In New Jersey divorces, all property acquired by the husband or wife during the marriage is subject to being divided, unless that property was inherited or received as a gift to one spouse from a third party. It doesn’t matter whose name the property is in. The law disapproves of divorced spouses sharing property after the divorce. Instead, we divide the value of the property either by selling it or by one spouse keeping the property and the other spouse receiving his or her share of the value either in cash or from another asset. We call this process Equitable Distribution. Importantly, equitable distribution doesn’t mean 50/50. It means what is fair as determined by the judge in a trial or the spouses in their settlement.
There are three steps to property division in divorce. First, we determine what property is included in the “marital estate.” That property includes real estate, bank accounts, investments, the items in the home as well as businesses, rights to receive future pension benefits, stock that was awarded during the marriage but may not be received until after the divorce, patents, and trademarks.
The second step in the process of property division is to place a value on the property. This can be done by an appraisal in the case of real estate, cars, jewelry or collectibles. Where one party owns an interest in a business, it is done by a valuation by an expert forensic accountant. In determining the value for the purposes of property division, the expert considers the assets owned by the business such as equipment, income generated by the business as compared with similar businesses, debts of the business and the business risk. If the property is a pension, it may be valued by an actuary.
The third step is the actual property division. Some property tends to be divided equally such as a home or a bank or stock account. When dividing an investment account, it is important to take into consideration the tax impact of the assets in the account. Since it is rare that divorcing spouses continue to co-own a business, typically one spouse retain the business and the other spouse receives a payment for the value of his interest. The spouse who is being paid for his interest rarely receives half the value since the party retaining the business is assuming the risk and because the business being retained is often the same asset that produces the income that is being used to pay alimony. Another property division method is for the spouses to trade assets of similar value and tax consequences. Once the property division takes place, it is not subject to modification.
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The information in this article is not intended as legal advice. For legal advice, you should consult your attorney.