One of the most financially impactful events in life can be the possibility of a divorce. New Jersey is not a community property state, but rather, an equitable distribution state. This means that, under New Jersey equitable distribution law, the courts have the discretion to divide marital property in an equitable manner – meaning the split between you and your spouse will be fair but not necessarily equal.
The recent Slutsky v Slutsky case provides a good application of New Jersey equitable distribution law after a party appealed their final decree of divorce. This case illustrates the idea that dividing up property in a divorce is very often complex, and not straightforward. Nancy Slutsky filed for divorce from Kenneth Slutksy after 30 years of marriage. The court case was long and difficult, and eventually, a trial was conducted over 19 days. Both parties challenged various provisions of the final judgment, and Kenneth ultimately appealed. There were nine issues he brought before the court, but for our purposes, this article will focus only on the equitable distribution issues. Essentially, Kenneth claimed there were factual flaws in what the judge found, and argues that the calculations of the division should be reversed.
Defendant was a lawyer, having graduated from Harvard Law School. He was a tax law specialist, became an equity partner in his firm, and owned one share of stock. Shortly before the divorce was filed, the firm changed its payment structure, from a corporation to a limited liability partnership. As capital, Kenneth provided $300,000 to the firm, which was financed through a four-year promissory note. Plenty of evidence was presented concerning Kenneth’s compensation, including the payout for his stock, estimated earnings until retirement, value to the company and his contributions to the firm in general, in order to determine the value of his ‘termination credit account’ (TCA), or what his interest in the firm was. Nancy’s expert initially found the TCA value was $350,830 – but on cross-examination, he admitted the value was likely closer to $292,908, excluding goodwill. Not surprisingly, Kenneth’s expert found the value of the TCA to be $285,000. However, Nancy’s expert estimated goodwill in the firm to be over $1 million, resulting in a revised TCA value of $1,185,304. Kenneth’s expert denied there was any goodwill, to the judge’s dismay. The judge accepted Nancy’s expert’s valuation, finding that Kenneth shared in the firm’s goodwill and awarded plaintiff one-half of the value as her equitable interest. Continue reading