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Property DivisionCourt Equitably Distributes Enhanced Earning Capacity and Real Property

November 14, 2007

The Appellate Division in Mildy v. Mildy examined some of the factors considered in equitably distributing martial assets. In this case, the Court was confronted with the issues of equitably distributing the wife’s enhanced earning capacity and jointly held real property which was, in large part, paid for with the wife’s separate property.

The Wife earned a master’s degree during the marriage.  Her enhanced earning capacity  was valued at $140,000. After trial the husband was awarded a half interest in the degree. The Appellate Court reduced the husband’s interest in the wife’s enhanced earning capacity to 25%, and provided the following reasoning:

While both parties agreed that they hired a babysitter to care for the child while the wife was in school, the husband testified that, although he continued to work full time while the wife was in school, he cared for the parties’ child during the time when he was not working, relieved the wife of her household chores so that she could study, maintained the household, took the child to school and activities, and assisted the wife with her studies, as he had a similar background in special education. There was no evidence that the husband sacrificed any career opportunities during the time the wife was pursuing her degree. Under the circumstances of this case, we find that the husband’s contributions did not warrant an award of 50% of the wife’s enhanced earning capacity.

The parties purchased a vacation property in Florida in 1997 for the sum of $270,000, subject to a mortgage of $243,000. In 1998, the wife received $500,000 as a gift from her family, which was deposited in a joint account. The husband conceded that the money was her separate property. On February 2, 1998, the sum of $216,238.58 was withdrawn from the joint account to pay off the mortgage on the Florida property.

In equitably distributing the property, because the wife’s separate property contribution was traceable, the court granted the wife a credit equal to the $216,238.58 paid to satisfy the mortgage. The balance of the house proceeds were distributed equally between the parties.

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