By Shari Lee Genser, Esq.[1]

Equitable distribution of the marital estate in New Jersey is governed by the statutory factors set forth in N.J.S.A. 2A:34-23.1.  One of the factors the Court must consider in making equitable distribution awards is “the debts and liabilities of the parties”.  When discussing the marital estate, it is therefore imperative to itemize not only the assets of the parties, but their debts and liabilities as well, in order to reach the proper starting point for equitable distribution.  The first step of the equitable distribution analysis is to identify the assets and liabilities which make up the marital estate, the second step is to determine their respective values, and the final step is to distribute the marital estate.

In making equitable distribution awards, the Court is required by statute to make specific findings of fact on the evidence relevant to all issues pertaining to asset eligibility or ineligibility, asset valuation, and equitable distribution.  Similarly, in the alternative dispute resolution setting, it behooves the practitioner to have a full understanding of what assets and debts are subject to equitable distribution and what assets and debts are exempt from equitable distribution, as well as a proper valuation of all assets and debts.  Only with all relevant information can the appropriate division of the marital estate take place, either by way of litigation or settlement.  Thus, the careful completion of the Case Information Statement is critical to the equitable distribution analysis.

In completing the Case Information Statement, it is important to attach documents to back up the incomes, assets, and liabilities of the parties.  Notations should be made where a party is claiming certain assets or liabilities to be exempt from equitable distribution, and proofs of the exempt status should similarly be appended.  It is equally important to highlight outstanding information where one party is not in possession of said documents.  A properly completed Case Information Statement will serve as the roadmap for all financial negotiations, and in certain instances, a properly completed Case Information Statement can limit the need for the parties to exchange further discovery.  At minimum, a properly completed Case Information Statement will assist the parties in narrowing the issues which do require further discovery.

Once all of the relevant information has been gathered, the practitioner must be cognizant that New Jersey’s equitable distribution statute does not provide for an equal distribution of the marital estate.  Rather, the statute provides a rebuttable presumption that each party made a substantial financial or nonfinancial contribution to the acquisition of income and property during the marriage and provides for equitable distribution, which is not always equal.

A common line of argument against an equal distribution of the marital estate is that one spouse has dissipated marital assets or incurred debts with the intent to diminish the other spouse’s share of the marital estate.  This dissipation provides a basis for an unequal distribution of the marital estate.  This line of argument pre-dates New Jersey’s equitable distribution statute and the caselaw exploring same provides guidance on the equitable arguments in favor of an unequal distribution of the marital estate, as follows:

  • Baskinger v. Baskinger, 129 N.J. Eq. 224 (Ch. 1941), the Court granted the wife’s application to set aside the fraudulent conveyance of certain business interests by husband, finding that husband had deliberately planned to desert his wife after rendering himself judgment-proof;
  • Monte v. Monte, 212 N.J. Super. 557 (App. Div. 1986), husband appealed the trial court’s determination that the wife was not obligated to repay loans from the husband’s family, and the Court remanded for further findings, commenting that the party alleging a debt has the burden of proving the fact and nature of the alleged debt, and that debts resulting from a party’s intentional dissipation of marital assets are not chargeable to the other party;
  • Siegel v. Siegel, 241 N.J. Super. 12 (Ch. Div. 1990), the Court equated the husband’s gambling losses incurred pre-complaint, but after the marriage was irreparably fractured, with a dissipation of marital funds, and the wife was not held responsible for same; and
  • Kothari v. Kothari, 255 N.J. Super. 500 (App. Div. 1992), the Court held that the husband’s transfer during the marriage of significant funds to his family in India to satisfy his moral obligation to repay monies received by him from them to finance his education and initial passage to America, and the husband’s later expenditure of further significant sums on the support of himself and his parents, while providing no support to the wife and the parties’ child, were clearly not made to benefit the marital enterprise and were designed to divert from the wife her equitable share of the marital assets, and affirmed an award of equitable distribution to the wife in the form of cash indebtedness.

Not all divorce cases involve salacious fact patterns such as the fraudulent conveyance of business interests, gambling debts, or the transfer of marital assets to relatives overseas.  In the typical divorce case, a practitioner will be confronted with various combinations of debts and liabilities, including but not limited to loans against real property, credit card debts, loans against retirement assets, and loans to and from the parties’ families.  A careful analysis of how the borrowed funds were used by the parties is required to determine whether the various debts and liabilities are subject to equitable distribution, and if so, to what extent.

HOT TIP:  Dissect the assets and liabilities of the parties to determine how to equitably distribute the marital estate.

 [1] Shari Lee Genser, Esq. is an associate at Seiden Family Law, LLC.  She previously was an associate at a boutique family law firm in Morristown, New Jersey and prior to that she was a Staff Attorney at Essex-Newark Legal Services.  Shari clerked for the Honorable Nancy Sivilli, of the Superior Court of New Jersey, Chancery Division, Family Part, County of Essex.