The purpose of equitable distribution is for a fair and equitable division of marital property. Pressler, Current N.J. Court Rules, comment 4.1 on R. 5:7-4 (2017); Steneken v. Steneken, 183 N.J. 290, 299 (2005). In order to accomplish an equitable division of marital property, a three-part analysis must be completed. First, all assets must be determined and identified. Second, the value of the assets must be established. Finally, the factors, including the standard of living established during the marriage or civil union, of N.J.S.A. 2A:34-23.1 are weighed and considered to allocate the assets equitably. 65 N.J. 219 (1974). This final step is where the factors that are enumerated in N.J.S.A. 2A:34-23.1 are central to the analysis. These factors are:
(a) The duration of the marriage or civil union; (b) the age and physical and emotional health of the parties; (c) the income or property brought to the marriage or civil union by each party; (d) the standard of living established during the marriage or civil union; (e) any written agreement made by the parties before or during the marriage or civil union concerning an arrangement of property distribution; (f) the economic circumstances of each party at the time of the division of property becomes effective; (g) the income and earning capacity of each party, including educational background, training, employment skills, work experience, length of absence from the job market, custodial responsibilities for child, and the time and expenses necessary to acquire sufficient education or training to enable the party to become self-supporting at a standard of living reasonably comparable to that enjoyed during the marriage or civil union; (h) the contribution by each party to the education, training or earning power of the other; (i) the contribution of each party to the acquisition, dissipation, preservation, depreciation or appreciation in the amount or value of the marital property, or the property acquired during the civil union as well as the contributions of a party as a homemaker; (j) the tax consequences of the proposed distribution to each party; (k) the present value of the property; (l) the need of the parent who has physical custody of a child to own or occupy the marital residence or residence shared by the partners in a civil union couple and to use or own the household effects; (m) Debts and liabilities of the parties; (n) the need for creation, now or in the future, of a trust fund to secure reasonably foreseeable medical or educational costs for a spouse, partner in a civil union couple or children; (o) the extent to which a party deferred achieving their career goals; and (p) any other factor which the court may deem relevant.
Subsection (d) is the standard of living established during the marriage or civil union. This factor is also a consideration in determining alimony under N.J.S.A. 2A:34-23(b), which means that many of the cases that discuss standard of living may be tackling the issue of alimony. Nevertheless, the cases addressing alimony can also be helpful in determining how the standard of living is determined.
WHAT IS THE STANDARD OF LIVING?
To determine the standard of living, the Court must look at the way parties actually lived during the marriage. Hughes v. Hughes, 311 N.J. Super. 15 (App. Div. 1998); Weishaus v. Weishaus, 360 N.J. Super. 281 (App. Div. 2004) aff’d in part and rev’d in part 180 N.J. 131 (2004).
WHY DOES THE STANDARD OF LIVING APPLY TO EQUITABLE DISTRIBUTION?
Under N.J.S.A. 2A:34-23.1, the Court must consider all of the sixteen factors enumerated. With respect to the standard of living established during the marriage, the Appellate Division, in McGee v. McGee, reversed and remanded the equitable distribution award because the trial court failed to address the specific issue of standard of living. 277 N.J. Super. 1 (App. Div. 1994). The Appellate Division further stated that the case was remanded for “a full reconsideration of the equitable distribution based on the statutory criteria”. Id.
HOW IS THE STANDARD OF LIVING DETERMINED?
This determination should be made without regard to whether the lifestyle was supported by the parties’ actual income, parental support, or debt. Hughes at 34. However, there are some exceptions. For example, if the marital lifestyle was supported by the acquisition of marital debts, then these marital debts must be considered when addressing equitable distribution. Monte v. Monte, 212 N.J. Super. 557 (App. Div. 1986). In that case, the Appellate Division remanded to the trial court for a determination of the existence, nature, extent and allocation of debts incurred by the Plaintiff during a time when Plaintiff had little to no income. Idat 569. Specifically, the Appellate Division noted that, Defendant must have been award of the fact that the parties’ lifestyle was being funded even though there was no income, thus making it “necessary to borrow funds upon which to subsist.” Id. at 566.
Since both the alimony and equitable distribution rely on the standard of living during the marriage as a factor, don’t ignore the case law on alimony in making your arguments for this factor of equitable distribution.
A Case Information Statement should reflect the actual standard of living of the parties. Consider involving a forensic accountant to assist with determining the marital lifestyle if this factor is critical to the determination of Equitable Distribution.
If the standard of living during the marriage was higher than the actual income of the parties, remember to ask your client how the lifestyle was supplemented and ask for the supporting documentation, such as credit card statements, HELOCs, promissory notes, bank statements showing contributions from third parties, and proof of the reduction of assets.
If your client relied on assets, debt, loans, or gifts from third party to support a higher lifestyle than the actual income, indicate, footnote and/or annotate your Case Information Statement to include:
Any debt or loans that exist due to close the gap between the lifestyle and the actual income;
State in the income section of the CIS if your client lost his or her employment and had to rely on assets, debts or gifts to support the standard of living.
In the statement of special problems, include whether a third party provided gifts to support the lifestyle.
In the Asset Section, include a footnote about any asset that was used to support the marital lifestyle.
Attach proofs of assets being used, debts being incurred, promissory notes, or gifts to the parties.
Although we generally think of alimony when discussing the standard of living, N.J.S.A. 2A:34-23.1 clearly references the standard of living during the marriage as a factor that must be considered when a Court is deciding the Equitable Distribution award.