It’s All About Property: Business and Distribution in Divorce

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Business and Distribution in Divorce

You and your spouse own and operate a thriving business. Managing daily operations seems almost effortless and financial results exceed all expectations. Life is good, except for one problem. Your marriage is not what it should be and you are contemplating a divorce. You are worried about how a divorce will affect the business. Could it destroy a lifetime of hard work?

Business Valuation

The first step in answering this question is assessing the value of the business. A valuation expert, a forensic accountant, will provide this essential information. A business valuation is a complex computation considering such things as the value of both tangible and intangible assets, current and projected cash flow and outstanding debt. The valuation expert will provide an estimated value of the business as well as a cash flow analysis (based on an average of the past 3 to 5 years) to help determine the available income to determine support.

Based on the valuation the divorcing couple must then decide how to deal with the business. The options include continued joint ownership and management, buyout of one spouse’s interest by the other, a total sale of the business or its complete liquidation. If the business was owned by one spouse prior to the marriage the increase in value during the marriage is potentially subject to equitable distribution of the marital estate. The income generated and the other spouses’ role in the business, if any, will be considered by the Court in determining support, if applicable, and the distribution of the business. Even if one spouse had nothing to do with operating the business, the fact the parties were married creates an equitable interest in the business by both spouses.

Equitable Distribution

Once established, the fair value of the business becomes part of the marital estate and is subject to equitable distribution. It is important to understand equitable distribution means a fair distribution of the entire marital estate and not necessarily an equal division of each asset.

Typically, both income stream and the value of the business help determine the price of the buy-out of the other spouses’ interest in the business and ongoing support. The court will consider when the business was established, the length of the marriage and income generated by the business when determining how to divide the business and establish a support figure.

It’s All About Property: Real Estate and Housing

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In a divorce the largest financial asset is usually the marital home. Who gets to stay in the house and who has to leave is not always an easy decision to make. Emotional attachment to the home can cloud your judgment making it difficult to make the right choice. What things should you consider when making this choice?

The purchase date the house is an important consideration. The law in New Jersey is not specific as to how to distribute a spouse’s interest in the marital home if the home was purchased or inherited prior to the marriage. The length of the marriage, subsequent contributions and the increase or decrease in value of the home as well as debt will all be considered by the court.

In many cases the spouse with parental custody may remain in the house if a buy-out can be arranged between the two parties in a reasonable timeframe. If this cannot be accomplished the home may have to be sold. Remaining in the home has the obvious advantage of providing children with a sense of security and stability. Children maintain familiar friendships and continue their education in the same school. This arrangement depends on the custodial spouse’s ability to continue to afford living in the house.

A variety of options exist for distributive sharing of the marital home. In one scenario a “buy-out” between spouses occurs. Another option allows one spouse to remain in the house for a finite period of time before selling the house. If the divorcing couple cannot arrive at a mutual agreement a judge may order the couple sell the home and divide the proceeds. It is always best if the couple can agree on a distributive sharing plan themselves. The couple understands their situation better than anyone else.

Deferred distribution allows the spouse with child custody to live in the home until the youngest child is 18. At that time the home must be sold and the proceeds divided between the couple. Deferred distribution is also permissible when real estate markets are weak allowing the sale to take place in the future when a reasonable price can be obtained.

Advantages and disadvantages exist for keeping the house and selling it.

  • Staying in the house could prevent a major financial loss if there is a lot of equity in the house.
  • The tax write offs for mortgage interest and taxes could be more valuable after the divorce than during the divorce proceedings.
  • The comforts of home and familiar surroundings are not cheap. Sometimes it is wiser to move to a smaller home to lessen your monthly expenses.

It’s All About Property: Solving Property Disputes

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Reaching a compromise regarding the division of marital property is usually your most cost-efficient option. It saves time, money and aggravation for both parties. Unfortunately, emotions can run high during divorce proceedings, often causing irrational behavior and stalled progress. What happens when things cannot be settled peaceably? There are other options to solve disputes before asking the court to intervene?

Mediation

Mediation is a non-adversarial process conducted by an objective third party designed to solve disputes. The spouses identify key issues and find reasonable solutions with help from the mediator. Property and liability disputes are typically addressed during mediation. Questions such as who gets the house and how bills get paid are discussed and usually resolved. If this option is not successful the couple maintains the right to litigate their divorce in court.

Collaborative Divorce

Relatively new, collaborative divorce allows amicable couples to negotiate the terms of their divorce without going to litigation. Spouses are not seeking a pound of flesh but a peaceful dissolution of their marriage and equitable distribution of property. To start the process each spouse hires a collaborative attorney. Both parties sign an agreement to settle matters in a non-adversarial way. The two spouses and their lawyer conduct a four way meeting where everyone participates equally. Mental health professionals are available to help the couple regain perspective if emotions spiral out of control.

Arbitration

Arbitration uses a third party to resolve disputes and issues when an impasse has been reached. Both spouses identify open issues for the arbitrator. The Arbitrator must issue his final decision within an agreed upon time frame. Usually the arbitrator’s award is binding and can only be appealed under certain circumstances. The arbitration hearing is scheduled and heard in a private setting at a time convenient for all parties. The divorcing couple chooses the Arbitrator that best fits their needs and circumstances.

Divorce can be a contentious process where each spouse feels the need to protect his or her own best interest. Many times this mindset creates an adversarial atmosphere and poses challenges in solving property disputes. Mediation, collaborative divorce and arbitration are three ways to solve property disputes.

It’s All About Property: Equitable Distribution

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Most marriages begin with loving gestures to share everything equally. Married couples start their journey together sharing assets, property, cars and newly acquired debt. What happens when the marriage starts to disintegrate and ends up in divorce? Every shared item can become a point of contention. Possessions, assets and debts once willingly shared must now be divided and distributed equitably.

What is Equitable Distribution?

In New Jersey, martial assets are subject to equitable distribution. Martial assets and property are divided fairly but not necessarily evenly. With a few exceptions, marital property is any asset or debt acquired by either one or both spouses between the date of the date of marriage through the date the Complaint for Divorce was filed. The division of assets such as cars or the marital home occurs regardless of whose name in on the title or deed. Assets acquired during the marriage belong to both parties.

Three-Step Process

The State of New Jersey follows a three-step process for equitable distribution. Let’s look at that process.

Step 1: The parties, or the court decides which assets are subject to distribution. The marital home, new cars, retirement accounts/pensions, even such things as lottery winnings and airline reward miles are subject to equitable distribution.

Step 2: Valuation of all property for distribution is completed by parties under the court’s guidance. This can be as simple as looking at bank statements to verify dollar amounts or as complex as obtaining an official appraisal of the marital home or other items of value. Luxury items such as jewelry, furs, or artwork must be appraised to determine their value if the parties cannot decide the value amongst themselves. In New Jersey, the engagement ring is exempt if it was not replaced or enhanced during the marriage. Items that were acquired prior to the marriage or inherited and not commingled are also generally exempt.

Step 3: If the parties cannot agree, the Court will determine the most equitable way to divide the assets and liabilities based on an extensive list of considerations, such as the length of the marriage, age and health status of each spouse, pre-nuptial agreements, income or property brought to the marriage, standard of living, present value of property and earning potential. Education, work experience, training and previous employment are also considered. Child care duties and family responsibilities are considered as well.

However, the Court will not render a decision until it has heard arguments from both sides and reviewed the evidence presented at trial. It is not a matter of simply “asking the Court,” the trial process is expensive and time consuming for all involved. However, agreeing upon most of the issues in contention then asking the Court to decide the remaining issues at trial, should reduce the overall cost. For example, if custody and parenting time arrangements can be settled in advance remaining financial issues can be decided at trial.

New Jersey is an equitable distribution state. Remember equitable is not necessarily equal. More importantly, no two divorces are the same. Choosing a competent, experienced matrimonial attorney who understands your goals and provides realistic advice is invaluable.

Steps in The Litigated Divorce Process in New Jersey

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Steps in The Litigated Divorce Process in New Jersey

Before you go any further please note that in order to obtain a divorce in New Jersey one spouse must live in the state for at least one year prior to filing.

Step 1: Gather Your Information and Key Records: The single most important task is to acquire information regarding your current financial, personal and legal standing. This cannot be stressed enough. Access to records may become extremely difficult once the complaint is served and they are vital to a successful settlement. Gather your documents and store them in a safe place. Do not keep them in your car or a drawer in your home. If you cannot safely remove original documents, make clear and legible photocopies or pictures of them. See our list of important documents here.

Step 2: Contact the Professionals

Legal Representation: Talk to a qualified Divorce attorney. Even if you think you can come to an amicable settlement and your matter will resolve without a trial, an experienced divorce attorney will act as your advocate, making certain that the negotiations are fair and the settlement agreement is equitable.

Counseling: If you have the opportunity, counseling may save you from a good deal of heartache. It may give you the opportunity to repair your relationship or to understand how and why you need to move on. Counseling with a qualified professional before, during and after the divorce process is incredibly valuable to you.

Step 3: File a Complaint for Divorce: Your divorce attorney will file the complaint for Divorce. This is an official legal notice that you are seeking a divorce. It includes the reason (grounds) for the divorce and an Affidavit of Insurance Coverage.

Once you file the Complaint, your attorney may ask the court for Pendente Lite orders to be put in place while you negotiate the divorce. These temporary orders can include custody, visitation, and parenting time or financial arrangements, such as child support, spousal support, and maintenance of the marital bills pending the final resolution of your matter.

Step 4: Serve the Complaint:

Your divorce attorney will arrange that the complaint be delivered to your spouse. This step is very important, the Court will want written proof that your spouse was aware of the action to end your marriage.

Step 5: Court Process

From here the process is geared toward producing an equitable settlement. A divorce settlement divides the property and responsibilities created during the marriage. The sooner that you and your partner come to a fair settlement, the more likely you are to avoid the expense and emotional cost of a trial.

There are many factors to consider in crafting a comprehensive divorce settlement and consulting a legal professional is an important component to protect everyone’s interests. There are plenty of divorce-yourself products available online and some couples see these DIY divorces as a way to cut costs by doing the work themselves. Unfortunately, in their rush to save time and money, these couples may find they have crafted an agreement that costs them much more money in the long run.

Case Management Conference

The Case Management Conference clarifies the issues in the divorce and produces a set of deadlines for information to be exchanged. These are a set of actions, a legal to-do list, that need to be accomplished during the next phase.

Discovery

Think of discovery as a period of fact gathering and investigation. The value of assets and mutual responsibilities are gathered. You will complete a Case Information Statement and answer questions about your marriage. If you have worked out an agreement with your spouse by the end of the discovery period you can appear in court and finalize your divorce.

If you have not reached a fair settlement by the end of the discovery period New Jersey has steps in place to help you get to an agreement before there’s need for a trial.

Early Settlement Panel

If you have disagreements on important financial issues after the discovery period, you will discuss the remaining issues with your own attorneys and two impartial, experienced divorce lawyers. This experienced panel will recommend a fair settlement based on the particulars of the case. Couples who accept the panel’s recommendations may be able to finalize their divorce almost immediately.

Assigned Economic Mediation

If unresolved economic issues are standing in the way of settlement an economic mediator will be assigned to bring your matter to conclusion.

Pretrial Conference w/ Judge

These are relatively rare, but for couples who have not reached an agreement they are a chance to go over the issues that are still pending before a judge. If the Judge makes a recommendation that resolves the issue, the couple can obtain a divorce very quickly.

Intensive Settlement Panel

These panels are a last chance to resolve any remaining issues before a trial.

Trial:

If after every effort has been exhausted there is still no agreement, the couple will go to trial. A Judge will hear the facts of your case, including expert testimony and witnesses and make a final decision about the nature of your divorce. The Judge will require you to know the rules of evidence and abide by Court Rules and Procedure. The Court is confined to rule on matters based upon the law.

Step 6: Judgement of Divorce

This is the final step in the divorce process. The Judgement makes your divorce final, it is the document that legally ends the marriage. If you wish to modify your surname, you can incorporate this into the Judgment of Divorce.

Types of Divorce

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Types of Divorce

There are several types of divorce in New Jersey. The most common is a divorce sought because the couples’ relationship is at an impasse that cannot be fixed. They have reached the point of “Irreconcilable Differences.” However, there are several grounds on which to seek a divorce. A divorce is most commonly an absolute divorce that separates the spouses, their households and their goods as well as custody of their children. These are usually either “fault” or “no fault” divorces.   In a “fault” divorce one partner has done something which caused the marriage to fail. In a “no-fault” divorce the marriage has ended even though neither partner specifically caused it to end.

 

Fault Divorce

“Fault” divorces are far less common than they used to be since Irreconcilable Differences came about. A spouse may seek a “fault” divorce many reasons, two of the more common fault grounds are separation and extreme cruelty.

If one spouse leaves and lives separately from the other for 12 months or more then divorce can be granted on the grounds of desertion. When one partner has been violent or abusive toward the other for at least three months then divorce may be granted on grounds of extreme cruelty.

 

No Fault Divorce

New Jersey law recognizes two categories for “no fault” divorce. If the couple has lived apart for 18 months or more before filing, then divorce may be granted on the basis of separation.

If the couple finds that they’re unable get along and reconciliation is unlikely for 6 months or more, they can be granted a divorce based on “irreconcilable differences”.

 

Divorce from Bed and Board

New Jersey doesn’t have a legal separation process, instead some couples engage in a process called “Divorce from bed and board” also known as a limited divorce. Couples who go through this process are still technically married, so if they reconcile they can have the judgement revoked. If the partners, choose to end the marriage for good they still have to obtain an absolute divorce. In the interim, one spouse may remain eligible to receive health benefits on the other spouse’s policy, and they may continue to file taxes jointly or as “married, filing separately.” During a divorce from bed and board, neither spouse can be legally re-married, or resume their former name.

 

Annulment

An annulment isn’t a divorce, it’s a reversal of the marriage. Annulment undoes the fact of the marriage as if it never happened. Annulments are extremely rare and can have lasting implications for children or other family members. Annulments greatly affect the way property is distributed.

 

 

Before You File for Divorce

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Before You File for Divorce

 

Before You File for Divorce: Gather Your Records

If you are filing for a divorce, your attorney will need documents that show your current financial situation. You may not have all of these documents handy, but it’s important that you gather as much information as you can before you start the process. Use this list and keep these documents, or copies in the safest place you can. That may mean keeping them outside your home, in a safe deposit box or storing them with a trusted friend.

 

Personal Information

  • Your identifying information, birth certificate, Social Security number, immigration/citizenship information (if applicable), and Passport.
  • Children’s birth certificates and Social Security numbers

 

Financial Records

  • 3 years of Tax returns (for you and your spouse if you have not filed jointly)
  • 3 to 6 weeks of recent pay stubs for you and your spouse
  • Proof of other income such as pension, SSI, SSD, annuity payments, etc.
  • 1 year of bank statements – all accounts.
  • List of all bank accounts (yours and spouse)
  • List of financial assets, Stocks, bonds, real estate, collectibles, art or other possessions with significant value.
  • Recent credit card statements
  • Loan statements
  • Leases or deeds for all properties
  • Mortgage documents
  • Business ownership documents
  • Car titles and loans
  • Insurance policies health, dental, life, automobile, homeowners, or renters
  • Pension plans and retirement accounts
  • Foreclosure orders
  • Bankruptcy orders
  • Will for you and your spouse
  • Information regarding any Trust that names you, your spouse or your children as a beneficiary.
  • Receipts, claims or bills for personal injury or property damage caused by your spouse

 

Expense Information

  • List of monthly expenses, (food, clothing, shelter, education, travel, etc.)
  • Copies of your monthly bills
  • Documentation if you or your children are receiving any form of public assistance, adoption stipends or outside support.

Documents Related to Your Marriage.

  • Marriage certificate
  • Pre-nuptual agreements
  • Domestic violence restraining orders / police or hospital reports
  • Name change orders
  • Adoption of Children

It may seem troublesome but don’t give up; you’re gathering the tools needed to make your divorce successful and equitable. If you feel that gathering this information might endanger you or your family get advice from your attorney on how to gather your information safely.

 

When you start the divorce process with this information, your attorney will have a clear picture of the marital finances. More importantly, you’ll save time and legal fees. With this information in hand you can reach an agreement to settle your case fairly. And if you need to fight, you’ll be armed with evidence.