Identifying and Valuing Assets in a Divorce

Marital property division in a divorce case can be hotly disputed in even the most amicable of separations. One reason for the difficulty is that over the course of a marriage, couples accumulate lots of different assets. Yet unless they have a prenuptial agreement, they might not stop to consider whether these assets fall into the “marital” or “exempt” property categories. 

Because of this, what’s viewed as fair distribution of property in a divorce may be widely different. The perception of the value of assets might also significantly differ between couples.

The conflicting views on assets and their value can add complication and conflict to a divorce, slowing down the timeline and frustrating the ability of parties to reach a mutually agreeable settlement. However, progress is possible with a clear understanding of the role of assets in the divorce process and a proactive legal strategy. 

What is “marital property” vs. “exempt property”?

Understanding the difference between “marital” and “exempt” property in divorce is the starting point for creating a legal strategy to ensure you protect yourself, your finances, and your long-term interests. 

Marital property

New Jersey law considers any debt or asset acquired during the marriage marital property, regardless of whose name the property or debt is in. These assets are subject to equitable distribution, meaning that property should be split fairly, but not necessarily equally. 

Exempt property

Under NJ divorce laws, exempt property is individually owned property acquired before marriage or through inheritance or gift from a third party. 

Some exempt property can be considered marital property if a spouse commingles exempt assets with marital ones. 

A common example is one in which one spouse used an inheritance for a down payment on the family home, thus changing the asset (inheritance) from exempt to marital (the shared family home). The inheritance is now commingled with marital assets and is therefore subject to equitable distribution.

How are assets identified during divorce?

During a divorce, both parties must disclose all their assets and debts. This requires providing documentation such as:

• Bank statements
• Tax returns
• Investment account information

If one party suspects that the other has undisclosed or hidden assets, they can request a formal discovery process, which might involve hiring a forensic accountant or other financial expert to investigate and uncover hidden assets.

Both parties need to be transparent and honest during this process to ensure a fair distribution of assets.

In addition to identifying all assets, they must also be properly valued as part of the divorce process. The value of assets can greatly impact how property is divided, as well as other aspects of the divorce settlement, such as spousal or child support.  

How are assets valued during a divorce?

How much an asset is worth varies widely based on both objective and subject factors. Assets like bank accounts or investment portfolios typically have a clearly defined cash value. Other assets, such as real estate investments or business interests, can require a more complex valuation process.

In general, though, there are three methods commonly used to ascertain how much assets might be worth:

1. Market value: This method looks at the current market value of an asset, such as stocks or real estate. This value might be determined by appraisals or using online tools.
2. Income approach: Typically used for businesses, this approach considers the income generated by the asset, as well as potential future earnings.
3. Cost approach: This approach assesses potential replacement or replication costs if the asset was damaged or lost. For example, with real estate, it would look at how much it would cost to build a similar property under current market conditions.

While some assets can be based on quantifiable data, subjective factors can also influence value. Let’s say one spouse has been actively involved in starting and running a small business. This business might represent higher value to them compared to the spouse that has no business interests or involvement. 

In these cases, careful valuation is necessary. It may also be necessary for assets like artwork, jewelry, or collectibles.

You may be able to agree on an appraiser to value certain assets based on their current market value. However, we often see couples refuse to agree on an appraiser; in these cases, you may each have the property appraised and submit separate reports for the court’s consideration.

What is a valuation date in divorce?

The valuation date in New Jersey establishes a firm date to end the period of acquisition of assets and debts in the union. Often, this is the date that the Complaint for Divorce is filed. Couples may determine a different date for the end of their marriage, such as the date they moved into separate residences.

The couple remains legally married until the divorce is finalized, but assigning a specific end to the union makes it easier to start the property and debt valuation process. Debt or assets acquired after the valuation date are typically considered separate property.

A valuation date can also be critical in cases where one spouse is set to receive a promotion, bonus, or other asset they don’t want to share. They may file the divorce before receiving the asset, mistakenly believing that it will be “safe” from division. 

An experienced divorce lawyer may argue for a different valuation date, giving their client access to that asset as part of divorce negotiations.

Factors that influence divorce valuations

Complex assets like stocks and stock options, real estate, businesses, or retirement plans and pensions require specialized knowledge to be valued accurately. Asset appraisers must have the necessary expertise to value the asset in question, and depending on what you have, you may need more than one appraiser.

Other factors affecting asset valuation include:

• Market conditions, especially for real estate or a stock portfolio
• The liquidity of the asset in question
• Any debt, lien, or other liability on the property
• Estimated future earnings (when valuing a pension or retirement plan)
• Potential value of an investment asset

Do you always need valuation when dividing assets?

If you have major assets or are a high-net-worth household, it’s advisable to seek out professional valuation or appraisal services. This information can then be used to ensure a fair and equitable distribution of property. It can also be used to support your goals for your divorce during negotiations.

Not all assets need to go through the formal valuation process, though. For example, assets like furniture or household items might not be worth the time and money required for valuation.  Instead, they may be divided based on their current market value or through mutual agreement between both parties.

Consult an experienced NJ equitable distribution attorney

If disputes over which assets are considered exempt and which are marital (and thus divisible) have stalled your divorce process, the skilled New Jersey family law attorneys from Dughi, Hewit & Domalewski can help. We’re committed to ensuring that our clients receive their fair share of marital assets, and we have the tenacity to fight for what’s yours. 

Contact our firm today for a consultation with one of our compassionate NJ divorce lawyers.