In New Jersey, equitable distribution is the method courts use to ensure a fair division of marital property during a divorce. Unlike community property states where assets are split 50-50, equitable distribution aims for fairness based on various factors such as the duration of the marriage, the economic circumstances of each spouse and contributions to the marriage. However, this division pertains solely to marital property, not to the separate property of each spouse.

Marital property includes assets and income acquired during the marriage, regardless of who earned or received them. Separate property, on the other hand, consists of assets acquired before the marriage, gifts, and inheritances designated to one spouse individually. The distinction is clear in theory, but complications arise when separate property becomes intertwined with marital property through commingling or transmutation.

Commingling occurs when separate property is mixed with marital property to such an extent that it loses its separate identity. For example, one spouse inherits money and deposits it into a bank account or investment account jointly held with the other spouse. If the proceeds of that account are used for the spouses’ mutual benefits, they may be considered marital property

Transmutation occurs when the parties take actions that change of ownership of property. For example, one spouse owned a house before marriage, but the mortgage on the property is refinanced during the marriage. The other spouse cosigns the loan and contributes to paying the principal and interest. The title to the home may in fact be changed to both spouses’ names. Another type of transmutation is when the both spouses contribute to maintenance or improvements of a property during the marriage. 

These situations present significant challenges during equitable distribution. A court may use any of the following methods to decide whether an asset should remain separate or be divided:

1. Tracing method — Courts attempt to trace the asset back to its original source to determine whether it retains its separate property status. This requires meticulous documentation and can be challenging if records are incomplete or unclear.

2. Intent analysis — Judges examine the intent behind the commingling or transmutation. If the intention was to treat the asset as marital property, it might be subject to equitable distribution. Statements, actions and how the property was managed are all relevant in this analysis.

3. Proportional division — In some cases, courts may determine that only a portion of the asset has become marital property. For example, if a separate property house increased in value due to marital efforts or funds, the increase in value might be considered marital property while the original value remains separate.

A New Jersey divorce attorney can play a vital role in resolving the issue of marital vs. separate property. They gather evidence such as financial records, deeds, and testimonies to support their client’s claims about the nature of specific assets. When commingling or transmutation is alleged, attorneys may work towards an agreement through negotiation or mediation, helping both parties reach a mutually acceptable resolution without the need for contentious litigation.

At The Law Offices of Kelli M. Martone in Haddon Heights, I represent divorcing South Jersey clients in matters related to division of property and assets under New Jersey’s equitable distribution law. To schedule a consultation, call my firm at 856-432-4587 or contact me online.