Equitable Distribution in New Jersey
When a couple gets divorced, a vital issue that must be resolved during legal proceedings involves the division of marital assets and liabilities. Each state has its own particular laws governing how marital assets are distributed upon divorce. Many jurisdictions, including New Jersey, follow principles of “equitable distribution” when dividing marital assets in a divorce case.
The equitable distribution of marital assets of a divorcing couple is not necessarily rendered in an equal fashion. Instead, courts look at the specific circumstances of the case to determine a “fair” or “equitable” split of marital property.
On one hand, the property that a married couple acquires during their marriage qualifies as marital property subject to equitable distribution upon divorce. On the other hand, property that does not fit the definition of “marital property” is considered to be the separate nonmarital property of the party who acquired it, and is not divisible at divorce.
Divisible “property” and assets include real estate, personal property, and money. However, there are many things that are not easily classified as assets or property acquired during the marriage and divisible upon divorce.
A person’s wages and earnings are generally considered to be divisible marital property if earned during the marriage. Income that a person regularly receives at a fixed and continuous basis is generally considered to be a marital asset subject to equitable division.
But what about bonuses? Although New Jersey courts have not made a definitive ruling on this issue, trends suggest that the marital character of bonuses depend on whether it serves more like a person’s salary or like an additional reward for someone’s work.
Courts have defined bonuses as money received on top of a person’s usual salary, or as an extra dividend paid from the employer’s profits. Courts from other jurisdictions have held that the marital character of a bonus revolves around whether a party earned the bonus during the marriage or after divorce proceedings had begun.
Like bonuses, stock options are a type of employment compensation that incentives employees to work toward increasing the value of the company. Generally, stock options are considered divisible marital property if acquired during the marriage. However, courts have looked at the nature of stock options to determine its marital or nonmarital character upon divorce.
One court found that stock options awarded to compensate past joint efforts expended during the marriage should be characterized as property subject to equitable division upon divorce. Conversely, if stock options serve more like an incentive for one party’s work for a new company, instead of compensation for past work, the “bonus” should be treated as the employee party's separate nonmarital property.
If a party acquires stock options after obtaining a final judgment for divorce, they may be considered as income from which alimony or child support obligations can be paid. Generally, stock options are considered as income of a party, whether or not such options are exercised, purchased at the option price, or transferred to another party at a gain, during the marriage.
People generally understand that physical, tangible property may be divided upon divorce. However, intangible assets such as intellectual property may also be subject to equitable distribution. Copyrights, trademarks, and patents are among those intangible assets that may be split between divorcing spouses in some instances.
New Jersey courts have recognized that intellectual property may be subject to equitable distribution if they are associated with a specific tangible asset. This is because some intangible assets derive their value from the ownership or possession of a tangible asset.
Learn More by Contacting Lane & Lane, LLC
If you are curious about your rights and responsibilities when it comes to matters arising from New Jersey family law, including issues concerning the equitable distribution of property during a divorce, you should reach out to an experienced attorney from Lane & Lane, LLC.