Divorce and the Protection of Premarital Assets

Divorce and the Protection of Premarital Assets

In New Jersey, upon divorce, most assets acquired during the marriage are subject to equitable distribution. That is to say the court will distribute the marital assets in a manner that is fair to both parties. Marital assets in NJ are assets that have been legally and beneficially acquired by them or either of them during the marriage, however there are some exceptions.

Is Your Child’s Inheritance a Premarital Asset?

Under N.J.S.A. 2A:34-23(h), premarital assets are not subject to equitable distribution. The general rule for a premarital asset is that an asset acquired prior to the marriage by one spouse remains his or hers upon dissolution of the marriage, as long as that asset has not been commingled with other marital assets. That is to say the asset has not been put into joint names, a joint account, or used to purchase a marital asset such as a house. The premarital asset must remain separate and apart from the marital assets throughout the marriage.

An effective method of protecting premarital assets is a prenuptial agreement. A prenuptial agreement will outline the separation of property and will discern what is actually martial property versus premarital property. It is essentially an agreement wherein you and your spouse decide what assets are premarital and what assets you each want to keep in the event of a divorce.

Issues arise when couples do not have the foresight to draft and sign a prenuptial agreement. In order to protect premarital assets, it is important to keep that asset separate, even in regard to the other spouse’s access to the account. For example, a premarital investment account may earn interest during the marriage. Is the interest then a marital asset? It depends. Did the spouse do anything to help with the investments, such as give advice or move the money with the consent of the other spouse? Did the spouse have direct access to the account? If the answers to these questions is yes, then these assets may not remain premarital.

Another issue that often arises is whose name is on the asset. One of the most common examples of this issue is real estate. For example, say you decide to buy a townhouse years before you are married and only your name is on the deed. The Court will then ask if the home was bought in contemplation of marriage. If the home was bought with the intention of you and your spouse living in the home as a married couple, then the asset may be marital. If it was bought before the two of you even met, it may be premarital. Upon marriage did the two of you live in the home together? If the answer is yes, then the court applies the factors listed under N.J.S.A. 2A:34-23(h), the New Jersey equitable distribution statute.

In New Jersey, equitable does not mean equal. In a case where only one spouse bought the home, but both spouses lived in it together, the Court may decide that a 70/30 split may be equitable. The Court may also decide a 60/40 split may be equitable. It will depend on the circumstances of the case, the amount of time and money each spouse put into the upkeep of the home and how much money each spouse put into the down payment. Remember, while the two of you were married, the spouse who is not on the deed contributed to the upkeep and maintenance of the home whether it may be in payment of mortgage or cutting the lawn each week. In situations such as this the Court attempts to preserve the premarital portion of the home by giving one spouse a larger percentage in terms of equitable distribution.

Another issue that often arises is inheritance. Generally speaking, inheritance is considered a premarital asset as long as it is kept separate from other marital assets. As soon as money from an inheritance is used to buy a marital asset such as a boat or shore home, then the premarital asset is converted into a marital asset. Any inheritance should be maintained as a separate asset, maintaining inherited funds in separate accounts and or maintaining inherited property separate and apart from marital property. It is also important to note that gifts and trust funds should be treated the same as an inheritance and be kept separate from marital property in case of a divorce.

Protect Your Premarital Assets With Lyons & Associates

If you or someone you know is concerned about the protection of your premarital assets, please contact the Law Offices of Lyons & Associates, P.C. Our skilled team of attorneys are here to help you. For a free consultation, please email us, visit our website, or call us at (908) 575-9777.