When two people are going through a divorce, the equitable distribution of property is going to be one of the main focal parts of any dispute. The question often arises about what property should be part of the marital estate and subject to this distribution versus separate premarital property that should remain with the party who owned it prior to the marriage.
One of the main ways to protect premarital assets is through the execution of a prenuptial agreement that outlines the separate nature of the property and makes it clear that it will not become marital property. Of course, if a divorce already is a possibility, this no longer is an option. In addition, many couples contemplating marriage find it difficult to foresee a time when this type of agreement will be necessary, even though fifty percent of marriages end in divorce.
The law in New Jersey does protect premarital property. Under New Jersey law, N.J.S.A 2A:34-23(h), there is a clear rule that premarital assets are not subject to equitable distribution. However, it often is not this simple when the property in question has been heaped in with the property acquired during the marriage. There are several different types of analysis that may be applied to determine whether the property is subject to distribution.
If an asset was purchased in contemplation of marriage, then it may be pulled into the scope of marital property. The court will look at the behavior of both parties surrounding the acquisition of the property. For example, if one person purchases a house while the couple is dating or engaged, but not married, and the title only is in the name of the purchasing party, the court will review whether the other spouse had input into the purchase and how much time and resources have been invested in maintaining or improving the property. A determination that the property was purchased in contemplation of marriage means that it is now a marital asset.
Another scenario involves when one party to a marriage had an asset prior to the relationship and that asset increased in value during the course of the marriage. The court will take a hard look at the value increase. The analysis will turn on whether the asset was passive or active. A passive asset will increase in value without any contribution from the other spouse. When one person owns $100,000 in stocks before entering into a relationship that eventually leads to a marriage and that stock increases to $150,000 during the marriage, the analysis is whether the other spouse had anything to do with the increase. The stock did not require any contribution of time or money, and its increase in value was due to forces outside of the control of either party, so it likely will be ruled a premarital asset that is not subject to distribution.
If the asset were not stock but instead was a condo that increased from $100,000 to $150,000 and the condo was not purchased in contemplation of marriage, then the court may look at whether the non-purchasing spouse exerted physical or financial effort towards maintaining or improving the property. If the court deems this an active asset, then the $50,000 increase in value likely will be subject to equitable distribution.
Another problem that confuses the issue of whether an asset is subject to equitable distribution is when the parties have co-mingled premarital assets with marital assets. Placing funds into a joint account could transform the asset. Selling stock and using the funds to purchase a family home likely will result in the conversion into marital assets.
In order to protect premarital assets, the person possessing the property should never:
- Comingle the assets with marital property;
- Permit the other spouse from investing time or effort into improving the asset or otherwise increasing its value;
- Add the name of the spouse to any title, account, or any other indicator of ownership.
It is important to keep premarital assets as separate as possible. Any inheritance should be maintained as separate assets, with funds in separate accounts and property outside the marital home. Distancing certain property prior to a divorce action may prevent it from being part of the equitable distribution, but this should not be done in such a manner as to make the court suspect that a fraud is being perpetrated.
The Micklin Law Group, LLC Advocates Zealously for Clients Going Through Divorce
When there is a dissolution of marriage, there is going to be emotional turmoil and arguments over who gets what. If you came into the relationship with significant personal property, it may be possible to protect some of the assets during the distribution of property. The Micklin Law Group, LLC will provide an honest evaluation of what items may reasonably remain separate from the marital property. To schedule an appointment with a skilled and hard-working divorce attorney at The Micklin Law Group, LLC, call us at (973) 562-0100 and we will work with you to protect your interests.