In any New Jersey divorce, attorneys strive to assist our clients with the division of their assets. In a courtroom, this is known as equitable distribution. While this is often a fairly straight- forward process, it can become significantly more complex when dealing with property or assets located in other states or even foreign countries. As my divorce and family law firm was one of first in the nation to have a web site, my associate attorneys and I have confronted this complex area of the law more so than others here in New Jersey.
This piece shall explain how New Jersey divorce laws come into play when your divorce lawyer is striving to protect your rights as to property located elsewhere other than here in New Jersey. The following legal analysis is both comprehensive yet complex, which is another reason that you always want an expert in divorce and family law handling your case.
Family Courts in New Jersey, having jurisdiction over the parties, can equitably divide marital property. Marital property includes all real and personal property acquired during marriage. While the statutes further state that real or personal property located outside of New Jersey is subject to equitable distribution and the court may include in its order appropriate provisions to ensure compliance with the order of equitable distribution, it is not always easy to enforce an award for distribution of property that is located in a foreign jurisdiction. The term “foreign jurisdiction” applies to other states as well as other countries.
New Jersey and most other states make a legal distinction between matters which are “in rem” and those which are “in personam”. An in rem action means that the property itself is located within the state (such as land) while “in personam” means that the court is asserting its power over a person, not a thing. Any attempt by a court to assert title to property in another state is void. Instead, the court may order a party of the divorce, a “person”, over whom it has jurisdiction to do an act, such as convey the property located in the other state. So long as the court has the power over the person it can make an effective order.
So how does this apply to your divorce? If you have a property located in Pennsylvania, for example, that was purchased during the marriage, it or its value, is subject to equitable distribution upon dissolution of your marriage. Accordingly, if it is determined that the property must be sold so that the equity can be distributed between you and your spouse, then the court has jurisdiction to order either one party, or both parties, to effectuate that sale. While the Court does not have jurisdiction over the property itself as it is outside of New Jersey, it does have jurisdiction over the property owners, and can compel action accordingly.
This issue becomes more complex when we venture into the international scope. Let’s assume we are dealing with a bank account in a foreign country which holds a large sum of money. If, during your divorce proceeding one party to the action obtains a valid order in New Jersey as to what is to happen with those funds, it would have to be enforced in the foreign country. For example, if the Court in New Jersey has entered an Order that a bank account must be “frozen”, (meaning there can be no withdrawals from the account), this may be difficult to enforce in the foreign country. Some foreign entity banks which do business in the United States may honor the order on a short term basis which may make for an easy resolution. However, that may not be the case. The United States and each individual state is hesitant to allow foreign judgments to be enforced here as the foreign courts may not afford the litigants the same due process rights as are required by our courts. Similarly, foreign courts whose judgments are not honored here will often refuse to honor the judgments and orders of our courts.
It may be that the best step is to obtain local counsel in the foreign country to aid in this process and work in connection with your local counsel in New Jersey. In many countries it is difficult, time consuming, and costly to obtain a satisfactory result. Whenever possible, a party is best off to be awarded distribution of assets located in the United States, rather than trying to divide and distribute foreign assets
There are other considerations to account for when dealing with foreign distribution of assets. For example, while the IRS has held that transfers of property incident to divorce are not a taxable event, other countries may not have the same law and there may be unknown tax ramifications. Similarly, it may not be possible to remove property or currency from the foreign location.
Foreign property distribution is a complex matter even for the most experienced family law attorneys. If your matter includes foreign assets you would be best suited to make your counsel aware of these facts as soon as possible so that appropriate action can be taken to find and preserve these assets for valuation and distribution.
I invite you to contact my office if you or a loved one is facing a divorce involving property outside of the state of New Jersey. Thank you.