Edward R. Weinstein, Esq.Edward R. Weinstein, Esq.

Is A Professional Degree Considered Property In A N.J. Divorce?

No.  A professional degree is not “property” that would then be valuated and divided between the husband and wife in a New Jersey divorce.  Having said that, the other spouse’s divorce attorney may argue that their client should be compensated for any monetary contributions made to help their spouse obtain that post-graduate degree.  One way to accomplish this goal under New Jersey divorce law is called reimbursement alimony.  Following is the lawyer’s legal breakdown of the paramount case on this issue in this state. 

In Mahoney v. Mahoney, the Supreme Court of New Jersey explored whether one has a right to share in the value of a business degree attained by a former spouse during the marriage. To accomplish this the Court had to determine if the degree cold be considered “property” under New Jersey Statute 2A:34-23. This statute requires the equitable distribution of all property legally and beneficially acquired during the marriage. Alternatively, even if the business degree is not property, the Supreme Court still had to determine if one can recover money that he or she contributed towards a former spouses support while that spouse worked toward the degree. The Supreme Court of New Jersey agreed with the New Jersey Appellate Division that the professional degree was not property and thus not subject to equitable distribution, but still reversed the appellate panel’s decision because it effectively denied any sort of monetary relief for the spouse who contributed to her husband’s degree.

In 1971 Melvin and June Lee Mahoney married in Indiana. At that time Melvin had an engineering degree, and June Lee had a bachelor of science. Generally, had shared household expenses until the time they separated in October 1978. However, this was not the case for the time period Melvin attended the Wharton School of Business, from September 1975 to January 1977, and earned an M.B.A degree.

While Melvin was attending school for sixteen months, June Lee contributed about $ 24,000 for the household Melvin made no monetary contributions while he was studying. After he earned his degree he started working as a commercial lending office at Chase Manhattan Bank. In 1976, June Lee started a part-time graduate program of study at Rutgers University. Her tuition was paid by her employer, and she earned her master’s degree in microbiology a year after she and Melvin separated. Unlike Melvin, June Lee worked full time during graduate school.

Melvin filed for divorce in 1979, and a dual judgement of divorce was granted on May 1980. During the time of trail. Melvin earned $ 25,600 a year, and June Lee earned $ 21,000. June Lee did not make any claim for alimony, nor was there any real property. What little personal property the couple owned was divided by a property settlement agreement. The only remaining issue was June Lee’s claim to be reimbursed for the amount of support she provided her husband while he was studying for his M.B.A. degree. She wanted 50% of the $ 24,000 that she contributed towards the household, in addition to the 50% of the $6,500 cost of Melvin’s tuition.

The Family Part of Middlesex County concluded that June Lee deserved to be reimbursed, and held that the degree Melvin earned constituted a property right, and “to ignore the contributions of the sacrificing spouse would be. . ., an unjust enrichment of the educated spouse. The trial court ordered that a reasonable credit should be paid to June Lee to cover the costs of maintaining the household and supporting Melvin while he was studying for his M.B.A. The court ordered Melvin to pay June Lee $ 5,000, at a rate of $ 100 every month.

Melvin appealed the decision, and the New Jersey Appellate Division reversed the order. Not only did the appellate panel reject June Lee’s reimbursement claim, but also stated that professional licenses and educational degrees are not considered “property” under the equitable distribution statute, N.J.S.A. 2A:34-23. The panel reasoned that that degrees do not have the attributes of most property rights, their value is merely speculative, and it may already be accounted for in alimony or the equitable distribution of other assets. The Supreme Court of New Jersey granted certification to review the issue.

The Supreme Court of New Jersey started its opinion by stating that in the past, the Court has held that the world “property” should be given an “expansive interpretation.” New Jersey Family Part courts have subjected a wide range of interests and assets to equitable distribution including military retirement pay and disability benefits, personal injury claims, unmatured private pensions, and unliquidated claims for workers’ compensation benefits. Still, the court has never subjected any asset to equitable distribution with an uncertain and unquantifiable future monetary value, like a degree or professional license. Unlike traditional property, a degree or professional license cannot be sold, nor can its value be readily determined. If the court were to allow the equitable distribution of a degree it would essentially be distributing “earning capacity” or in other words, income that the holder of the degree might never obtain. The whole valuation would be completely speculative. Moreover, any income that comes from the degree would be property acquired after the marriage ended. Equitable distribution is strictly limited to property obtained during the marriage.

While most courts have refused to consider degrees as marital property subject to equitable, many courts have awarded supporting spouses an amount based on what it costs the supporting cost to help the other spouse attain a degree. The Supreme Court of New Jersey stated that the Family Part court correctly recognized that June Lee should be reimbursed for her contributions. While the Supreme Court, generally, does not support the idea of reimbursement between former spouses, because “marriage is a shared enterprise, a joint undertaking,”  the Court also stated that “every joint undertaking has its bounds of fairness.” And to the Supreme Court, when a spouse takes the benefit and support of his or her spouse to attain a professional degree, and then the marriage ends without the supported spouse giving anything back for this support, an unfairness has occurred, and justice demands a remedy.

In Mahoney, June Lee acted as a supporting spouse and made monetary contributions towards Melvin’s M.B.A, while he studied, expecting that both of them would reap the benefits of her labor once he obtained degree. As such, it would be unfair to deny June Lee of the mutually awaited benefit, when Melvin gets to keep the degree he earned from his wife’s support, and all of the financial rewards that would come from it. Furthermore, June Lee not only financially supported her husband while he worked toward his degree, she also made personal sacrifices while Melvin chose not to work and financial contributions to the household. June Lee effectively chose to live a diminished financial level while Melvin got ready for a new career. If the marriage did not end, her sacrifices would have been remunerated. For these reasons the Supreme Court of New Jersey held that justice and equity required that June Lee receive a remedial award related to the amount of money she contributed towards her husband’s education. The Court referred to this award as reimbursement alimony. Reimbursement alimony is for when “a supporting spouse should be reimbursed for financial contributions he or she made to the spouse’s successful professional training. Reimbursement alimony of this sort encompasses all of the monetary contributions the supporting spouse made towards his or her former spouse’s education. This includes educational costs, household expenses, and any other contributions the supported spouse may have used in attaining his or her professional degree or license. This does not mean, however, that every single spouse that has contributed to his or her former partner’s degree has a right to reimbursement alimony. The only financial contributions that qualify for reimbursement alimony are ones made with the shared and mutual expectation that both spouses will eventually get increased income and material financial benefit. Reimbursement alimony does not undermine the basic goals of equitable distribution and traditional alimony.

June Lee financially supported her husband while he worked toward his M.B.A. degree. This support was assumed with the reasonable expectation that the degree would bring with it material benefit for both spouses. Therefore, the Supreme Court of New Jersey reversed the decision of the New Jersey Appellate Division and ordered a new hearing to be held for the Family Part to determine if reimbursement alimony should be awarded.

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