If you're contemplating divorce in New Jersey, you'll need to know how your property will be divided. New Jersey divorce laws consider the assets and debts a married couple acquire either individually or together during marriage to be "marital property," regardless of how the property is titled.
No, it isn't. New Jersey uses the concept of "equitable distribution" to divide property in a divorce, which means that fundamental fairness, under the circumstances of each case, forms the basis of property division. By contrast, in community property states, courts attempt to divide property as near to a 50-50 split as possible.
To learn more about the difference between community property states and equitable distribution states, see the article "Property Division by State".
A court must consider many factors in dividing a divorcing couple's property, including:
For the most part, judges dividing marital property in New Jersey aren't interested in fault, but there are a few rare exceptions. Where one spouse has "dissipated" (wasted) marital assets by misusing property (such as by gambling or spending marital funds on an adulterous affair), 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.
It's up to a judge to 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. Spouses ending longer marriages have usually contributed more significantly to a joint standard of living, and given up more individual income-generating opportunities.
Couples can negotiate their own property divisions either independently, or with the help of attorneys or a mediator. New Jersey courts also provide various programs for divorcing couples to assist them in resolving property disputes. If all else fails, a judge or arbitrator will make the final decision.
Equitable distribution happens in three basic steps, described below.
Marital property includes assets and debts accumulated during marriage. While the type and amount of property is unique to each marriage, marital property generally includes:
This list gives a good idea of what could be divided at divorce, but it isn't everything.
Note that marital property doesn't include property either spouse acquired before marriage. Nor does it include property received during the marriage by way of an inheritance, or a gift from someone other than the other spouse. 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" (mixed together), such as where a spouse deposits funds from what initially was a separate account into a joint account, and the spouses 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 owns a house separately, but then transfers the title to both spouses, the house becomes martial property subject to equitable distribution.
As long as separate property is kept apart from 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 (including money) a spouse receives for the sale or exchange of separate property remains separate.
If the value of a separate asset increases during the marriage as a result of economic circumstances alone, the increase generally remains separate. Think in terms of interest that accrues on a separate investment account. But if the increase results from the active efforts of either spouse, the increase is marital property. Let's say both spouses pay to remodel a home owned by one spouse as separate property. The increase in value resulting from the remodel will likely be subject to equitable distribution.
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.
There are various rules governing valuation of property. But generally, assets are assessed at "fair market value", which is what you could get for the property if you sold it today. In some cases, couples may need help from professionals, such as real estate or business appraisers, to arrive at the right figure.
With some martial property—like a house, a boat, or a savings account—it's relatively easy to determine a value. But things get trickier with other assets, particularly where the benefit from those assets hasn't accrued yet. Property like unexercised stock options, and pensions before retirement, fall into that category. For these types of assets, you may require an opinion from a forensic accountant and/or an actuary.
Most property lends itself to straightforward division, such as a savings account. Split what's in there and close the account. But other assets can be problematic.
Dealing with the marital home can sometimes pose difficulties. Of course the simplest method of dividing the home is to sell it and share the proceeds. You can even do this before the divorce is final. However, if only one spouse wants to take that route, 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 period of time. This is most common when there are minor children involved. The order or agreement might specify that the house will be sold at a set future date, such as when the youngest child leaves for college.
If a couple has enough joint assets to enable one spouse to "buy out" the other spouse's share of the marital home, they can adjust the distribution of the assets to make that happen. An alternate means of accomplishing this would be for the spouse who wants to keep the house to refinance the existing mortgage, and use the refinance funds to buy out the other spouse. But a note of caution: whatever method you're contemplating to buy out your spouse, determine up front that you'll have enough future income to pay the ongoing expenses of maintaining the home.
Distributing benefits earned by a spouse who participated in a retirement plan during the marriage (participating spouse) can be cumbersome. If you get divorced before the benefits are paid out, then there are typically two methods used to divide them. One is to postpone the division until the benefit matures (is legally able to be paid). That way, both spouses get to share the payout. Note that, depending on the type of retirement plan involved, you may need a Qualified Domestic Relations Order (QDRO) to be able to share the benefits. The QDRO is a document separate from the final written divorce judgment, and must be tailored to each plan's specific requirements.
The second way to divide retirement benefits is to allow the participating spouse to keep the entire benefit, but the other spouse gets to keep another asset (or assets) that equals the benefit's value at the time of divorce.
As mentioned above, spouses can attempt to agree on how to split assets. The more you can do on your own, or with the aid of your attorneys or a mediator, the more you'll save in time, anxiety, and legal fees. In fact, you should attempt to do this with every aspect of your divorce, if possible. If you're successful, you can enter into a written settlement agreement which the court can incorporate into your divorce judgment.
Debts, just like assets, are subject to equitable distribution. In fact, in some divorces, dividing debts will be the overriding concern.
For the most part, both spouses are responsible for debt either spouse acquired during the marriage (marital debt). Separate debt, such as one that arose prior to the marriage, would continue to be the sole responsibility of the spouse who initially incurred it.
Note that under certain circumstances a judge might deem a debt incurred during the marriage to be a separate obligation. Let's say a spouse squanders marital assets on a luxury car, to get back at the other spouse for wanting a divorce. It's a good bet the vindictive spouse alone will be stuck with those car payments.
As with equitable distribution of assets, dividing marital debt is a balancing act, with the judge deciding who should be responsible for what. Again, fundamental fairness is the key. So, for example, if one spouse has a much greater ability to pay a certain debt, the court might assign that debt solely to that spouse.
It's crucial to note that separation agreements and divorce orders aren't effective against creditors, so 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 does remain on any account your former spouse is supposed to be paying, remember that you're still responsible to the lender for this loan. So verify actual payment by your spouse to make sure you aren't surprised in the future by a late payment fee or default charge, and a resulting blot on your credit rating.
For many more articles about divorce in New Jersey rules and regulations, including child custody, child support, and property division, see our New Jersey Divorce and Family Law page.