails, a judge or arbitrator will make the decision.
Equitable distribution happens in three basic steps, described below.
Identify Marital Property
Marital property includes assets and debts accumulated during marriage. It doesn’t include property either spouse acquired before marriage or received as an individual inheritance or gift from a third party during marriage. A spouse who claims that any property the couple owns at the time of divorce is separate will have to prove it. This can be difficult, as separate and marital property are often “commingled,” or mixed together. For example, one spouse might deposit funds from a previously separate account into a joint account, and then continue to add marital funds to the joint account during the marriage.
A property owner can “transmute” (change) separate property into marital property, or vice versa, by changing title to the property during marriage. For instance, if one spouse changes the title on a separately owned home to both spouses as “tenants by the entireties,” the home becomes martial property subject to equitable distribution.
As long as separate property is kept separate and not mingled with or changed into marital property, it belongs only to the spouse who originally owned it. This is true even if the property changes form or value. For example, property a spouse receives for the sale or exchange of separate property remains separate. An increase during marriage in the value of a separate asset as a result of economic circumstances alone is generally separate, while an increase from the active efforts of either spouse is marital. For instance, interest owned on a separate investment account remains separate; however, if both spouses paid to remodel a home one spouse owned as separate property, the resulting increase in value is likely marital property.
Distinguishing marital property from separate property can be complicated. If you and your spouse disagree about whether specific property is separate or marital, ask an attorney for advice.
Determine the Value of Marital Property
Generally, property is valued at its current "fair market value," which is what you could get for the asset if you sold it today. In some cases, couples need help from professionals, such as real estate or business appraisers, to determine asset values for property, such as a home or business. A retirement pension can be especially difficult to evaluate and may require an opinion from a forensic accountant and/or an actuary.
Distribute Marital Property
There are many options to consider in the distribution of marital assets and debts. A couple can agree to sell a marital home and divide the proceeds even before the divorce is final. If only one spouse thinks this is necessary, that spouse will have to ask the court for permission to put the home on the market.
A couple can also give (or a court can order) one spouse the right to live in the home for some temporary period of time. This is most common when a couple has minor children. The order or agreement might specify that the house will be sold at some specified future date: for example, when the youngest child leaves for college. A couple may also transfer the home to one spouse, while the other retains an interest-bearing loan.
If a couple has enough joint assets to enable one spouse to “buy out” the other spouse’s share, the spouse keeping the house may be able to refinance it with a new mortgage.
Some spouses want to trade retirement assets for the family home. If you are thinking about doing this, be careful. Before making this kind of decision, make sure that you have some other means to rebuild your retirement fund, and that you can afford to pay the ongoing expenses of maintaining the home.
Retirement accounts require special care in distribution, as many are subject to a federal law called the Employee Retirement Income Security Act (ERISA) and can only be distributed to a former spouse by mean of a Qualified Domestic Relations Order (QDRO) approved by the plan administrator. QDROs are complicated and difficult to prepare, so you should ask an attorney and/or your plan administrator for more information.
Unfortunately, in some divorces, dividing debts will be the overriding concern. Courts generally divide debts equally, but if one spouse is solely responsible for a debt, will receive the entire benefit from the debt, or is simply much more able to pay the debt, the court might assign the debt solely to that spouse.
Because separation agreements and divorce orders are not effective against creditors, the best practice is to liquidate assets to pay off joint debts and refinance any remaining debts in the name of the spouse who will be responsible for payment. If your name remains on any account that your former spouse is supposed to be paying, you should verify actual payment to make sure that you aren’t surprised in the future by a late payment fee or default charge. You will still be responsible to the lender for this loan, even if you and your spouse agreed that your spouse would repay it.
For many more articles about divorce in New Jersey, including child custody, child support, and property division, see our New Jersey Divorce and Family Law page.
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