What is Considered Marital Property in a New Jersey Divorce

Splitting assets acquired during a marriage is often a key factor that determines whether former spouses start their post-divorce lives with a solid financial foundation. Courts typically approve property distribution agreements reached by spouses. When an agreement cannot be reached, a judge will determine how property is allocated.

New Jersey, like most states, uses the principle of equitable distribution to allocate property. Spouses generally keep their separate property, while marital property is to be distributed fairly between the parties after considering a variety of factors. Equal distribution is not required. While a court may rarely reallocate some separate property to achieve an equitable result, the primary focus is on division of marital assets.

Factors affecting property distribution include the length of the marriage, age and health of each party, standard of living achieved during the marriage, financial and non-financial contributions to the marriage and the future earning capacity of each spouse. Understanding how marital property is defined is critical to achieving a fair result.

What Constitutes Marital Property

Marital property is almost anything acquired during a marriage as measured from the date of the marriage to a specified date, usually the date on which a divorce is filed in court. This includes the family home and other real estate, vehicles, bank accounts, retirement accounts, stocks, investment portfolios, furniture, personal property and all wages, bonuses, commissions or other compensation earned by either spouse.

The value of a business or professional practice started after marriage will usually be classified as marital property even if it is primarily operated by one spouse. If the business was started by the spouse prior to marriage, the increase in business value since the marriage date is subject to distribution.

Who pays for an item and how an asset is titled do not govern how property is classified. When the item was obtained controls. For example, if a spouse purchases a truck using assets acquired during the marriage and puts the title only in that party’s name, the truck will be considered as marital property.

Both spouses do not have to earn a regular income for property to be deemed a marital asset. A spouse’s non-financial contributions such as managing the household and raising children will be considered by courts to determine a fair resolution.

All debts or other financial liabilities acquired by either spouse during the marriage are also considered marital property and are to be allocated by the court in a fair manner.

What Constitutes Separate Property

Separate property includes assets owned by each party before marriage including real estate, vehicles, retirement account contributions and business interests. An inheritance received by one spouse before or during marriage and some personal injury awards for pain and suffering are also considered separate property.

Gifts given specifically to one spouse for that person’s use will generally be considered separate property. Gift letters or other documents stating the donor’s intent are often helpful to establish a gift’s status. Gifts intended for the benefit of both spouses, even if given to one party individually, will often be considered as marital assets. Gifts given between spouses during the marriage are marital property.

If a retirement account was started by one spouse before marriage, the increase in account value during the marriage is marital property. Determining pre-marriage and present-day values for retirement accounts often requires hiring an expert. When both spouses have retirement accounts, a common resolution to save time and money is for each spouse to keep his or her benefits regardless of value.

Similarly, if one party owned a home prior to marriage and the home becomes the family home, the increase in value from the date of marriage is usually subject to distribution. Putting the deed in the names of both spouses will also convert separate property to marital property.

How Commingling Creates Marital Property

Separate property can be transformed into marital property subject to division when mixed with marital assets. Courts view commingling of assets as an intent to share them.

If an inheritance to one spouse is deposited in a joint bank account containing funds earned during the marriage, the inheritance loses its status as separate property. Similarly, if one spouse owned real estate before marriage and marital funds are used to pay the mortgage or renovate the property, the other spouse will generally acquire an interest in that property.

Separate property of one party can be used to purchase an asset during a marriage that will remain as separate property. For example, a spouse receives an inheritance and deposits it in a solely owned bank account. Funds from this account are used to buy a motorcycle. In this scenario, the cycle remains separate property.

To maintain status as separate property, premarital and inherited funds should be kept in a separate, individually titled account. Marital funds should never be added to this account. Detailed records must be maintained. Titles, deeds, financial statements, receipts and other written agreements can be critical to prove claims of separate property. Courts will want to see clear tracing of funds to determine if there has been commingling.

Prenuptial and postnuptial agreements that conform to New Jersey law can help to determine whether specific property is classified as separate or marital. Such agreements often have a major impact on property allocation.

Finally, while the date on which a divorce case is filed usually serves as the end date for acquisitions to be declared as marital property, courts will often examine whether assets were wasted or their value reduced improperly after that date. Judges can adjust property distribution to account for either spouse negatively impacting the estate value.

Properly categorizing assets and debts as separate or marital property can impact the ultimate property distribution by thousands of dollars. Reopening property distribution decisions after a divorce becomes final is often difficult if not impossible. Working closely with an attorney and providing clear documentation on assets can help ensure you can achieve financial stability after divorce. If you have any questions concerning what is considered marital property in a New Jersey divorce, call the Law Offices of Peter Van Aulen at (201) 845-7400 for a free consultation.