Equitable Distribution Factors In A High Net Worth Divorce
In our previous post we discussed property division issues that may arise in a divorce. These property division issues are even more pronounced in New Jersey high net worth divorces. Couples that have been fortunate enough to accumulate significant wealth and assets during a marriage may have a more difficult time untangling these assets and arriving at an equitable distribution during a divorce.
Although New Jersey courts use the term “equitable distribution” to describe the division of property in a divorce, the word “equitable” does not mean “equal.” We mentioned in our previous post that only assets acquired during the marriage are subject to division.
One of the equitable distribution factors that many high net worth couples face is the difference between active appreciation and passive appreciation, Forbes reports. Active appreciation of an asset during the marriage may transform at least part of the asset’s value into marital property.
Active appreciation is an increase in an asset’s value that arises partially from the direct or indirect efforts of a spouse. For example, a business can experience active appreciation because one spouse entertained clients or offered ideas and advice.
Passive appreciation arises out of forces outside of the marriage such as supply and demand or inflation. Pieces of land may passively appreciate, but a piece of land may become marital property if a spouse used marital income or assets to pay for the mortgage, maintenance, or taxes on the land, Forbes reports.
Other factors considered during the equitable distribution of assets may include:
- The length of the marriage;
- What assets each spouse brought into the marriage;
- The health, income, and earning potential of each spouse;
- The cost of maintaining the marital lifestyle for the children.
An experienced divorce attorney can help guide a divorcing spouse through the asset division process and help preserve the spouse’s financial future by making sure that the marital assets are properly divided.
Source: Forbes, “Understanding How Assets Get Divided In Divorce,” Jeff Landers, 4/12/11