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

When Are Assets “Valued” In A Divorce?

In New Jersey, pursuant to Painter v. Painter, the Supreme Court of New Jersey explained that the period of acquisition for property eligible for equitable distribution terminates upon the date the complaint for divorce is filed.  Therefore, the lawyers at my divorce law firm understand that the “filing” of the Complaint of Divorce in the Family Part of the Superior Court of New Jersey is very important, even though the divorce has not yet been concluded. 

As a divorce attorney I embrace that a New Jersey Family Court has to the power to divide certain assets in an equitable and fair manner. The assets that may be subject to distribution are only those “legally and beneficially acquired” by one or both of the spouses “during the marriage.” In Even though this phrase may be clear on its face, it presents difficulties in its application in court. The start of this period is obvious-when the marriage ceremony takes place, however, the end date is a little more complicated.  A literal reading of the statute may seem to indicate the end point would be the date the judgment of divorce is entered. However, such an interpretation would result in two separate trials in almost every divorce case, because a litigant would not be able to present evidence about the value the value of marital assets, because the value would need to be current to the day the judgment of divorce is entered.

For reasons of fairness no property should be included in the calculation of equitable distribution that was acquired after the occurrence of an irreconcilable breakdown in the marriage, but there is no reasonable way to establish with sufficient precision when exactly a marital relationship broke down and became irretrievable. For these reasons, the Supreme Court of New Jersey explained that a better more workable rule for the purpose of determining exactly what marital property is subject to equitable distribution, the determinative date for equitable should be considered to end on the day the complaint for divorce is filed.

Stephen and Joan Painter got married on October 17, 1953, and had three children together. They lived together until their separation in January 23, 1967. Stephen and Joan divorced on March 14, 1972. The Family Part judge made an equitable distribution of the former couple’s martial property under the guidance of New Jersey Statute 2A:34-23. 

At trial, the court determined that Stephen had $ 230,309 in total assets, while Joan had $ 99,709 in total assets. While the court determined the value of each party’s property subject to equitable distribution under the guidance of New Jersey Statute 2A:34-23, in addition to excluding property owned before the marriage, the Family Part judge also excluded property that was acquired through inheritance or gift during the marriage as well. Using this formula, the judge determined that $ 82,571 of Stephen’s assets, and $ 58,199 of Joan’s assets were available for equitable distribution.

As a result, the Family Part issued an order that required Stephen to pay $ 12,000 a year in support, structured as $ 500 a month in alimony, and $ 166.66 a month in child support for each of the three children. The order also required Stephen to pay twenty percent of the difference between his and Joan’s available assets, which was $ 4,874.

On appeal, Joan argued the section of New Jersey Statute 2A:34-23 that deals with equitable distribution should be stricken from the statute as unconstitutional because there is no explicit or specific language in the statute that defines what property is subject to equitable distribution. New Jersey Statute 2A:34-23 grants monetary awards to parties in divorce matters, in addition to alimony and support, for the purpose of equitably dividing the marital property that was beneficially acquired by one or both spouses during the course of the marriage. The clear purpose of this law is to empower courts to divide marital assets in a divorce, irrespective of the ownership of the property.

That said, N.J.S.A 2A:34-23 is explicit that any property owned by a spouse before the marriage will still remain the separate property of that same spouse after a divorce, and is not subject to equitable distribution. Moreover, if that property, acquired by one spouse before the marriage, increases in value during the course of the marriage, that increase in value is not subject to equitable distribution either. Similarly, and income derived or gained from property acquired by one spouse before the marriage, or any property exchanged for the same property, or the proceeds from such property’s sale, will be considered the separate property of that same spouse, and thus not subject to equitable distribution.

The Family Part judge held that gifts and inheritance also similarly immune from equitable distribution. The Supreme Court of New Jersey disagreed. The justices could find no legislative intent to consider gifts or inheritance to be considered separate property. The Family Part has to the power to divide certain assets in an equitable and fair manner. The assets that may be subject to distribution are only those “legally and beneficially acquired” by one or both of the spouses “during the marriage.” The operative word here is “acquired.” The Supreme Court of New Jersey found that the Legislature deliberately used this word to include property and assets received by inheritance or gift, in addition to those gained directly through effort. Had the New Jersey Legislature had intended a more narrow restrictive application for the law, it would have indicted such a purpose by using more confining language.

Next, the Supreme Court of New Jersey moved the question of exactly what period of time was intended by the language, “during the marriage.”  Even though this phrase may be clear on its face, it does present difficulties in its application in court. The start of this period is obvious-when the marriage ceremony takes place, however, the end date is a little more complicated.  At first glance, a literal reading of the statute may seem to indicate the end point would be the date the judgment of divorce is entered. However, such an application of the statute presents practical complications. To interpret the end point of “during the marriage” to be at the judgment of divorce, would result in a bifurcated trial in almost every case. A bifurcated trial, is basically when a case is split into two different cases, or trials, to decide two issues separately. This would be the result in almost every case because a litigant would not be able to present evidence about the value the value of marital assets, because it would need to be current to the day the judgment of divorce is entered. The would require the Family to first conduct a full trial, enter a judgment of divorce, and then start the whole process over again, and conduct a new trial just for the purposes of equitable distribution.

Furthermore, it could be argued, for reasons of fairness and public policy, that no property should be included in the calculation of equitable distribution that were acquired after the occurrence of an irreconcilable breakdown in the marriage, or after a complaint for divorce has been filed. But the breakdown of the marriage is not a reasonable or workable point in time to establish a rule. There is no reasonable way to establish with sufficient precision when exactly a marital relationship broke down and became irretrievable. For these reasons, the Supreme Court of New Jersey explained that a better more workable rule for the purpose of determining exactly what marital property is subject to equitable distribution, the period for acquisitions should be considered to end on the day the complaint for divorce is filed. In addition to the afore-mentioned reasons, the Supreme Court of New Jersey also had in mind the likely need in most cases for giving a period of time for discovery to take place, both to identify the marital assets of each spouse available for equitable distribution, and the respective values of those assets.

If you or a loved one is facing a divorce, please contact my office to learn how we may help you.