In Divorce, the Status of the Parties' Assets Will Determine What Portion – If Any – of Each Asset is Subject to Equitable Distribution
One of the popular misconceptions which matrimonial attorneys labor to dispel is the idea that divorcing parties are each entitled to “half of everything.” If only it were that simple! We regularly discuss the many factors affecting equitable distribution here at our DeMichele & DeMichele legal blog. It's a distinction that's easiest to explain with a simple example: the marital home… First and foremost, you and your attorney will need to ascertain whether the asset in question is “passive” or “active.” The key New Jersey cases on point are Scavone v. Scavone, 230 N.J. Super. 482 (Ch. Div. 1988) and Valentino v. Valentino, 309 N.J. Super. 334 (App. Div. 1998). To summarize, passive assets are those that fluctuated in value during the marriage exclusively due to market conditions. Active assets, by contrast, were managed during the marriage such that a change in value is attributable, at least in part, to active contributions from the parties. The Valentino Court decided that those contributions could include non-economic efforts by the dependent spouse to maintain the household including raising the parties' children. After you've determined whether an asset is passive or active, you'll need to see whether it falls into one of four (4) general categories:
(1) The first category of assets is an outright immune asset.
Immune assets could've been purchased before the marriage, received as gifts or obtained as part of an inheritance. A passive immune asset is always exempted from equitable distribution pursuant to N.J.S.A. 2A:34-23. Using our marital home example, a husband who purchased and paid off the marital home five (5) years before the marriage and has only his name on the title is likely able to argue this asset is immune unless the wife can show she contributed to an increase in the home's value…
The key issue, again, is whether she contributed. An increase in value alone won't render the asset subject to distribution at the time of divorce. The wife needs to obtain a real estate appraisal to see whether the home did increase in value during the marriage, and then she has to demonstrate that her efforts (e.g. raising the kids, helping repaint the home, working a job that helped pay for a new addition) cumulatively contributed to the increase. If she's successful, then the asset is distributable based on the asset's value as of the date of distribution.
(2) The second category of assets is an asset purchased in contemplation of marriage.
What happens if husband and wife to-be went and bought a home during their engagement? With the clear intent to purchase a marital home but before the actual date of their nuptials?
This assets is likely distributable and the analysis is just a matter of dates. If a couple goes and buys a home in contemplation of marriage, passive increases are distributable and valued as of the date of distribution. Active assets are therefore also distributable but the valuation benchmark is the date of the complaint.
(3) The third category of assets is a joint asset acquired during the marriage.
A passive asset purchased by the parties during the marriage AND in both of their names is clearly distributable and it will ordinarily be valued as of the date of distribution.
The analysis is slightly more complicated if the home is considered an active joint asset. The seminal case here is Bednar v. Bednar, 193 N.J. Super. 330 (App. Div. 1984). Absent fraud or bad faith, the incremental value will be distributable and valued as of the date of distribution. However, the value will be calculated based on the date of the complaint if only one party actively contributed to the increase in value.
(4) The fourth category of assets is an asset acquired during the marriage in only one party's name.
Last but not least are those assets acquired during the marriage but NOT jointly. If passive in nature, they're still distributable but the valuation occurs with the date of distribution as the benchmark. Active assets in one party's name are distributable under these circumstances but with the value set as of the date of the complaint.
So let's assume that our fictional wife bought the house with her husband during the marriage but, for whatever reason, her name wasn't on the complaint. The home is distributable either way; the parties simply need to hash out how she contributed to the increase if at all.
Figuring out “who gets what” in divorce is clearly a complicated question. Your attorney not only needs to apply the law and determine the implications of your unique factual circumstances, but even couples with relatively few assets may require the services of an home appraiser to the appropriate valuation point contingent upon the factors discussed above. Married couples with significant assets and a high net worth often need the help of multiple experts to appraise artwork, boats, retirement accounts and closely-held family businesses. Don't take a chance with the fruits of your life's work! If you have a question regarding New Jersey divorce, equitable distribution or, specifically, how to value your assets for the purposes of distribution, please contact the family law lawyers at DeMichele & DeMichele online today. Call now to schedule your confidential consultation (856) 546-1350.