What Happens When a Marital Asset Depreciates?

If you have ever read a financial advice column or sought advice from a financial “guru,” you have probably been told that you should not buy a new car because it depreciates in value almost immediately after you drive it off of the dealership’s lot. At the Bronzino Law Firm we know that cars are not the only piece of property you can own that depreciates in value over time. In fact, a great deal of the property people accumulate will, over time, depreciate in value. How does depreciation factor into a New Jersey divorce proceeding?

Initial Orders Entered by a Divorce Court

When one spouse initially files for divorce in New Jersey, courts often enter temporary orders that are meant to govern the behavior of the parties during the pendency of the divorce. One of these orders directs that the parties retain any martial assets in their possession and take action to preserve the value of those assets. This is important, because when a court is called upon to enter a final property division order at the final hearing in a divorce case, the court will often use the value of the marital assets on the date the divorce petition was filed to determine the size of the marital estate and conclude what constitutes a “fair and equitable” division of property. A spouse who purposefully allows or causes a marital asset to depreciate in value between the time the divorce is filed and the divorce is finalized can negatively impact the fairness of this property division.

What Happens When Marital Assets Do Depreciate?

When entering a property division order and presented with evidence of the depreciation in value of one or more marital assets, a court will begin by determining the cause of the depreciation. If the depreciation occurred simply because of the passage of time or normal “wear and tear” on the asset and in spite of the efforts of the party in possession of the asset to preserve its value, a court will not likely penalize the party who had possession of the asset during the pendency of the divorce. The court may take the depreciated value of the property into account when determining what constitutes a “fair and equitable” division of property.

But suppose that a party is found to have deliberately caused a marital asset to lose its value – for example, suppose that a divorcing spouse took the car he or she was temporarily awarded and set it on fire in a ploy to get the court to award him or her more marital property. In this case, the court may penalize the party who deliberately destroyed or devalued the marital asset by imputing the fair market value of the property prior to its destruction to the party who destroyed or devalued it, thus affecting the division of property.

For example, suppose Tommy and Gina are divorcing and Tommy is awarded the temporary use and possession of the couple’s car, which is valued at $25,000. Suppose Tommy and Gina’s marital estate has a total value (including the car) of $100,000. If Tommy deliberately crashes the car, a court could take this into account and award $50,000 of the remaining marital assets to Gina and only award Tommy $25,000. (If the depreciation was not due to Tommy’s fault, a court may have awarded both parties $37,500 in marital assets as a fair and equitable property division award.)

Contact a New Jersey Property Division Attorney for Help

Contact Bronzino Law Firm for assistance with your divorce case and in protecting your right to a fair and equitable distribution of property. We assist divorce clients in Ocean County, Monmouth County, and in the surrounding areas. Call our office today at (732) 812-3102 to schedule your free initial consultation.