How Property Is Divided in a New Jersey Divorce

New Jersey divides property in a divorce under equitable distribution (N.J.S.A. 2A:34-23.1). "Equitable" means fair in light of the factors in the statute, not automatically 50/50. In general, property acquired by either spouse during the marriage is subject to division regardless of whose name is on it, while premarital property and gifts or inheritances from third parties are generally exempt.

Is New Jersey a 50/50 state?

No. New Jersey is not a community property state, and there is no presumption of an equal split. In practice many divisions end up close to even, especially after a long marriage, but a court can divide assets unequally when the statutory factors call for it. The statute also presumes that each spouse made a substantial financial or non-financial contribution to the property acquired during the marriage, so a spouse who stayed home with children is not at a disadvantage for having earned less.

What is marital property, and what is exempt?

Marital property is generally anything either spouse acquired from the date of the marriage until the cut-off date, which is generally the date the divorce complaint is filed. Title does not decide the question: a 401(k) in one spouse's name, built from contributions during the marriage, is marital.

Exempt property generally includes:

• Property owned before the marriage.
• Gifts and inheritances received during the marriage from someone other than your spouse.
• Property acquired after the complaint is filed.

Exempt status is not absolute. Two issues come up often:

• Commingling. Depositing an inheritance into a joint account, or using premarital savings toward a jointly titled home, can make the funds difficult to trace and may turn them into marital property.
• Active appreciation. If exempt property increased in value because of either spouse's efforts during the marriage — for example, a premarital business that grew because of work done during the marriage — the increase may be subject to distribution. Passive growth from market forces alone is generally treated differently.

How do courts divide property?

Courts follow three steps: identify which assets are eligible for distribution, determine their value, and then decide how to allocate them. In the final step, the court weighs the factors in N.J.S.A. 2A:34-23.1, which include:

• The duration of the marriage or civil union.
• The age and physical and emotional health of each spouse.
• The income or property each brought to the marriage.
• The standard of living established during the marriage.
• Any written agreement between the spouses, such as a prenuptial agreement.
• Each spouse's economic circumstances when the division takes effect.
• Each spouse's income and earning capacity.
• Contributions by one spouse to the other's education or earning power.
• Each spouse's contribution to the acquisition, preservation or growth of marital property, including as a homemaker.
• The tax consequences of the proposed division.
• The need of a parent with physical custody to own or occupy the marital home.
• The debts and liabilities of each spouse.
• The extent to which a spouse deferred career goals.

How are specific assets handled?

• The marital home. One spouse may buy out the other's equity, often by refinancing, or the home may be sold and the proceeds divided. If one spouse keeps the house, the agreement should set a deadline to remove the other from the mortgage.
• Retirement accounts and pensions. The marital portion of a 401(k), IRA or pension is generally divisible. Employer plans are usually divided through a qualified domestic relations order (QDRO), and some government and military plans use their own court orders. IRAs can generally be divided by a transfer incident to divorce.
• Businesses and professional practices. A business owned by either spouse usually requires a valuation, often by a forensic accountant, and the analysis must avoid counting the same income twice for both distribution and alimony.
• Debts. Credit cards, car loans and other debts incurred during the marriage are allocated alongside assets.
• Personal property. Vehicles, furnishings and collections are usually divided by agreement; parties are encouraged not to spend more fighting over items than they are worth.

How can I protect my share?

• Make full disclosure, and insist on it. Each spouse files a sworn Case Information Statement, and discovery can test it. Our guide to how divorce works in New Jersey explains the process.
• Keep records of exempt property, such as account statements showing an inheritance and where it went.
• Don't move or spend assets outside the ordinary course once divorce is on the horizon. Courts can account for dissipation of marital assets when dividing what remains.
• Look at the whole settlement. Property division interacts with alimony and child support, so trading one asset for another should be done with the full picture in view.

Talking to a lawyer about your situation

Property division often involves the largest financial decisions of a divorce, and many are hard to undo once the judgment is entered. A consultation can help you identify what is marital and what may be exempt, what information you need, and how to approach the negotiation.

Gray Law Group is based in Jefferson and serves clients in Morris, Sussex, Warren and Passaic counties and throughout northern New Jersey. You can request a consultation to talk through your situation.