Dividing Assets – and Debts – In A Divorce

New Jersey is an equitable distribution state, meaning simply that the courts seek a fair, although not necessarily equal, distribution of a couple’s assets and debts in a divorce. First, though, the assets and debts must be categorized as either marital property or separate property.

Essentially, marital property are assets acquired during the marriage. New Jersey defines that period as beginning on the day of the wedding and ending the day a spouse files for divorce. Marital assets typically include but are not limited to:

• Income from either spouse
• Joint bank or investment accounts
• Houses, furniture, motor vehicles
• Gifts from one spouse to the other
• A portion of any business started during the marriage
• Contributions made during the marriage to retirement plans along with any associated appreciation

Marital debt includes but is not limited to such things as mortgages, auto loans, and joint credit card balances.

Separate property, on the other hand, are assets owned by one spouse prior to the marriage, as well as gifts and inheritances received by one spouse during the marriage. Separate debts are those incurred by one spouse prior to the marriage. Typically, these assets and debts stay with the original owner after divorce; however, spouses may be required to produce evidence of ownership, such as receipts or other relevant documentation.

It should be noted that separate property can become marital property if:

• The original owner puts the title or deed to the property in the names of both spouses
• The separate property is mixed with marital property in such a way that one cannot be distinguished from the other; for example, depositing a monetary gift or inheritance into a joint bank account.

In such cases, the assets would be subject to New Jersey’s equitable distribution laws.

To maintain some control over how their assets and debts are divided, couples can negotiate an agreement on their own or through mediation. They then sign a Marital Settlement Agreement (MSA) which must be submitted to a judge for final approval. If a couple cannot reach an agreement, a Family Court judge will make the final determination after considering such things as length of the marriage; the age, health and financial status of each spouse (including their income and earning capacity); and the lifestyle to which the couple was accustomed.