Equitable Distribution: Who Gets What?

by William H. Donahue, Jr., Esq., APM

In New Jersey, divorcing couples divide marital property equitably or fairly. Property you acquire while you are married is marital property. Property you had when you got married is not, and is generally exempt from distribution. There are some important exceptions to this general rule. Property inherited by or given to one of you is not marital property even if you got it while you were married. If property you owned before you got married increases in value while you were married, the increase may be marital property under some circumstances.

Once you know what marital property you have, you have to figure out what it's worth. Bank accounts, publicly traded stocks, and bonds are usually pretty easy to put a value on. Some assets are more difficult. The present value of a pension, a business that hasn't been bought or sold recently, stock in closely held corporations and stock options often need to be valued by experts. Certain cars, antiques, art, furniture, jewelry, and other collectibles often need to be professionally appraised. In mediation, as in litigation, you use experts to help you determine what these assets are worth.

After you value everything, you have to decide how you are going to divide it up. The guiding principle is equity or fairness. Is it fair that you each get half of the marital property? In many cases, that is fair. In many it isn't. Judges are required by law to take many factors into consideration when they decide distribution issues. Those factors include how long you've been married, your age and health, property you brought to the marriage that may or may not be exempt from distribution, your income and earning capacity, custodial responsibilities for children, and the time and expense necessary to acquire sufficient education or training to enable you to become self-supporting. Missing from the list is marital fault. In most cases, it has little or no bearing on equitable distribution.

If you decide a 50/50 split is fair, you don't have to split every asset in half. To do that, you would probably have to liquidate everything you own to cash. That would hardly ever make sense and would often be impossible. Pensions usually can't be cashed out. IRAs and 401(k)s shouldn't be for tax reasons. You may want to keep your house to live in. The most common solution is a trade-off of assets. You might keep the house and your spouse might keep a pension that is worth roughly the same as the house.

In theory, this three-step process should be easy.

  1. Determine what marital property you have.
  2. Determine the value of each item of property.
  3. Split the marital property fairly under all the circumstances.

Don't Forget the Emotions
But for many people, deciding what is fair can be very difficult. The reasons can have very little to do with money. Every divorce lawyer has a story about the client who spent thousands of dollars in legal fees to get something of little or no monetary value. It might be a set of dishes, a bed or a chair. It doesn't make sense until you learn more about the item fought over.

Think about things in your own life that you would never want to part with. You might have the chair you sat up nights in nursing a baby who is grown now and out of the house. It might be the sailboat you spent months refinishing; the house you've spent a lifetime making a home; a martini glass, a painting, a photo. Even bank accounts, pensions and family cars can hold meaning beyond their monetary value because of who earned them, purchased them or used them the most. These are the things you have to divide when you get divorced. Unless you recognize and respect the emotions attached to them, resolving equitable distribution can be almost impossible.

In mediation, I encourage clients to think about and discuss these emotional attachments, and to respect them. It is often easier to let go of an item when you really understand why you are clinging to it. You may find it isn't that important to you after all. Or you may decide to let go of something when you realize why it is so important to your spouse. A good divorce settlement should be based on your financial needs and your rights under the law, but it should also reflect and respect your emotional needs and the attachments you have to the things you've accumulated throughout your marriage.