In a New Jersey Divorce, When Will My Assets Be “Valued?”
You do not need to be a divorce lawyer to know that your assets are likely to be “split” during a divorce here in New Jersey. Equitable distribution of assets is an extremely sensitive aspect of a divorce proceeding. Not only does a New Jersey Family Court have to determine which assets are subject to distribution, but it also has to decide the value of each asset and how much each party is entitled to. Yet, one problem that the court frequently encounters is the fact that assets tend to fluctuate in value. Therefore, a court will have to determine at what point in time the asset’s value should be considered. Sometimes a court will look to an asset’s value at the time the divorce complaint is filed; however, that is not always the case. The case of Syed v. Syed illustrates this perfectly.
In the case the parties married in June 1992 as the result of an arranged marriage, and divorced in November 2009. One child was born of the marriage. The main issue in the case was whether the husband’s investment account, titled completely in his name but comprised of both pre-marital and marital assets, should be valued at the time the wife filed her complaint for divorce or at the time of the trial.
The wife was employed as a bank clerk in NYC from 1990 until 2006. She then secured several part-time jobs, earning $9500 in 2010. The wife testified that even though she had been looking for a full time job, her lack of fluency in English held her back. Based on her income level, she could not afford to pay for her monthly expenses without support from her ex-husband. She stated that she could get a full time position as a nursing assistance, yet she first needed to complete a course at a local school, which cost $2000, and then pass an exam, which she had previously failed.
Additionally, the wife testified that at the time of the marriage she had savings of $15,000 to $20,000. In 1997, the parties bought a two-family home at a cost of $215,000. The wife stated that she and her husband had always maintained separate accounts, and she contributed $21,500 towards the down payment of the house from her own money. At the trial, the parties stated that the house had increased in value to $385,000, yet there was still a mortgage for $76,051.50. Moreover, the wife testified that she had no knowledge of her husband’s stock dealings and was never involved in the management of the contested investment account.
On the other hand, the husband testified and the trial judge found that before the parties were married, the husband bought 20 subdivided building lots in Pakistan for $50,000. He sold 19 of the lots in 2004, yielding proceeds of $320,000. The husband kept the majority of his profits in the investment account, although $22,144 was deposited in the wife’s separate bank account. However, the husband wound up taking that money back from his ex and used it, along with other money, to buy 3 properties in Jersey City. The properties amount to $262,000, yet by 2006 the husband had sold those 3 properties as well for $383,000. He deposited that amount into the investment account. The trial court concluded that the $383,000 contribution to the account constituted marital property.
As of July 2006, the investment account was worth $570,088. The husband stated that he made deposits into the account after 2006, but was not sure on what dates and for what amounts. By May 2008, the account had more than doubled in valued to $1,384,245. The husband opened a margin account that allowed him to borrow and trade stocks. The amount owed on the margin account was more than $500,000, leaving the investment account to be valued at $844,782.75.
By October 2008, the investment account had significantly decreased to $101,239.54. The husband claimed that changes in the market were the main reason a vast majority of the money was lost. In September 2009, the husband deposited $42,751.97 into the account and by the end of the month, the account had rebounded slightly to $281,869.92. On December 31, 2009, the date closest to the filing of the divorce complaint, the account was valued at $310,357.90. Yet, after the complaint was filed the husband continued to trade the investment account. By December 9, 2010 the account had decreased to $144,000.
At that point in time, the court ordered the husband to transfer 50% of the balance to a CD, which he was restricted from using pendente lite. However, the husband continued to trade the account. By December 31, 2011, the account had decreased to $21,428.71. At the time of the divorce proceeding the court determined, with the exception of the investment account, that each party was entitled to half of the marital assets. Although the investment account was considered a marital asset since it was comprised of both pre-marital and marital assets, the court recognized the husband’s sizable pre-marital contribution and awarded him 60% of the account. The trial judge valued the account at $310,357.90, using the balance closest to the filing of the divorce complaint. The husband appealed.
On appeal, the husband argued that the trial court erred in valuing the investment account as of the filing date of the divorce complaint instead of at the time of the trial. However, the Appellate Division disagreed and affirmed the findings of the lower court. The court stated that “where an asset has not just decreased, but has become worthless after the date of the complaint but before the distribution, the court must consider that factor in its equitable distribution of that asset.”
Here, the judge found that to an extent, market forces did cause the investment account to decrease; however, the drastic decrease in value was not due solely to market forces. Rather, the husband had actively traded the account during the period between the filing of the complaint and the time of the trial. The court believed that the husband lost even more money because he tried to trade against the account and had margin calls at the high percentage rates. Therefore, it was only proper to value the account before all of that had occurred, at the time the complaint for divorce was filed.
The main takeaway from Syed is that the court will look to all of the facts surrounding this issue before making a determination of when to value an asset for purposes of equitable distribution. For more questions, please contact my law firm today.