The division of assets during a divorce is one of the most intricate and emotionally charged aspects of the process. When assets are complex, such as real estate, investments, business interests, retirement accounts, and other significant properties, the challenge of achieving a fair division becomes even more pronounced. In New Jersey, where equitable distribution governs the division of marital property, the process demands a meticulous and informed approach. Understanding how these assets are evaluated and divided is crucial for anyone undergoing a divorce in the state.
Understanding Equitable Distribution in New Jersey
New Jersey operates under the principle of equitable distribution, which differs significantly from the community property laws observed in some other states. Under equitable distribution, marital assets are divided in a manner that is fair but not necessarily equal. The court considers various factors in determining what constitutes fairness, including the length of the marriage, the age and health of each spouse, their respective financial contributions, and the economic circumstances each party will face after the divorce.
It is important to recognize that not all assets are subject to division. Only marital property, which generally includes assets acquired during the marriage, is considered. Property owned by one spouse prior to the marriage, as well as inheritances and gifts received by one spouse during the marriage, are typically excluded from division, provided they have been kept separate from marital assets.
The Complexity of Dividing Real Estate
Real estate is often one of the most valuable assets in a marriage, and its division can be particularly complex. This is especially true when the property includes not just the marital home but also additional properties such as vacation homes, rental properties, or commercial real estate. The first step in dividing real estate is determining its value. This may involve hiring a professional appraiser who can provide an accurate assessment of the property’s current market value. The value of real estate can fluctuate based on various factors, including the local market, the condition of the property, and any renovations or improvements made during the marriage.
Once the value of the property is established, the court will consider how it should be divided. There are several potential outcomes. One spouse may be awarded the property outright, often in exchange for other assets that balance the distribution. Alternatively, the property may be sold, with the proceeds divided between the spouses. In some cases, particularly when children are involved, the court may allow one spouse to remain in the marital home for a period of time, such as until the children reach a certain age, before selling the property and dividing the proceeds.
More than an accomplished divorce and family law attorney, Tanya L. Freeman, is a consummate professional with a wealth of corporate and life experience. Known as a leader and strategist, Tanya L. Freeman was appointed by the Governor of New Jersey as Chair of the Board of Directors of the University Hospital in Newark, New Jersey. Tanya L. Freeman also presents among the ranks of public speakers. She captivates and inspires professional groups nationwide. "Tanya has the eloquence and oratory brilliance with the ability to forge deep connections with her listeners."
Tanya L. Freeman, Attorney at Law
Managing Partner of the Family Law Practice at Callagy Law
Valuing and Dividing Investments
Investments represent another category of assets that can be complex to divide. These may include stocks, bonds, mutual funds, retirement accounts, and other financial instruments. The value of investments can fluctuate based on market conditions, making it challenging to establish a fair division. Additionally, certain investments may have tax implications that must be considered when determining how to divide them.
For example, retirement accounts such as 401(k)s and IRAs may be subject to specific rules regarding division. In many cases, a Qualified Domestic Relations Order (QDRO) is required to divide these accounts without incurring tax penalties. The QDRO is a legal order that instructs the retirement plan administrator on how to distribute the funds. When dividing retirement accounts, it is essential to consider not only the current value of the account but also the potential future value, including any interest or earnings that may accrue.
Stocks and bonds can also be challenging to divide, particularly if they are part of a larger portfolio. The court may consider the cost basis of these investments, as well as any potential capital gains taxes that may be triggered by their sale or transfer. Mutual funds, which pool money from multiple investors to purchase a diversified portfolio of stocks and bonds, may be divided by transferring shares to each spouse, or by selling the fund and dividing the proceeds.
Business Interests and Professional Practices
Dividing business interests and professional practices is one of the most challenging aspects of asset division in a divorce. A business may represent a significant portion of the marital estate, and its division requires a detailed and complex analysis. The first step is to determine the value of the business, which may involve hiring a forensic accountant or business valuation specialist. The valuation process considers various factors, including the business’s assets and liabilities, its earning potential, and any goodwill associated with the business.
Once the value of the business is established, the court must determine how it should be divided. In some cases, one spouse may be awarded the business outright, with the other spouse receiving other assets to balance the distribution. Alternatively, the business may be sold, with the proceeds divided between the spouses. However, selling a business is not always practical or desirable, particularly if one spouse has a personal or professional interest in continuing the business. In such cases, the court may consider alternative arrangements, such as structuring a buyout over time or establishing a payment plan that compensates the non-owning spouse for their share of the business.
I was very fortunate to find Tanya online during an urgent family matter. I was able to speak with her on our situation and she immediately jumped on the case the same day. I was impressed at her knowledge and her team as they were able to answer questions on the spot and navigate through an unpleasant situation. Her honesty and responsiveness have made this process much easier, and the support she has provided has truly gone above my expectation of a family law firm. This is truly an exceptional firm & I would highly recommend.” - Lydia Martinez My father recently hired Tanya Freeman; Family Law Attorney and her team as a replacement to handle his divorce which has been going nowhere for over 3 years with a different attorney. Tanya and her team have done so much within just a few months for his trial and has given my father a new sense of hope. The team is always quick to respond to any questions. The case is still ongoing, however, my father has newly restored confidence that he will be treated fairly and with his best interest in mind. We definitely recommend Tanya Freeman; Family Law Attorney." - Molly Howard Tanya is an outstanding attorney! Her attentiveness to detail and willingness to be honest with her clients means you’re going to get the best possible outcome for your case. She and her team went above and beyond, making sure my divorce and custody case ended neatly and in the best interest of my children. Her pricing is reasonable and she’s willing to work with you. I highly recommend Tanya Freeman to anyone going through a divorce or family law case!" - Jenifer Mckinney
Retirement Accounts and Pensions
Retirement accounts and pensions are often among the most valuable assets in a marriage, and their division can be particularly complex. These assets may include defined contribution plans, such as 401(k)s and IRAs, as well as defined benefit plans, such as pensions. The value of these accounts can fluctuate over time, and the tax implications of dividing them must be carefully considered.
In many cases, a Qualified Domestic Relations Order (QDRO) is required to divide retirement accounts and pensions. The QDRO allows for the division of these assets without incurring tax penalties or early withdrawal fees. It is essential to consider the current value of the account, as well as the potential future value, including any interest or earnings that may accrue.
When dividing pensions, it is important to consider the nature of the pension plan. Some pensions are based on a formula that considers the employee’s years of service and salary, while others may be based on contributions made by the employee and employer. The court may consider the length of the marriage, the employee’s years of service, and the expected future benefits when determining how to divide the pension.
Related Videos
Handling Debts and Liabilities
While dividing assets is a significant part of the divorce process, it is equally important to address debts and liabilities. These may include mortgages, credit card debt, car loans, and other obligations incurred during the marriage. In New Jersey, marital debts are typically divided in the same manner as marital assets, based on the principle of equitable distribution.
The court will consider various factors when dividing debts, including each spouse’s financial situation, their earning potential, and their role in incurring the debt. For example, if one spouse took on a significant amount of credit card debt for personal expenses, the court may assign that debt to that spouse. Alternatively, if the debt was incurred for joint expenses, such as household costs or family vacations, the court may divide it between the spouses.
It is important to note that the division of debt in a divorce does not change the terms of the original loan or credit agreement. Both spouses may remain liable for joint debts, even if the court assigns the debt to one spouse. This means that if one spouse fails to make payments, the other spouse may be held responsible. To avoid this situation, it may be possible to refinance or consolidate debts in one spouse’s name, or to pay off joint debts before finalizing the divorce.
The Importance of Legal Guidance in Dividing Complex Assets
Dividing complex assets in a New Jersey divorce requires a comprehensive understanding of the law, as well as a careful and methodical approach to valuation and division. The process can be emotionally challenging, as it often involves assets that have significant financial and personal value. Ensuring a fair division of these assets is essential to achieving a just outcome and to providing each spouse with the financial stability they need to move forward after the divorce.
Given the complexity of dividing real estate, investments, business interests, retirement accounts, and other significant assets, it is crucial to seek legal guidance from an attorney with experience in handling complex divorces. An attorney can provide valuable assistance in navigating the legal process, negotiating with the other spouse, and advocating for a fair division of assets.
If you are facing a divorce involving complex assets in New Jersey, Tanya L. Freeman, Attorney at Law, can provide the support and guidance you need. With extensive experience in family law and a deep understanding of the nuances of asset division, Tanya L. Freeman is committed to helping her clients achieve a fair and equitable resolution. Contact Tanya L. Freeman, Attorney at Law, to discuss your case and learn how she can assist you in protecting your rights and securing your financial future.