People who plan to divorce in New Jersey might have multiple concerns. They might wonder how to handle child custody and whether they might pay or receive child and spousal support, but determining how the property and debts will be divided is a major concern for most people. While you might think that everything you and your spouse own will be divided equally, that is not always the case in New Jersey. Here is what you need to know about the division of assets in New Jersey divorces from a divorce attorney in Essex County at the Ziegler Law Group, LLC.
Understanding Property Division in a Divorce
Every divorce will require the division of the couple's property and debts. However, each spouse will be able to keep their separate property and be responsible for paying his/her separate debts. State law determines how the property and debts will be divided in your case. Your marital finances and circumstances will also play a role. If you and your spouse can negotiate a full settlement agreement, the judge will likely approve it as long as the agreement is fair to both of you.
Community Property vs. Equitable Distribution
There are two different approaches used by states to determine how the assets and debts are divided, including community property and equitable distribution. New Jersey is an equitable distribution state.
Community Property States
A minority of states have community property rules for the distribution of debts and assets in divorce cases. In these states, the marital property that the couple accumulated during the marriage will be divided equally between them. Each spouse retains control of the separate property he/she owned before the marriage as well as inheritances and gifts one spouse received as long as they weren't commingled with community property during the marriage.
The majority of states, including New Jersey, follow equitable distribution rules for the division of property and debts in a divorce. Equitable distribution means the marital assets and debts are divided fairly. A fair division of assets and debts does not always mean that they will be divided equally, however. Instead, the court will consider the specific circumstances involved to determine the fairest way to divide the assets and debts. The factors courts consider when deciding how to divide the assets and debts in a New Jersey divorce are listed in N.J.S.A. 2A:34-23.1.
Types of Assets That Might be Divided
In a divorce, the following types of assets that were accumulated by either spouse during the marriage will be divided:
- Real estate, including the marital home
- ndividual Retirement Accounts (IRAs)
- 401(k) plans
- Bank accounts
- Household furnishings
- Stock options
- Investment holdings
To be included in the marital estate and divided in a divorce, these and other assets will typically need to have been acquired by either spouse during the marriage.
Separate vs. Marital Property
Assets and debts must be classified as either separate or marital property to determine whether they are subject to division in a divorce. Marital property and debts will be divided equitably between spouses. By contrast, the separate property might be protected from inclusion in the marital estate and retained by the spouse who owns it.
Property Included in the Marital Estate
Property that will be included in the marital estate includes assets or debts acquired or incurred by either spouse during the marriage. The marital property might include real estate, employment benefits, wages, investments, businesses, and others. If a spouse disputes that something is a marital asset, the court will consider other factors to determine how it should be classified. For example, including the names of both spouses on a title will be evidence that the property should be deemed to be a marital asset. For example, if a wife owned a home before getting married but added her husband's name to the deed after marriage, the court will likely find that the home lost its separate nature.
Separate property and debts are owned by one spouse but not the other. Typically, this will include property that the spouse acquired before getting married or after filing for divorce. An inheritance or gift one spouse received during the marriage will also be that spouse's separate property as long as he/she took steps to retain its separate nature. Similarly, an award or settlement one spouse received for pain and suffering from a personal injury lawsuit will also likely be considered that spouse's separate property. However, portions of a settlement or award that were meant to replace lost wages might be considered to be marital property.
Separate Property Transforming Into Marital Property
There are some circumstances in which separate property may become marital property. If the facts suggest that the property was treated as marital property, it will likely be deemed as such and subject to division. For example, if a spouse received an inheritance and commingled the funds with marital funds, the inheritance will likely be treated as marital property instead of the recipient's separate property.
Some assets might also be a mixture of separate and marital property. For example, if one spouse owned a business before the marriage, the business could be a mix of separate and marital property if both spouses worked together to build the business's value during the marriage. Similarly, an IRA owned by one spouse before the marriage that the spouse continued making contributions to during the marriage might be deemed to be a mix of separate and marital property. In these types of situations, the party who owns the separate portion of the asset might compensate the other spouse for their portion to buy his/her interest out.
Proving an Asset is Separate Property
It might be necessary for a spouse to admit evidence showing that an asset is his/her separate property. The court will consider evidence to make the determination. When the separate property has been commingled with marital assets, it can be difficult for the spouse to prove that it should be treated as separate and not as a marital asset. In that type of situation, the spouse might need to negotiate a buyout or offset to compensate for the separate portion of the property.
Figuring out whether an asset is separate or marital can involve a fact-specific analysis. A spouse that wants to ensure an asset will retain its separate nature should be careful to avoid commingling it with marital property. For example, if a spouse receives an inheritance, his/her should deposit it in a separate account and only use the proceeds to make separate purchases instead of buying things for both spouses.
Speak With an NJ Divorce Attorney
Since New Jersey is an equitable distribution state for the division of property and debts, this means that the property and debts will be divided fairly instead of equally. In many cases, what might be deemed to be fair will be a 50/50 split. In other situations, however, the property and debts might be divided unequally. A divorce attorney in Essex County at the Ziegler Law Group, LLC can review the assets and debts that you and your spouse have acquired both before and during your marriage to determine which are separate property and which are marital assets and debts. We can then work to negotiate a settlement agreement that will achieve parity. Call us today to schedule a case review at (973) 878-4373.
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