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Dividing appreciated stock value in a New Jersey divorce

We've written before about how marital assets and debts in a divorce are supposed to be equitably divided in New Jersey. For example, our previous post -- "How can the home be divided in a New Jersey divorce?" -- discusses the options available to divorcing spouses who are unsure of the best way of protecting their financial future.

Now let's consider another kind of asset that many people are unsure about when contemplating divorce. The value of stock in a family business can be divided in a New Jersey divorce settlement, but only under certain circumstances.

If, for instance, a wife's father gave her stock in a business, then the stock will probably be categorized as separate property, which is not subject to equitable distribution in a divorce. The business stock can be called separate property because it was a gift from the wife's father to the wife alone. She may have to prove, however, that the stock was meant to be given to her only and not to the husband.

The husband may still be entitled to some of the appreciated value of the stock, but only if the appreciation in value is shown to be active appreciation. In other words, if the value of the stock increased because of the wife's actions, then the appreciation is regarded as active. Proving that the value of stock actively appreciated can be complicated, and a divorce attorney with experience in this area can help make a case.

Passive appreciation in value occurs as a result of factors beyond the stockholder's control. For example, the value of stock may increase because of inflation. If appreciation in stock value is shown to be passive, then the husband in this case would not be entitled to a share of the appreciated value.

New Jersey residents with questions about the equitable division of property should speak with their attorneys about establishing a comprehensive divorce strategy.

Source: Rhino Times, "Divorce Doesn't Mean Division of Family Business," Carolyn Woodruff, Feb. 6, 2014

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