ew Economics of Divorce in New Jersey

The

There are several differences to focus on between

divorce New Jersey-style as it existed prior to 2008

versus how it exists now and for the foreseeable future

One of these is the matter of what the practitioner

whether he or she is a forensic accountant who

specializes in divorce or is a traditional accountant

must provide in professional advice to clients who are

going through the process

More than 30 years ago Census data indicated that nearly 50 percent of first marriages ended in divorce and today this basic statistic still holds true In 2003 New Jersey ranked as the 16th lowest state for number of divorces The real estate market was strong and home values were high retirement plans and stock investments were still generally strong Most importantly

By Randall M Paulikens CPA employment was robust In 2003 the

and Ronald Markovich unemployment rate was less than half of what it is today People had moreWithumSmith+Brown discretionary income to spend and accordingly had the financial means to get divorced Despite the emotional woes and concerns of divorce people still had economic confidence and a sense of economic security and

stability This stability allowed them to make necessary but difficult financial decisions

The New Jersey Divorce Divorces trigger property distribution of the marital estate and income distribution (ie alimony) In New Jersey there are a dozen factors that are considered for spousal support (alimony) Half of these factors are not substantially impacted by location or economic cycles bull Marriage length bull Age and health of each party bull Parental role of each party bull Time and expense to acquire sufficient

education or training to become selfshysupporting

bull Consequences to both parties bull Factors that the court deems relevant

(New Jersey Statutes Title 2A Chapters 34-23)

The following factors can be impacted by geographic location and the economy bull Actual needs and ability of a party to

pay alimony bull Standard of living established during

the marriage bull Earning capacities of the parties

education level job training and skills bull Length of a bsence from the

NEW JERSEY CPAmiddot JANUARYmiddot FEBRUARY 2012

8

job market of the party seeking maintenance

bull Property a ward bull Income-producing assets (eg rental

real estate)

The economy obviously plays a potentially significant role in many of these latter factors For example the ability to be gainfully employed

and thus establish a standard of living depends greatly on the current state of the employment market Even if the standard of living itself is not in dispute the ability to continue that standard may be significantly impacted The job or position may simply be eliminated on a temporary long-term or permanent basis Some of these issues were not as prevalent pre-2008

as they are today The prior economic situation allowed various customs for income and asset splitting to take hold and become part of what was and to

an extent still is in New Jersey divorce cases

Postmiddot200S and Future Expectations As the economy started its decline in

bull Operation Ceasefire in New Jersey The crime problems in Newark are well known While there has been some progress its clear further improvements will require new solutions A recent grant by CFNJ helped to bring asuccessful nationally tested model to reduce gang violence called OperationAt the Community Foundation of New Jersey were focused on Ceasefire to Newarkhelping our donors use their donor advised funds to create real

impact in their communities and see the good their charitable If your clients are looking to make adifference through I

giving creates charitable giving wed like to be of assistance Please contact )

Here are two recent examples of innovative ways our donors are Hans Dekker at hdekkercfnjorg I 973-267-5533 lusing their funds to make adifference I bull Donor Fund Helps Special Needs Adults Find Work

Employment Horizons is a non-profit organization that COM M U NIT Y bull F 0 U N D A T IONmiddot 0 F bull NEWmiddot] E R S E Y

provides job counseling and placement to special needs adults Through agrant from a donors fund the organization now has been able to place more special needs adults in jobs by expanding staffing services and underwriting the costs of drivers and career coaches Now these adults are able to not only obtain employment theyre able to keep it

NEW JERSEY CPA JANUARY FEBRUARY 2012

10

job market of the party seeking maintenance

bull Property a ward bull Income-producing assets (eg rental

real estate)

The economy obviously plays a potentially significant role in many of these latter factors For example the ability to be gainfully employed

and thus establish a standard of living depends greatly on the current state of the employment market Even if the standard of living itself is not in dispute the ability to continue that standard may be significantly impacted The job or position may simply be eliminated on a temporary long-term or permanent basis Some of these issues were not as prevalent pre-2008

as they are today The prior economic situation allowed various customs for income and asset splitting to take hold and become part of what was and to

an extent still is in New Jersey divorce cases

Postmiddot200S and Future Expectations As the economy started its decline in

bull Operation Ceasefire in New Jersey The crime problems in Newark are well known While there has been some progress its clear further improvements will require new solutions A recent grant by CFNJ helped to bring asuccessful nationally tested model to reduce gang violence called OperationAt the Community Foundation of New Jersey were focused on Ceasefire to Newarkhelping our donors use their donor advised funds to create real

impact in their communities and see the good their charitable If your clients are looking to make adifference through I

giving creates charitable giving wed like to be of assistance Please contact )

Here are two recent examples of innovative ways our donors are Hans Dekker at hdekkercfnjorg I 973-267-5533 lusing their funds to make adifference I bull Donor Fund Helps Special Needs Adults Find Work

Employment Horizons is a non-profit organization that COM M U NIT Y bull F 0 U N D A T IONmiddot 0 F bull NEWmiddot] E R S E Y

provides job counseling and placement to special needs adults Through agrant from a donors fund the organization now has been able to place more special needs adults in jobs by expanding staffing services and underwriting the costs of drivers and career coaches Now these adults are able to not only obtain employment theyre able to keep it

NEW JERSEY CPA JANUARY FEBRUARY 2012

10

2007 the number of divorces in New Jersey also started to decline By 2008 New Jersey had the second-lowest divorce rate in the country After 2008 the divorce rate has been declining at an even greater rate as the recession took its toll on family finances New Jerseys economy suffered due to its proximity to the financial services sector The number of new divorce cases filed in New Jersey during the first six months of 2009 fell by 9 percent compared to the same period in 2008 People are choosing to stay together until prices of real estate and stock portfolios rebound Despite a belief held by many family law attorneys that there will be an increase in divorces as the economy recovers there has not yet been a significant increase in cases filed

In the past divorces were caused by numerous factors such as financial disputes adultery and children-related matters Couples who typically rely on salaries may endure excess stress as a result of a layoff Even if a divorcing spouse has a job the fact that he or she may lose a job can impact the decision-making process Previously the consequences for stress were marital dissolution Paradoxically financial

stress caused by one or both spouses losing a job may be the reason the couple remains together Simply put the couple may not be able to afford to live apart as well as pay professional fees coincident with divorce

The Role of the Accountant Accountants should expect to tell their clients the plain truth It will take years to recover equity in the home the job may never come back a lifestyle funded with debt cannot continue and so on Accountants deal with economic reality daily They should communicate to their clients honestly and openly since clients may not know or be willing to admit certain things Avoiding certain truths does not make these realities go away

CPAs can help a divorcing couple conserve what likely may be fewer assets than either spouse wants to acknowledge This is the time for the CPA to educate both parties as to the actual financial picture Most often neither spouse understands the entire picture For example one spouse typically is aware of the big ticket items such as the mortgage and car payments but has no idea how much

food and school activities cost

As we look forward to 2012 and beyond the economy does not appear to be rebounding anytime soon With a weak economy and growing costs couples will be forced to remain unhappily married just to survive Perhaps the saying in good times and bad has more meaning than ever

Randall M Paulikens CPA ABV CFF CITP is a partner and the director of the litigationlaw firmvaluation service group at WithumSmith+Brown He is a member of the New Jersey Society of CPAs Business Valuation Forensic Litigation Services Interest Group Ronald Markovich is a senior accountant at WithumSmith+Brown Contact the authors at 201-265-2800

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