Equitable Distribution

1. The purpose of equitable distribution is to divide property acquired during the marriage in a manner that is just under the circumstances of the case. In other words, a court is required to make an equitable (NOT necessarily an "even") division of marital property, and this allocation is to be in accordance with the non-exhaustive list of statutory factors prescribed by N.J.S.A. 2A:34-23.1.



2. Law Lessons from Jarvis v. Jarvis (App. Div., Docket No. A-7050-03T2, Decided November 9, 2005, not approved for publication):
   
   The court must engage in a three step process for effectuating an equitable distribution of the parties' assets. Rothman v. Rothman, 65 N.J. 219, 232 (1974). The court first must decide what specific property of each spouse is eligible for distribution; then it determines the value of the asset for purposes of such distribution; and finally it determines how such allocation could most equitably be made. Ibid.; accord LaSalla v. LaSalla, 324 N.J. Super. 264, 276 (Ch. Div. 1999), rev'd on other grounds sub nom La Sala v. La Sala, 335 N.J. Super. 1 (App. Div. 2000), certif. denied, 167 N.J. 630 (2001).



3. Law Lessons from Weimer v. Weimer (App. Div., A-5065-02T5, November 28, 2005, not approved for publication): The Supreme Court requires the trial judge, when equitably distributing marital assets, to employ the following three-step procedure: (1) identify the specific property determined to be subject to equitable distribution; (2) determine the value of each asset, and (3) equitably distribute the assets. Rothman v. Rothman, 65 N.J. 219, 232 (1974). This three-step process was incorporated by the Legislature in N.J.S.A. 2A:34-23.1.



4. Law Lessons from Cunningham v. Cunningham (Appellate Division, A-3176-03T3, October 11, 2005, not approved for publication):
   
   In the process of equitable distribution of marital property, the parties may stipulate to, or the court can determine, the value of the marital assets. The court will then considered the statutory factors prescribed by N.J.S.A. 2A:34-23.1, and allocated the assets accordingly.
   
   The purpose of equitable distribution is to divide property acquired during the marriage in a manner that is just under the circumstances of the case. Painter v. Painter, 65 N.J. 196, 209 (1974)). To this end, "where the parties to a divorce have accumulated substantial assets during a lengthy marriage, courts should compensate for any unfairness to one party who sacrificed for the other's education . . . by an equitable distribution of the assets to reflect the parties' different circumstances and earning capacities." Mahoney v. Mahoney, 91 N.J. 488, 504 (1982). In other words, a court is required to make an equitable, not an "even", division of marital property, and this allocation is to be in accordance with the non-exhaustive list of statutory factors prescribed by N.J.S.A. 2A:34-23.1.
   
   Tax consequences can be considered, along with all the other factors, in determining a party's distributive share. Goldman v. Goldman, 275 N.J. Super. 452, 462 (App. Div. 1994). However, if the tax is simply too speculative to permit a reduction in value, that hypothetical tax consequences upon the future sale or transfer of marital assets should not be deducted from present value for equitable distribution purposes. See Orgler v. Orgler, 237 N.J. Super. 342, 355 (App. Div. 1989).



5. Law Lessons from Pollack v. Pollack (Appellate Division, A-6632-03T5, September 26, 2005, not approved for publication):
   
   A spouse may acquire an interest in marital property by virtue of the mutuality of efforts during marriage that contribute to the creation, acquisition, and preservation of such property. This principle, primarily equitable in nature, is derived from notions of fairness, common decency, and good faith. Carr v. Carr, 120 N.J. 336, 349 (1990).
   
   A marital home acquired in one party's name during the parties' engagement, which the parties intended to be their marital home, was subject to equitable distribution despite the manner in which legal title was held. Weiss v. Weiss, 226 N.J. Super. 281, 288 (App. Div. 1988).



6. Law Lessons from Edell v. Edell (App. Div., Docket Nos. A-1695-02T5 & A-5953-03T5, Decided November 28, 2005, Not For Publication):
   
   When a trial judge makes findings and conclusions as to equitable distribution and support, it is axiomatic that those issues are interrelated and intertwined. Claffey v. Claffey, 360 N.J. Super. 240, 263 (App. Div. 2003). Clearly, the question of support is intimately related to the question of equitable distribution. Conforti v. Guliadis, 128 N.J. 318, 324 (1992). See N.J.S.A. 2A:34-23(b)(10); Lepis v. Lepis, 83 N.J. 139, 154-55 (1980). As required by the Legislature, all determinations of alimony, child support and equitable distribution are governed by a number of factors, including the needs of the supported parties, their income, assets, earning abilities, the duration of the marriage, and the standard of living during that time. See N.J.S.A. 2A:34-23(a),(b); N.J.S.A. 2A:34-23.1.
   
   Our Supreme Court has held "that a trial court's determination of the interplay between an alimony award and equitable distribution is subject to an overarching concept of fairness, bearing in mind the interrelated yet separate purposes of alimony versus equitable distribution." Steneken v. Steneken, 183 N.J. 290, 293 (2005).
   
   Although the issues of equitable distribution and support are "clearly interrelated, the structural purposes of alimony and equitable distribution are different." Id. at 298. In Crews v. Crews, 164 N.J. 11, 16 (2000), the Court "reaffirm[ed] the Lepis v. Lepis, supra, 83 N.J. at 139 (1980) principle that the goal of a proper alimony award is to assist the supported spouse in achieving a lifestyle that is reasonably comparable to the one enjoyed while living with the supporting spouse during the marriage." "Accordingly, the supporting spouse has a continuing responsibility 'to contribute to the maintenance of the dependent spouse at the standard of living formerly shared.'" Glass v. Glass, 366 N.J. Super. 357, 370 (App. Div.), certif. denied, 180 N.J. 354 (2004) (quoting Lepis v. Lepis, supra, 83 N.J. at 152). See Crews v. Crews, supra, 164 N.J. at 16; Innes v. Innes, 117 N.J. 496, 503 (1990); Heinl v. Heinl, 287 N.J. Super. 337, 344 (App. Div. 1996).
   
   The standards for child support are similar except that child support is a joint obligation of both parents for as long as the children remain unemancipated. Martinetti v. Hickman, 261 N.J. Super. 508, 512 (App. Div. 1993); Lynn v. Lynn, 165 N.J. Super. 328, 343 (App. Div.), certif. denied, 81 N.J. 52 (1979). "The right to child support belongs to the child . . . ." Pascale v. Pascale, 140 N.J. 583, 591 (1995) (citing Martinetti v. Hickman, supra, 261 N.J. Super. at 512); Patetta v. Patetta, 358 N.J. Super. 90, 94 (App. Div. 2003). A child support obligation may continue while a child is away from home attending school, including college. Patetta v. Patetta, supra, 358 N.J. Super. at 93-95; Raynor v. Raynor, 319 N.J. Super. 591, 613-14 (App. Div. 1999); Martinetti v. Hickman, supra, 261 N.J. Super. at 512-13; Zazzo v. Zazzo, 245 N.J. Super. 124, 131-32 (App. Div. 1990), certif. denied, 126 N.J. 321 (1991). Child support and contribution to school expenses "are two discrete yet related obligations imposed on parents." Hudson v. Hudson, 315 N.J. Super. 577, 584 (App. Div. 1998). Cf. Guglielmo v. Guglielmo, 253 N.J. Super. 531, 548-49 (App. Div. 1992) (parent responsible to pay for more than just college tuition and books).
   
   "In contrast, equitable distribution determinations are intended to be in addition to, and not as substitutes for, [support] awards." Steneken v. Steneken, supra, 183 N.J. at 299. It involves identifying the elements of the marital estate, valuing them as of a particular date, and then determining an appropriate division utilizing various statutory factors. Rothman v. Rothman, 65 N.J. 219, 232 (1974); N.J.S.A. 2A:34-23.1. See Painter v. Painter, 65 N.J. 196, 212 (1974). The guiding principle is to effect a fair and just division of marital assets. Steneken v. Steneken, supra, 183 N.J. at 299. Compare Robertson v. Robertson, ___ N.J. Super. ___, ___ (App. Div. 2005) (slip op. at 7-8) (post-divorce vested stock options not marital assets).
   
   Both marital assets and marital debts are subject to distribution. As to marital debts, the court has observed:
   
   The trial court's approach to the allocation of debts is supported by judicial authority. In Schweizer v. Schweizer, 301 Md. 626, 484 A.2d 267 (1984), the court distinguished between marital debts, which are directly traceable to the acquisition of marital property, and nonmarital debts which are not. If marital, the debts are subtracted from the total value of the marital property before distribution. If nonmarital, they are taken into account as a reflection of the party's economic circumstances when the court determines the amount and method of payment of the award. Id. at 637, 484 A.2d at 272. Even if debts are determined to be marital, they could be allocated to one party based upon his or her greater earning potential. See Painter v. Painter, 65 N.J. at 211.
   
   Generally speaking, in dividing marital assets the court must take into account the liabilities as well as the assets of the parties. Finley v. Finley, 422 N.E.2d 289, 295 (Ind. Ct. App. 1981). In other words, if the assets are to be divided between the parties, the debts incurred in obtaining those assets should likewise be allocated between the parties. Hansen v. Hansen, 302 N.W.2d 801 (S.D. 1981). However, it may not be an abuse of judicial discretion to divide the assets of the parties equally without requiring them to share the debts. Levy v. Levy, 277 S.C. 576, 291 S.E.2d 201 (1986).
   
   Plaintiff has the burden of establishing the traceable debts. Sharp v. Sharp, 58 Md. App. 386, 398 (1984). However, if the debt resulted because the husband intentionally dissipated marital assets "such intentional dissipation is no more than a fraud on marital rights," and the debt will not be charged to the wife. Ibid. [Monte v. Monte, 212 N.J. Super. 557, 567-68 (App. Div. 1986).] See Robertson v. Robertson, supra, ___ N.J. Super. at ___ (slip op. at 14-15) (denial of supporting spouse's requests for a credit of one-half of home equity loan used for marital purposes solely because the supporting spouse "was in a better position to pay the debt" was an abuse of discretion).



7. In the September 2005 issue, The Matrimonial Strategist [a newsletter published by Law.com, associated with ALM media company] warns that country club memberships need to be evaluated closely to determine if they are marital property subject to equitable distribution. The newsletter reports that in Brewster v. Brewster [FSRFA03019425S, Conn. Super., May 17, 2005], the court decided that a club's bylaw that does not allow for a transfer of membership prevents the rights of membership, by themselves, to be considered marital property.



8. Who gets the frozen embryos? See Owning Persons: The Application Of Property Theory To Embryos And Fetuses, published in the Wake Forest Law Review by Jessica Berg, Associate Professor of Law and Bioethics, Case Western Reserve University Schools of Law and Medicine.



9. A couple who decided to collect art as a way to spend quality time together may be viewed as a "collecting unit" [see Scull v. Scull, 94 App. Div. 2d, 462 N.Y.S. 2d 890 (1st Dept. 1983)], whose art assets may need special handling due to the personal attachment that may add a dimension other than dollar value in the mind of the collectors. See Art As An Asset In Divorce, Resolving The Power Struggle, by Beverly Schreiber Jacoby, published in the September 2005 edition of The Matrimonial Strategist.



10. Law Lessons from Robertson v. Robertson (App. Div., Docket No. A-2282-03T2, approved for publication November 9, 2005):
    
    In Painter v. Painter, 65 N.J. 196, 218 (1974), the Supreme Court stated "that for purposes of determining what property will be eligible for distribution the period of acquisition should be deemed to terminate the day the [divorce] complaint is filed." Although the Court appeared thus to set forth a bright-line rule in its decision, the court observed further: We are under no illusion that what we have said above will provide certain and ready answers to all questions which may arise as to whether particular property is eligible for distribution. We have sought only to implement the legislative intent, as we discern it, by setting forth what we believe should be the general governing rules. Individual problems must be solved, as they arise, within the context of particular cases. [Id. at 218 n.7.]
    
    A principal purpose of equitable distribution is to recognize and provide compensation for the contribution of each party to the joint marital enterprise, whether as a homemaker or salary-earner. Pascale v. Pascale, 140 N.J. 583, 609 (1995) (recognizing marriage as a shared enterprise, the fruits of which should be distributed upon dissolution); Rothman v. Rothman, 65 N.J. 219, 229 (1974) (recognizing that as the result of the supportive role played by a homemaker-wife, she should "clearly be entitled to a share of family assets accumulated during the marriage."). "[A]ssets acquired after that enterprise or partnership no longer exists should not be so included" in the marital estate. Portner v. Portner, 93 N.J. 215, 219 (1983).
    
    In Pascale, a case concerning the distribution of options to the wife during the course of her continuing employment but after the divorce complaint had been filed, the Court held that the focus should be on "whether the nature of the asset is one that is the result of efforts put forth 'during the marriage' by the spouses jointly, making it subject to equitable distribution." 140 N.J. at 609. Holding that it would be inequitable to apply the date of complaint rule inflexibly, the Court in Pascale found that the husband should not be denied the benefit of stock options that were earned by the wife during the marriage but were not awarded to her until shortly after the marriage terminated, and that the options at issue had been granted for the "excellent service that [the recipient] had provided to the company during her marriage." Id. at 610.



11. How do you value stock options (vested or not) for purpose of equitable distribution? ---
    
    Potential approaches are:
    
    Valuation of stock options can be done through the Black-Shoals method. However, some feel that it is complex, expensive and speculative.
    
    Alternatively, the parties may want to provide in the Property Settlement Agreement for a constructive trust, whereby each party holds in trust for the other those options which are to be distributed to that party (arguably, no actual trust agreement is required). If and when the stock options mature, the employee spouse provides written notice to the other spouse, who can then choose to exercise his/her share of the options. The net proceeds (after taxes attributed to the employee spouse) are then paid to the alternate spouse.
    
    Apparently, some companies now permit a direct transfer of stock options pursuant to a Judgment of Divorce -- this would avoid the need for the constructive trust.
    
    Most stock options become null and void if the employee leaves the company; in that case, neither spouse will get the options.
    
    For other (perhaps better) approaches, consult with an appropriate expert.



12. Law Lessons from JAGTIANI v. JAGTIANI (App. Div., A-1226-04T3, December 13, 2005, not approved for publication): If the property's value increased while defendant continued to both maintain possession of the property and delay plaintiff's receipt of his interest in the property -- whether rightly or wrongly -- then fundamental fairness required that plaintiff be entitled to benefit to the extent the value of the property increased. In such a circumstance, simple equity requires that any increase in value attributable to market factors be shared by the parties. See, e.g., Wadlow v. Wadlow, 200 N.J. Super. 372, 384 (App. Div. 1985); Bednar v. Bednar, 193 N.J. Super. 330, 333 (App. Div. 1984).



13. Law Lessons from NAHAR v. NAHAR (App. Div., A-2728-03T2, December 27, 2005, not approved for publication): The Supreme Court set forth the proper procedure for equitably distributing property in Rothman v. Rothman, 65 N.J. 219, 232 (1974). First, the trial court must "decide what specific property of each spouse is eligible for distribution." Ibid. Then, the court "must determine its value for purposes of such distribution." Ibid. Third, the court "must decide how such allocation can most equitably be made." Ibid. The parties must identify the assets eligible for distribution and then present proofs regarding the assets' value. Sculler v. Sculler, 348 N.J. Super. 374, 380 (Ch. Div. 2001). Then, "it is up to the court" to distribute the assets by "applying the statutory factors set forth in N.J.S.A. 2A:34- 23.1." Ibid.



14. Law Lessons from DE SARO v. DE SARO (App. Div., A-1649-04T5, March 23, 2006, not approved for publication):
    
    While the courts have expressly disapproved of a presumption of equal distribution of assets, DeVane v. DeVane, 280 N.J. Super. 488, 493 (App. Div. 1995) (citing Rothman v. Rothman, 65 N.J. 219, 232 n.6 (1974)), that the end result is one where the assets are split relatively evenly does not automatically warrant a remand. "The goal of equitable distribution . . . is to effect a fair and just division of marital assets." Steneken v. Steneken, 367 N.J. Super. 427, 434 (App. Div. 2004), aff’d in part, modified in part, 183 N.J. 290 (2005). In distributing marital property, the court undertakes a three step process. Sculler v. Sculler, 348 N.J. Super. 374, 380 (Ch. Div. 2001). First, the court determines what property of each spouse is eligible for distribution. Ibid. Second, each property is valued. Ibid. Finally, the court "must decide how such allocation can most equitably be made." Ibid. (quoting Rothman v. Rothman, 65 N.J. 219, 232 (1974)). As a part of the third step, the court must apply the statutory factors set forth in N.J.S.A. 2A:34-23.1. Ibid. No one statutory factor is superior to the others. Ibid. The list of statutory factors is not exclusive, and the court may consider "any other factor" which it deems to be relevant. N.J.S.A. 2A:34-23.1p. The end result need only reflect that "the trial judge . . . appl[ied] all the factors set forth in N.J.S.A. 2A:34-23.1[,] and distribute[d] the marital assets consistent with the unique needs of the parties." DeVane, 280 N.J. Super. at 493.
    
    It can be made clear from the pre-marital conduct of the parties with regard to their assets, that the "shared enterprise of marriage beg[an] before the ceremonial act." McGee v. McGee, 277 N.J. Super. 1, 12 (App. Div. 1994). The conduct of the parties before and during a marriage is a relevant factor that the court may consider, as it carries great significance in determining their intentions as to each other had the enterprise been successful.
    
    While acknowledging that a substantial portion of the total economic value of the assets was derived from plaintiff's premarital estate, the judge may determine that the assets should be divided evenly based substantially on the parties' pre-marital conduct, their standard of living during the marriage, and the voluntary acts taken by plaintiff with respect to his premarital assets.



15. Law Lessons from COSTANZA v. CLEMENTE (App. Div., A-545-04T5, approved for publication March 27, 2006): N.J.S.A. 2A:34-23, governing equitable distribution, "authorizes the court to determine not only which assets [or liabilities] are eligible for distribution and their respective values, but also how the allocation of the assets [or liabilities] is to be made." Borodinsky v. Borodinsky, 162 N.J. Super. 437, 443 (App. Div. 1978) (citing Rothman v. Rothman, 65 N.J. 219, 232 (1974)).



16. Law Lessons from PLATT v. PLATT (App. Div., A-1555-04T2, approved for publication April 11, 2006): Passive assets, the value of which fluctuate after the filing of the complaint by virtue of market forces, should be valued as of the date of trial or distribution, not the date of the filing of the divorce complaint. Scavone v. Scavone, 243 N.J. Super. 134, 137 (App. Div. 1990).



17. Pets May Be Entitled To A "Unique Value"



18. For a discussion of equitable distribution of employee benefit plans, enter HERE.



19. A New Twist: Divorce After Death discusses potential posthumous divorce litigation in light of revised probate laws. The article reports that family law expert Jonathan W. Wolfe, Esq. warns: "If you have a will, it has to be changed immediately. And if you don't have a will, you need to have one ... because you are now [when you are divorcing] in a position in your life where you don't want your separate assets to go to the person you're trying to divorce."



20. Other Resources



21. Return to the Divorce Topic



22. Return to General Topic Index

NOTE: If you believe that ANYTHING on this Webpage is misspelled, incomplete, inaccurate or downright wrong; or if a Link fails to link to its intended Webpage, please send me an Email, expressing your concern or opinion.

Also, please be mindful that THE INFORMATION AND SOURCES PROVIDED HEREIN MAY NOT BE ACCURATE OR COMPLETE -- YOU SHOULD CONSULT WITH AN ATTORNEY BEFORE RELYING ON THIS INFORMATION.  No warranties, express or implied, are made regarding the accuracy, completeness, or usefulness of the information.

Also, please be aware that the information on this Webpage DOES NOT constitute LEGAL ADVICE, which advice will only be given in PRIVATE CONSULTATION, after entering into an ATTORNEY / CLIENT RELATIONSHIP, and the execution of a WRITTEN RETAINER AGREEMENT. Also, simply sending to me an email or providing information to me does NOT create an ATTORNEY / CLIENT RELATIONSHIP   -- if you wish to retain me as your attorney or mediator, you are welcome to call me at (908)486-2200, or to Email me, to schedule an appointment.

Links

Linked sites are NOT under the control of the Paul G. Kostro, A Professional Corporation or Paul G. Kostro, Esq. (the "Authors") and the Authors are NOT responsible for the content of any linked site or any link contained in a linked site.

The Authors do NOT endorse websites, companies or entities to which links are provided.

The Authors reserve the right to terminate any link at any time.

If you decide to access any of the third party sites linked to, you do so entirely AT YOUR OWN RISK.

© Paul G. Kostro, Esq. 2005