Equitable Distribution of Assets and Liabilities

What is equitable distribution and how is it determined in a New Jersey divorce?

New Jersey law states the standards by which marital assets and debts are to be divided between divorcing parties, called equitable distribution. Generally, non-marital or exempt assets remain the separate property of the owner, and consist of those acquired prior to the marriage, or gifts to a party from a third party during the marriage. There is no automatic 50/50 rule for equitable distribution, although when appropriate, we can use it as a starting place to determine who gets what. Equitable distribution can be a complex and sophisticated area of the law, so must be analyzed thoroughly and with knowledge in order to ensure the property division is in fact equitable. For example, a party sometimes will want to buy out the other party’s interest in the marital home, and offset other assets to do so. In that case, the tax consequences must be taken into consideration.

We bring our combined experience and knowledge in order to ensure that truly equitable distributions occur in our cases.

 

How are non-retirement marital assets and debts divided equitably in a New Jersey divorce?

The first step in this process is to determine what the marital and non-marital assets and liabilities consist of, and the second step is to value them. This is true regardless of whether the case is litigated in Court, mediated, arbitrated or resolved collaboratively. The third step is to work out who gets what. We counsel our clients at the very beginning to visualize where they want to be at the end, and to let us know if any particular asset is something of such importance that they’re willing to buy out the other party’s interest. We then work with them to develop various scenarios for resolution, based on the particular facts of their case and the applicable law. It helps to have reasonable expectations, which prepares our clients for the negotiations that occur during whatever process is chosen, i.e., litigation, mediation, arbitration or collaboration.

 

How are retirement marital assets and debts divided equitably in a New Jersey divorce?

There are generally three types of retirement assets, one or more of which may be “in the pot” for equitable distribution: individual retirement accounts (IRAs), defined benefit plans (pensions) and defined contribution plans (savings plans). What ordinarily happens is that the marital portions of any of these plans are divided between the parties, although sometimes they are valued net of tax to use as an offset against another post-tax asset the non-participant in the plan wishes to keep.

 

How are IRAs distributed equitably?

IRAs are the easiest of this category of assets to divide, because it can be done with a letter of instruction to the bank or other financial institution holding that asset. Once the amount one spouse will distribute to the other is determined, the letter of instruction can be prepared (many banks and other financial institutions have their own forms), and the parties’ agreement can be implemented.

 

How are pension and savings plans distributed equitably?

Pension and savings plans can be divided via a Qualified Domestic Relations Order (QDRO) if they are qualified under ERISA, the federal law governing these types of plans. Non-qualified plans, such as from government employment, can be divided via a Domestic Relations Order (DRO). Essentially, both are Court Orders directing the plan administrator how that particular plan is to be divided between the parties. As with IRAs, once the amount one spouse will distribute to the other is determined, the QDRO or DRO can be prepared, filed with the Court, then sent to the plan administrator for implementation. Many companies have developed their own QDRO forms, and most plan administrators are knowledgeable and helpful in this process.

Ms. Copeland was one of the first attorneys in New Jersey to use QDROs and DROs and to lecture on this topic for the New Jersey Institute for Continuing Legal Education. She has been retained as an expert by other attorneys to help resolve these issues.