NJ Family Legal Blog : New Jersey Divorce and Family Lawyer & Attorney : Fox Rothschild Law Firm : Domestic Violence, Prenuptial Agreements, Child Custody

There has been much talk in the news, on family law list serves and in other media that the economy is slowing divorce rates.  In following some of the anecdotal evidence, this may be true in some states and places and not as true in others who report that divorce filings have not changed.  Other than the usual slow down right before the holidays (which is usually followed by the New Years resolution rush of divorce filings), I have not seen much of a slow down.

That said, these times should by necessity to cause people to think out of the box in terms of the usual paradigms that we had been following over the last several years.

Yes the real estate market is down.  That may be good for a party wanting to stay in a house.  Or, maybe parties will consider working together to defer distribution until some future time when the real estate market rebounds.  That may be a fair resolution.  To read a related post on the value of real estate in divorce matters, click here.

Maybe someones income is down or has lost their job because of the unprecedented economic times.  If this is a real loss/reduction of income as opposed to divorce planning, maybe things such as a review of alimony and child support in a year or two or three, may be fair.  Maybe a formula approach may be fair where the support is based upon some base amount of income perhaps higher than someone is earning but lower than the historical income, with a formula to share in income above the base, up to some cap.  While typically a yearly exchange of income information is disfavored, maybe that needs to be considered where income now is not what it was.  To see a related post on this topic, click here.

While it is true that the economy may create challenges, it is not necessarily an absolute impediment from people freeing themselves from what they see as an unhappy if not impossible situation.  Rather, it may take creative thinking, if not a cooperative approach to get to a fair result.

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I just finished a day of trial yesterday taken up be competing real estate experts regarding the value of the marital home.  It was certainly a reminder of the problems with the values of real estate in a rapidly changing market.

We first have to start with the basic premise of using the appropriate valuation date.  The case law is clear that a marital home is valued as of the date of the trial.

That caused some interesting issues in this case. The Complaint for Divorce in this matter was filed in September 2006.  The original appraisal of the home was done in April 2007.  While the market had already started to decline, both experts testified yesterday that their profession was resisting making adjustments for time (that is, if the comparable sales they were using were months prior, they were not adjusting for the decline in the market between the time of the sale of the comparable and the home they were appraisal), prior to early 2008.

Because this case is in a county that is hard to get trial time, the trial had been adjourned several times.  The original appraiser, who was a joint appraiser, updated his report in January 2008 and it should come as no surprise the the value had decreased.  It should also come as no surprise that the person that wanted to be bought out of the house objected and got his own appraisal.  This appraisal was in April 2008 and used comparables from the last quarter of 2007.  No adjustments for time were made.  The original appraiser updated his report for trial in September 2008.  Given what is going on with the real estate market, it is no surprise that the value has gone down again.

In fact, the appraiser believes that at this point, values are going down at a rate of 1/2% to 1% per month.  He also anticipates this to continue.

This case illustrates several areas for concern:

1) Best practices, which is court policy that dictates the time line of cases, will inevitably force appraisals to be done several months before the trial date.  In this market, is that not forcing the parties to get at least one more appraisal given the time delay between the end of discovery and the end of a trial? 

2)  In the event that there is a trial, some times it takes many months to get a decision.  Assuming you have a fresh appraisal report as of the trial date, in this market, if there is a several month delay, is the value as of the trial date a fair assessment of value for equitable distribution?

3)  Does it make sense in this market for one party to keep the house and either buy out the other spouses interest from the equity or offset the other side's share of the equity against other non-real estate assets?  With the prognostications regarding the continued decline in the market, would it not be most fair to sell the house so that the pain is shared equally and then divide the rest of the assets, in-kind?  I suppose it depends on how long the person getting the house plans to stay there.  If it is a long time, maybe it makes sense to keep the house.  If it is a short time, probably not so much. 

The equitable distribution statute requires a court to look at the income producing aspect of the assets received in equitable distribution.  While you don't see this done too often, how should a court look at an asset that is expected to continue to decrease in value for the foreseeable future. 

What this all means is that we need to think our prior thinking about what to do with the marital home in this declining economy.

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Mark Ashton, a partner in our Exton (Chester County), Pennsylvania office and the editor of our Pennsylvania Family Law Blog, wrote a terrific post of the valuation of personal property on that blog. 

To read the entirety of Mark's post, click here.

In New Jersey, and probably elsewhere, the last things that judge's really want to get involved in is the division of personal property.  In most cases, the time spent wont justify it.  Some of the ways that personal property issues are resolved are as follows:

1) the alternate selection method (i.e. each party alternates picking until there is nothing left)

2) one party makes two supposedly equal lists and the other party gets to choose the list they want.

I have also heard of cases where, for a particular item or items, the parties had an auction between themselves on the item (particularly when the cannot agree upon a value.)

The bottom line is that these issues are best resolved between the parties, acting reasonably and rationally. 

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