Dear Cassie: How are vehicles divided in a divorce?
Vehicles which are owned by one of the parties to the divorce matter are treated the same way as any other asset of the parties–they are subject to equitable distribution.
To be able to address equitable distribution of a vehicle, its fair market value must be ascertained. As you may know, vehicles often lose significant value after their acquisition. For this reason, the purchase price of the vehicle may not be the best way to determine its current fair market value. Websites which affix value to used vehicles may be a helpful tool. If the vehicle is potentially of significant value, or contains custom alternations or upgrades, the parties may wish to hire an appraiser who specializes in luxury or exotic vehicles, to evaluate the vehicle for its fair market value.
The parties must also address whether the vehicle is subject to any loans which encumber it. A current loan statement should be obtained for this purpose. Much like an item of real estate, it is the equity in the vehicle (i.e., the fair market value of the vehicle, less any debt which encumbers it) which is divisible by the parties.
Related issues in the equitable distribution of a vehicle include transfer of title, and assumption of the debt against the vehicle. One party to a divorce may retain a vehicle titled in the name of the other party. In that event, title transfer documents must be executed, and the parties will need to cooperate for this purpose. A trickier issue is the debt against the vehicle. If the loan is held in the name of one party, but the other party is retaining the vehicle in equitable distribution, the parties will need to ascertain whether the retaining party is able to assume the loan in his or her name. If he or she cannot, the loan may need to be paid in full in connection with the divorce. Otherwise, the party who holds the loan remains liable to the loan provider post-divorce, even if he or she is not retaining the vehicle in the divorce.
Keep in mind that the above comments pertain to vehicles which are owned. Vehicles which are leased are not assets subject to equitable distribution, and should not be treated as such. However, the carrying costs for any vehicle, whether leased or owned, may still be relevant in any support analysis.
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Cassie Murphy is a divorce and family law Partner with the Law Offices of Paone, Zaleski & Murphy, with offices in Red Bank and Woodbridge.