What Is Equitable Distribution In Divorce?
If you’re beginning the process of divorce, much of the future is uncertain. You know you need to start thinking about the logistics, like where to live and how to effectively co-parent, but another important thing on your mind is how your assets will be divided.
New Jersey is an equitable distribution state, which means the split could be 50/50, or it could be something else that the court deems fair based on legal guidelines.
What is equitable distribution?
Equitable distribution is the court’s efforts to fairly divide marital assets, which include most assets acquired during the span of the marriage. The goal is not necessarily to distribute the property evenly; rather, the court aims to account for contributions (financial or otherwise) over the course of the marriage.
When splitting up the assets, the court also considers the types of property you and your spouse share. Some property, like gifts, are generally not be divided. Other types, like commingled and marital property, generally are.
Commingled property belonged to one spouse before marriage, but over time, the other spouse has contributed to its value, entitling that party to a proportion of it during equitable distribution. Anything acquired during the marriage and shared between spouses is marital property.
The court will treat your debts the same way. If you and your spouse have credit card debt or student loans incurred during your marriage, you may or may not take 50% of the debt in the divorce. Instead of basing its decisions on predetermined percentages, the court will determine a fair proportion based on the criteria of equitable distribution found in state law.
There are a few practical points you can take from this:
- Asset and debt distribution could be 50/50, or not. Although equitable distribution does not always split assets and debt cleanly down the middle, this can, and often does, occur.
- Not all property is marital property. The court will not divide individual inheritances or gifts between the spouses. Additionally, assets that you obtained prior to marriage are not marital property, but a value increase may be.
- Know your pre-nuptial or post-nuptial agreements. If you and your spouse have a legally binding prenuptial agreement in place, this will take precedence over equitable distribution. Anything you didn’t cover in your agreement or settle independently will be subject to equitable distribution.
How does equitable distribution work?
Using several criteria to evaluate the division of property, the courts will determine the fairest way to split your assets. In New Jersey, these criteria include (but are not limited to):
- Asset values and debts. To fully understand the economic situation of both parties, the court may bring on appraisers and other professionals to determine the value of marital property. The court will also consider and distribute marital debt.
- Age and health of the spouses. These factors contribute to earning potential, so they are important for determining asset distribution. This will have little impact if the spouses are of a similar age and health status.
- Length of the marriage. A longer marriage tends to involve more intertwined assets, which can make equitable distribution trickier. The court must tease apart each party’s contributions over a long period to best divide the assets and debts. The process can be much more straightforward if the marriage was short; even more so if finances were not combined.
- Economic forecast. The court will consider a number of components of each spouse’s economic status. Earning capacity is often lower for a spouse who withdraws from the workforce, for example, and the court may increase distribution to that party to account for the disparity. The same may happen if one spouse lacks the income to uphold the marital standard of living. Each spouse’s education, job prospects, and work experience are also relevant.
- Custody agreements. If there are children, it’s important that the distribution minimizes disruption to their standard of living. It is also important that if custody is not evenly split, the primary parent has the financial support needed to properly feed and house those children for the majority of the time.
Once the court has assessed these factors, it will divide your assets as fairly as possible. For this reason, transparency is important, and you should ensure you are accounting for all of your assets and debts.
Is all property subject to equitable distribution?
If you owned property before marrying and are now divorcing, you’re probably wondering what will become of your assets. For example, many people going through divorce are concerned with how their house will be handled. Generally, in New Jersey, equitable distribution does not count the house itself as a marital asset if you purchased it before your marriage.
However, if your initial purchase occurred prior to marriage, and your spouse contributed to the payments and upkeep, your spouse may be entitled to some percentage of the house or the proceeds from its sale. This principle applies to other assets. If you can prove that you owned something before marriage, and its value has not changed, it is unlikely that it will be included in the eventual distribution.
This also applies to debts.
If you entered the marriage with substantial student loans or credit card debt, you will still be responsible for paying them off after the marriage ends, and it is unlikely that your spouse will share that burden. Other exempt property includes assets covered by your pre-nuptial or post-nuptial agreement if applicable.
Determining what’s equitable
Determining which assets go to which spouse is not entirely dependent on financial contribution or need.
In many households, one spouse quits working for an extended time to care for children, and the court must account for that spouse’s non-financial household contributions and challenges finding sufficiently paying work following a large employment gap.
Consult with an attorney
Divorce is a painful time, and separating your life from your spouse’s often involves difficult decisions about how to divide property. At Dughi, Hewit & Domalewski, our family law attorneys bring compassion and years of experience navigating property settlements and New Jersey courts.
We want to help negotiate a settlement that works for you. If the court’s help is needed, we aim to represent your interests while keeping the process as smooth as possible. To discuss your case, schedule a consultation with us today.
