People sometimes assume that “equitable distribution” automatically means a 50/50 division of assets. However, a court cannot simply view a list of assets and make the automatic determination that the list should be divided 50/50 between the parties. The guiding case in New Jersey to help determine who gets what or how much in equitable distribution is Painter v. Painter, 65 NJ 196 (1974).  Another frequent question is what happens to assets that one party brought in to a marriage? Also, what happens to assets gifted to one party during the marriage by family members or third parties other than their spouse?

Recently, the Appellate Division issued an unpublished decision which addressed equitable distribution of a marital home and vacation home to parties who had been married twenty years. In the matter of Miller v. Miller, A-2506-07T1, Decided April 28, 2009, defendant-husband appealed from a Judgment of Divorce where the trial judge granted the plaintiff-wife an interest in both the marital home and vacation home that defendant alleged was not subject to equitable distribution as it was alleged to be an immune asset owned by him prior to the marriage.

Defendant-husband was 64 years old and a retired osteopathic doctor. Plaintiff-wife began working for defendant as his office manager and three years later moved in with him in what became the marital home for the remainder of the marriage. This home was owned by defendant’s parents and there existed an arrangement whereby defendant agreed to pay a sum specific each month in order to buy the home from his parents. However, evidence exists that after the parties were married, defendant’s parents executed annual notes forgiving the loan each year and these notes were addressed to both parties. The vacation home was similarly acquired. The deeds to both properties were placed into joint names some time after the parties were married.

The trial judge included both the marital home and vacation home in the marital estate and awarded plaintiff-wife a 45% share in the marital home and a 40% share of the vacation home. As to the marital home, the judge reasoned that this property was maintained and improved using joint funds and that both parties contributed to its care and upkeep. Most importantly, during the marriage, legal title had vested in both parties at the same time by operation of the same deed. Prior to that deed, defendant-husband never owned an outright fee simple interest in the property. Also, in a series of annual loan forbearance agreements issued to both parties, defendant’s parents had begun forgiving the loan on this property after the parties were married ending with the recordation of the deed in both names. The judge ordered a disproportionate division of this asset recognizing defendant’s pre-existent equitable interest as trustee.

As to the vacation home, the trial judge reasoned that defendant-husband’s parents apparently gifted the property to the parties jointly, evidenced by loan forgiveness letters; the parties never made any payments to defendant’s parents; plaintiff acquired a legal interest in the property in a deed recorded in 1991 or 1992; joint funds were since invested in the property and plaintiff oversaw its reconstruction after a fire; and no prior deed was produced evidencing defendant’s pre-marital ownership. Again, the judge ordered a disproportionate division of this asset recognizing the origin of ownership and source of gifting from defendant’s parents.

Defendant-husband appealed from this portion of the JOD arguing that the judge erred in the decision by failing to recognize the properties as immune assets owned exclusively by him or alternatively that the judge erred in overvaluing plaintiff’s interest in these assets. He argued that the properties were immune from equitable distribution because he owned them prior to the marriage and did not have the requisite donative intent to create marital assets since the deeds executed were done simply to protect his assets from medical malpractice liability.

To disturb the trial court’s findings, appellate review pertaining to equitable distribution is narrow. Wadlow v. Wadlow, 200 NJ Super. 372, 377 (App. Div. 1985). The standard is abuse of discretion, keeping in mind that a trial judge should not routinely or mechanistically divide the marital assets equally. “[T]he word ‘equitable’ itself implies the weighing of the many considerations and circumstances that are presented in each case.” Stout v. Stout, 155 NJ Super. 196, 205 (App. Div.1977).

The Painter case tells us that “[a]ll property, regardless of its source, in which a spouse acquires an interest during the marriage shall be eligible for distribution in the event of divorce.” Id. At 217. The burden of establishing immunity from distribution of a particular marital asset rests upon the spouse who asserts it. Pacifico v. Pacifico, 190 NJ 258, 269 (2007).

The Appellate Division affirmed the trial court’s decision. As to the marital home, it held that the parties jointly occupied the premises for 23 of the 30 years that defendant possessed it prior to separation; plaintiff contributed to the rebuilding of the property after it burned down and to maintaining it throughout the time she lived there. Also, the parties used marital funds to maintain and improve the property and plaintiff acquired legal title five years into the marriage.

As to the vacation home, defendant failed to produce documentary evidence to show that he owned the property before the joint deed was executed in 1991 or 1992 as no deed was ever produced. This property was likely transferred to the parties jointly as a gift, there being no credible evidence in the record contradicting that determination.

In sum, defendant failed to meet his burden of proof to establish to the Court that the assets in question were owned by him prior to the marriage and that plaintiff was not entitled to share in their value.
EDITOR’S NOTE:  To answer the questions posed at the beginning of this post, typically, an asset that one party brings in to a marriage would be exempt from equitable distribution.  Similarly, assets acquired from third parties by way of gift or inheritance are similarly exempt.  The caveat in both situations is that the assets cannot be commingled or put into joint names.  Similarly, if marital funds are used to pay for this otherwise exempt asset, it could become non-exempt.  That said, aside from the commingling issue, there are two other important factors to remember.  First, just because a pre-marital asset is commingled does not mean that it should now be divided 50-50.  In fact, in the above case, a disproportionate distribution was ordered in recognition of the source of acquisition.  Second, and perhaps more importantly, the person claiming an asset is exempt has the burden to prove it is exempt.  Saying so is not enough unless the other side agrees (and that rarely happens easily).  Put another way, you have to provide the documents to prove that an asset is exempt.  This is not always easy as people rarely keep all of the bank records going back 10, 20 or more years.  Further, banks and financial institutions only keep records for a limited time.  That said, depending on how large the asset is, it may make sense to spare no expense to prove the exemption.                      ERIC S. SOLOTOFF