New Jersey couples that are considering or experiencing divorce can benefit from learning as much as possible about the financial aspects of divorce, including equitable distribution of assets and debts. Couples with significant assets or a stake in a business may face particularly complex challenges in dividing their marital property. Another important financial consideration in New Jersey divorce is alimony, which may undergo significant legal reforms in the near future. In this podcast, Rosanne DeTorres, an Attorney from New Jersey, explores the financial aspects of divorce, including equitable distribution of assets and debts.
Press PLAY to listen to podcast. (Allow a few seconds for loading.)
Hosted by: Dan Couvrette, CEO, Divorce Magazine
Guest speakers: Family Lawyer – Rosanne DeTorres. Matrimonial law attorney Rosanne DeTorres practices family law with the New Jersey law firm of DeTorres & DeGeorge, LLC. An accomplished appellate attorney with experience in commercial, business, and real estate transactions, Rosanne is trained both as a family mediator and a collaborative law attorney. She is a member of the Executive Committee of the Family Law section of the New Jersey State Bar Association and the Hunterdon County Bar Association. Learn more at www.danddfamilylaw.com.
Divorce Magazine’s Podcasts are available on itunes. Click here to subscribe to our podcasts.
Read the Transcript of this Podcast Below.
Rosanne DeTorres on Financial Issues Related to Divorce
Dan Couvrette: What does equitable distribution mean and how does it apply in a divorce case?
Rosanne DeTorres: Equitable distribution is a fancy term to describe the division of assets and debts in a divorce. And what it means is that a court will require the parties to fairly—and that’s what equitably means—divide their assets and debts between them. There’s a whole series of factors that we look at in evaluating what fair means in your particular circumstances.
Does equitable distribution mean that assets are divided 50/50 in New Jersey?
No. There’s no case or statute or law that requires assets to be divided 50/50. Many times they are divided 50/50 because it’s a long-term marriage and both parties contributed equally to the creation of the marital wealth, if you will. When there’s a homemaker spouse or a dependent spouse, just because they stayed home and took care of the kids and home while you worked doesn’t mean that they would get less because their contribution to the marriage is deemed to be just as valuable as an income provider.
What if one spouse had an affair? Does that come into account when you’re figuring out who gets what in terms of the division of assets in a divorce?
New Jersey is a no-fault state, meaning that marital fault does not play a role. Marital fault, marital wrongdoing or immoral conduct in a marriage, except in the most egregious of circumstances—and it’s extremely rare—does not play any kind of role in the division of assets. So, the answer is, “No.” If your spouse has an affair, that doesn’t mean they get less. The only caveat to that would be if your spouse who’s having an affair uses marital resources to engage in a relationship outside the marriage, then those resources need to be basically refunded to you or refunded back into the marital pot of assets.
Are retirement accounts and pensions subject to equitable distribution?
Definitely. The rule of thumb for equitable distribution is this: whatever was accumulated during the marriage or acquired during the marriage—and that’s defined as from the date of the marriage to the date somebody files a complaint for divorce—is considered marital. So if you accumulated a retirement benefit between those two dates, then that is a marital asset that needs to be divided in the divorce.
When they’re dividing assets, does the court take into consideration if only one spouse worked during the marriage or does that not matter at all?
It matters only a little bit. By and large the homemaker spouse’s contribution is deemed to be as relevant, as important, and as valuable as the spouse who contributes wages and money to the marriage.
If the couple owes money at the end of their marriage, is that debt divided 50/50 as well?
Again, there’s no rule of thumb that it would be divided 50/50. We like to resolve most divorces so that everybody leaves the marriage with as little debt as possible. Many times, especially in this economic climate, that’s not possible. If there is a resource from which to pay marital debt, like, for example, if a home is going to be sold, we may want to encourage the parties to see if they can agree to liquidate and pay off marital debt from the proceeds of the sale of the home. If they have credit card debt that was marital credit card debt, we’ll just pay that off before we divide the proceeds from the sale. If you can’t do that, the debt has to be taken over by somebody after the divorce. Then we look at what the equities are. Do the parties have equal earning potential? Do they take home the same amounts of money? If we have some equality in terms of their incomes—from support or wages, all sources of income are considered—then it makes sense that the marital debt would be divided equally. But it’s not automatic.
If somebody files for bankruptcy while they’re going through their divorce—or even after—are they obligated to pay the ex-spouse alimony payments in New Jersey?
Yes. You cannot relieve yourself of your support obligations by filing bankruptcy. Nor can you avoid paying child support because you file for bankruptcy.
Are there different kinds of alimony in New Jersey?
There are many different kinds of alimony in New Jersey. There’s term alimony that lasts for a specific period of time—otherwise known as limited duration alimony. There’s permanent alimony, which isn’t really permanent, but it’s referred to in the statute as permanent—it just means for a much longer period of time unless the payer dies, the dependent spouse dies, or the dependent spouse remarries. There are also other events that might occur that trigger cessation or reduction of permanent alimony. There’s rehabilitative alimony and there’s reimbursement alimony. When you consult with DeTorres & DeGeorge, we evaluate your particular facts and circumstances and determine what avenue to pursue for you. We look at all the facts and circumstances of your case and decide what form of alimony is most appropriate in your particular situation.
We’re speaking in July 2014 and there are some changes happening with alimony in New Jersey. Do you have an idea of how that’s going to affect alimony in the future in the state of New Jersey or is it too early to tell?
There is actually a bill on Governor Christie’s desk right this minute that was passed by the New Jersey Legislature. It’s just awaiting signature of the governor to become law, and that would place some structure on alimony that we’ve never seen in the past. It would provide for some limitations on the length of alimony and make some adjustments in the factors that a court is allowed to consider in determining what alimony is. But until Governor Christie signs it, it’s not the law, and there’s no indication to the Family Bar when or if he may do that.
What is a dependent spouse?
The dependent spouse is the spouse that requires support in order to approximate the marital lifestyle. It could be a stay-at-home mother or a stay-at-home father. It could be that one of the spouses makes considerably less of an income than the other, so they’re more dependent on the financial support from their partner.
In a situation where a spouse isn’t working, can they be forced to work as they go through a divorce?
The court has no power to force people to get jobs, but if you are able-bodied, there’s no impediment to you working, you have some skill or experience, and there’s no custodial responsibility or other factor that would prevent you from earning an income, the court can impute an income to you for purposes of determining support. It’s very rare for a court to do that during dependency of the divorce action, but once the divorce is being finalized, whether by agreement or through trial, the ability of the dependent spouse to bring an income to the table for purposes of evaluating support is an issue and it needs to be resolved.
Does a premarital agreement limit the amount that somebody would have to pay or could receive as alimony?
Yes, it could. Premarital agreements are enforceable. They can certainly circumscribe how much support you get, whether you even get support, and, if you get it, for how long. If there is a premarital agreement, we definitely need to look at that to see how it affects your particular situation.
Can somebody file a motion to decrease the amount of alimony they pay in New Jersey after the divorce?
Yes, they can. If there’s a material change in your circumstances, whether you lost a job inadvertently, you can’t find a replacement job, maybe you’ve gotten sick, maybe you’re a dependent spouse and the situation has improved for the person that’s paying you support—then yes, you can seek a modification of the alimony up or down.
If somebody were to own multiple businesses, but they were not the spouse responsible for those businesses, how do you ensure they get their fair share?
The first thing we want to know is when the businesses were started. Were they started during the marriage? Were they started before the marriage? Did our client work in the business in any capacity? We look at all of those things. We also then engage the services of a forensic accountant to evaluate what is that business worth. Every business is different. It depends also on the ownership interest of the other spouse. Are they just an employee? Do they own stock? Is it a family run business? We always want to engage experts to help us look at that and derive a value for the spouse’s share of the business, and then we work to negotiate a division of the value between the husband and the wife. Not always 50/50, but depending upon our clients contribution to the business, it may be anywhere from 25 to 35%.
What about in the case of professional offices, like a law office or a dentist office? Do the spouses deserve a share of those practices?
Absolutely. Just because you didn’t work in the business doesn’t mean that you’re not entitled to a share of the business in the event of a divorce. Businesses are considered assets and they’re separate entities that have intrinsic value—that value can be derived by forensic accountants or experts. Just like any other business, whether it’s a deli, a pizzeria, a manufacturing facility, a law firm, or a physician’s office of some kind, they all can be valued.
We work with specific forensic accountants that deal with specific types of businesses. So we have experts in our rolodex that just do professional practices. We have experts in our rolodex that are very good at evaluating restaurants and so forth. And once we provide them with all kinds of financial data about the business, they can arrive at a value for the spouse’s share or ownership and then we negotiate a division of that share.
In a case where you are trying to value a business, is it normal that you would have one or two business valuators between the two spouses?
It’s up to the parties whether they want separate experts or a joint expert. I like to have my own expert that I work with because then I can talk to them privately. When you have a joint expert, all the communications with the expert has to be done with the other side of the case and they act as a neutral. I like to have my own expert, but it’s really a matter of preference and whether you think the case is really going to trial. If you have a sense that you’re getting this valuation from a forensic accountant just to leverage a settlement and to arrive at a number for negotiation purposes and you have no intention of ever taking the case to trial, then a joint expert may be fine. It’s really a matter of preference.
What happens in the case where one spouse is not reporting all their income? When it comes to deciding how much alimony the other spouse should receive, what can you do to help determine what the correct amount should be?
That’s a thorny issue. If you take the position, now that you’re divorcing, that your spouse was not reporting cash income, and you filed a joint tax return with that spouse during the time that there was income not being reported, you have some civil liability to the Internal Revenue Service. So we have to be very, very careful about making that argument. If you make that argument before a judge, a judge is actually duty bound to report you to the IRS if they find credible evidence that that was actually taking place— meaning you file joint tax returns and somebody had cash income that wasn’t being reported.
We have to be very, very certain that that’s really going on and we definitely want to negotiate that off the record, so to speak, because we don’t want anybody to be getting in trouble with the IRS if we can avoid it. The other point I’ll make there is it’s very, very hard to prove cash income. Obviously, cash is fungible. People take cash and then they spend cash. Unless somebody is foolishly keeping a little log of how much cash they’re receiving, it’s very hard to prove that. So, unfortunately, those kinds of arguments tend to be very difficult to make.
Does it make sense for divorcing spouses to file joint tax returns in their final year of their marriage?
It often makes sense financially for parties to file married jointly because it reduces their overall tax liabilities. Sometimes, though, there are other reasons why they shouldn’t, but we work with their personal accountants—not the forensic accountant, not the expert, but their personal accountants to determine whether they should file married separately for the last year of their marriage or married filing jointly. Usually, 9 times out of 10, it benefits them to file jointly.