New Jersey: retirement fund increase subject to distribution?

[MiseryInNJ]

What is the name of your state?
New Jersey


Came across a bit of a conundrum here.

My wife and I are getting divorced. But, I have a question about what happens to my existing Roth IRA, 401k, etc.

These accounts exist from when I was employed by another company years ago. I've rolled them over once to a different fund, but that was about it, and even that occurred well before the marriage. Actually, let me amend that. There are three total accounts, and I think I rolled one of them over to a different fund during the marriage, the other two were done significantly pre-marriage.

However, thus far we're going to a mediator company. Here's where the confusion starts.

I had previously been given to understand that all my premarital assets would NOT be subject to equitable distribution. I'd also been told that, since these assets' change in value were 100% passive, that the increase in value would also be immune to distribution. A lawyer I had a consultation with also mentioned this.

The person we were talking with at the mediation office was also a lawyer. She showed me a copy of the statute, and it seemed to specifically say things that were acquired during the marriage. I pointed this out, and she said that, even though the retirement funds themselves were premarital, the increase in value is considered '"acquired during the marriage" and thus subject to distribution.

I found this a little strange, because when we were debating other property/asset distribution, my wife even said she wanted to keep everything that was premarital totally separate, including the change in value. The mediator suggested that the fact that she wasn't taking the change in value of my retirement accounts "should be considered" when talking about splitting the other assets.

I've done some searching on the net, but can't seem to find anything definitive that I can "take to the bank" so to speak. Some seem to agree with my interpretation, others seem to not quite say, and I ran across one that agreed with the mediator's interpretation.

I suppose I could retain that attorney I consulted with earlier, but I don't want to wind up with a scenario where I wind up spending more in legal fees than the value of the assets. The mediation attorney, on the other hand, states that 100% passive assets are immune to distribution "is an argument your attorney can make, but there's no guarantee."

Does anyone have any reference to specific precedents, documentation, or whatever where this sort of thing is clearly, explicitly defined or decided?

I'm looking for hard, solid facts here. Thanks in advance.

 

[LdiJ]

What is the name of your state?
New Jersey


Came across a bit of a conundrum here.

My wife and I are getting divorced. But, I have a question about what happens to my existing Roth IRA, 401k, etc.

These accounts exist from when I was employed by another company years ago. I've rolled them over once to a different fund, but that was about it, and even that occurred well before the marriage. Actually, let me amend that. There are three total accounts, and I think I rolled one of them over to a different fund during the marriage, the other two were done significantly pre-marriage.

However, thus far we're going to a mediator company. Here's where the confusion starts.

I had previously been given to understand that all my premarital assets would NOT be subject to equitable distribution. I'd also been told that, since these assets' change in value were 100% passive, that the increase in value would also be immune to distribution. A lawyer I had a consultation with also mentioned this.

The person we were talking with at the mediation office was also a lawyer. She showed me a copy of the statute, and it seemed to specifically say things that were acquired during the marriage. I pointed this out, and she said that, even though the retirement funds themselves were premarital, the increase in value is considered '"acquired during the marriage" and thus subject to distribution.

I found this a little strange, because when we were debating other property/asset distribution, my wife even said she wanted to keep everything that was premarital totally separate, including the change in value. The mediator suggested that the fact that she wasn't taking the change in value of my retirement accounts "should be considered" when talking about splitting the other assets.

I've done some searching on the net, but can't seem to find anything definitive that I can "take to the bank" so to speak. Some seem to agree with my interpretation, others seem to not quite say, and I ran across one that agreed with the mediator's interpretation.

I suppose I could retain that attorney I consulted with earlier, but I don't want to wind up with a scenario where I wind up spending more in legal fees than the value of the assets. The mediation attorney, on the other hand, states that 100% passive assets are immune to distribution "is an argument your attorney can make, but there's no guarantee."

Does anyone have any reference to specific precedents, documentation, or whatever where this sort of thing is clearly, explicitly defined or decided?

I'm looking for hard, solid facts here. Thanks in advance.

I don't think that you are going to find an absolutely definitive answer. The statutes don't address it and there isn't much case law on the issue. (the cost of fighting through the higher courts just dissipates the value of the asset, therefore the cases generally don't go that far).

However, in general, the value of an asset that appreciates during the marriage (even if premarital) is generally divided. I am sure that a good attorney could argue for the opposite. However, at what cost?

That is part of what you need to weigh here.

Example: The amount of appreciation during the marriage is 15k.

It costs you 4k to have your attorney battle it out in court. If you win, you are still ahead by 3.5k. However if you lose, then 7.5k goes to the spouse, plus 4k to the attorney, and you only end up with 3.5k out of the 15k. If the appreciation is only 8k, then battling it out in court might cost you just as much as you would gain.

So take these issues into consideration when deciding what to fight about...and how hard to fight about it. The issue of appreciation of premarital assets is truly a murky one.
Make sure that the potential cost is worth the potential gain.

 

[MiseryInNJ]

So take these issues into consideration when deciding what to fight about...and how hard to fight about it. The issue of appreciation of premarital assets is truly a murky one.
Make sure that the potential cost is worth the potential gain.

Ahh, I was afraid it was going to be one of those unclear/murky things - thanks for being able to confirm that much for me, at least!