New Jersey Appeals Court Finds Rental Properties Purchased Before Marriage May Be Subject to Equitable Distribution

Although generally property a spouse purchases before marriage is not subject to equitable distribution, some assets purchased before the marriage are still subject to equitable distribution. A New Jersey appeals court recently issued a decision in a New Jersey divorce case in which it found that rental properties the wife purchased before the marriage may still have been considered as part of the marital estate.

In that case, the husband and wife were married in 1999, and the husband filed for divorce in 2018. Before they were married, the wife bought six residential properties in New Jersey with her own money. The husband later renovated the properties and maintained them. The couple bought many other properties together after they married. They earned rental income from the properties, and the wife eventually managed the properties full time. The husband maintained and repaired the properties, at least to some extent. The parties did not keep separate accounts for premarital and marital properties. At the time of trial, the rental properties were generating a rental income of about $12,000 per month.

The family court divided the properties purchased after the marriage evenly and equitably distributed two of the six premarital properties, which the court found were purchased in contemplation of the marriage. The court assigned the remaining four premarital properties to the wife. The husband appealed several issues, including that he was entitled to an equitable share of the premarital properties.

Increases in Value of Nonmarital Assets in New Jersey

In dividing marital assets, a court must identify the marital property, determine its value, and equitably distribute the property. Generally, property that is acquired by spouses during a marriage is subject to equitable distribution. Even an asset that was purchased before the marriage may be subject to equitable distribution if it was intended to be a marital asset. In contrast, premarital property is not subject to equitable distribution if it was kept separate from the marital assets. If an asset is not subject to equitable distribution, its increase in value may be subject to equitable distribution if the increase in value is due to the efforts of the owner’s spouse. Premarital property also may be subject to equitable distribution if the owner commingles it with marital assets, with the intention of gifting it into the marital enterprise.

New Jersey family courts tasked with equitably distributing property to spouses should use their discretion to fairly and justly divide the assets. There are a number of factors that should be considered in determining an equitable distribution, including the duration of the marriage, the standard of living enjoyed by the spouses during the marriage, the income or property each party brought to the marriage, the age and health of the parties, the earning capacity of each party, the debts and liabilities of the parties, the contribution of each party in the appreciation or depreciation in the amount or value of the marital property, and other relevant factors.

The Court’s Decision

The court found there was evidence that supported that the wife commingled her premarital property with marital assets, and gifted them to the marital enterprise. The court noted that the wife deposited rental income from marital and premarital properties into a joint account and used the money for marital expenses. The wife also did not distinguish between marital and premarital properties with regard to income or repairs, instead commingling all rental income. The premarital properties were also mortgaged and used as leverage to purchase marital properties. The husband also completed some repairs, renovations, and maintenance of all of the properties. Thus, the appeals court found that the family court failed to consider whether the wife’s premarital property was subject to equitable distribution for these reasons. Therefore, the appeals court overturned the decision and sent the case back to the family court.

Contact a New Jersey Divorce Lawyer for Immediate Assistance

If you are going through a divorce or custody dispute, having an experienced New Jersey divorce lawyer is essential. The Law Office of Jeffrey R. Brown, Esq., LLC provides representation in all aspects of New Jersey divorce and family law throughout Middlesex and Monmouth Counties, as well as elsewhere in New Jersey. The law office prides itself on providing diligent, responsive representation to New Jersey family law clients. Contact the office at 732-613-0066 or through the online form to set up a free appointment with a New Jersey divorce attorney.

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