Assets Exempt or Partially Exempt from Equitable Distribution

Not all assets are subject to equitable distribution; some assets are either exempt or partially exempt from equitable distribution.

The New Jersey statute says that any property “real, personal or otherwise, legally and beneficially acquired by them or either of them during the marriage or civil union” is equitably distributable property acquired by way of a gift or inheritance which is never subject to equitable distribution no matter when they are received.

The only exception to this exception is gifts between the parties which ARE subject to equitable distribution. Note also that property which is subject to equitable distribution can be in the name of either party; it doesn’t matter in whose name it is titled.

One of the most important phrases in the statute is “during the marriage or civil union.” Generally, this means that the acquisition must take place between the date of the marriage or civil union and the date of the filing of the divorce or dissolution complaint ending the marriage or civil union. Thus, assets which are acquired before or after the marriage or civil union are not equitably distributable. It should be noted that assets clearly acquired “in contemplation of” a marriage or civil union such as the house in which the couple intend to reside is considered to be “during” the marriage or civil union.

If a party signed a valid Prenuptial, Pre-Cohabitation, Reconciliation or Mid-Marriage Agreement, any property which is identified in that Agreement as ineligible for equitable distribution will also be exempt.

Assets that are not eligible for equitable distribution are known as immune assets. The party claiming that an asset is immune from equitable distribution has the burden of proving that the asset is immune. However, even if a spouse has shown that an asset is immune under the statute, it may be only partially immune. There is still the question of whether or not that asset increased in value during the marriage or civil union and, if so, whether or not that increase in value is equitably distributable.

If the increase in value during the marriage or civil union can be tied in any way to the efforts of the non-owning spouse, then any increase in value is subject to equitable distribution. It is important to note that “the efforts of the non-owning spouse” encompasses many tangible and intangible things such as being primarily responsible for raising the children, providing emotional support and the like. Therefore, if an immune asset increases in value during the marriage or civil union, it is most likely that the increase in value during the marriage or civil union will be equitably distributable. Arguments are sometimes made that the non-owning spouse was nothing but a detriment, caused heartache and loss of time from work and generally interfered rather than promoted the ability of the owner spouse to increase the value of his or her immune asset. However, since almost all dissolutions involve some degree of accusations of a lack of support during the relationship, the success of these types of arguments are highly fact-dependent and they are difficult to sustain.

Sometimes, otherwise immune assets are “co-mingled” with joint assets, thereby rendering them subject to equitable distribution. This is most common when someone takes a pre-marital asset, an inheritance or a gift from a third party and deposits it into a joint account or uses it to purchase a joint asset such as a house. Generally, once an immune asset is co-mingled in this manner, it loses its exempt status and is equitably distributable. However, there are exceptions to this general rule.

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