Maintenance Law in New York State – Finally Settled or as Unsettled as Ever?

No divorce, child support, or custody matter, is simple.  And with the New Year, there are a number of changes taking effect that could make things even more complicated.

Over the fall, the Domestic Relations Law was amended considerably.  These changes are taking effect on January 23, 2016.  Among the changes: for the first time, there are statutory guidelines for determining post-divorce spousal maintenance (a/k/a “alimony”) (new guidelines for temporary maintenance are already in effect).  The presumptive income “cap” for both temporary and post-divorce maintenance has also been reduced, considerably.  Also, whereas one spouse’s contributions to the other’s career could once be monetized and added to the “pool” of assets subject to distribution upon divorce, that is no longer the case.

Will the formula make determining maintenance easier for the judiciary?  It could, at least for lower wage-earners.  For higher wage-earners, however, much is still up in the air.  The formula may control, in many cases leaving the other spouse receiving less than he or she would have under the old system.  Or, the judge could rely on a number of discretionary factors to deviate from the formula.  The more that judges deviate from the formula, the more difficult it becomes to predict outcomes for purposes of settlement and trial preparation.

Have “enhanced earnings” (career contributions) truly been eliminated?  The law now requires that these contributions not contribute to the “pie”, that is the pool of assets subject to distribution; but the law still allows the contributions to arguably allow one spouse a bigger “slice” of that pie.  Again, the devil will be in the details of each case.

In short, some of the amendments’ attempts to simplify and streamline might actually make some matters more difficult to predict and more complicated to prove.  We are staying on top of these issues to maximize the benefit for our clients.  If you would like more information, please call or email us to set up an appointment.

We have prepared a more detailed and in-depth overview of these amendments and changes. Click here to view and download the featured article. 

 

Big Shift Pushed in Custody Disputes to Give Fathers More Control

I cannot believe we are still having this conversation in the year 2015. Debating whether or not kids need Dads as much as Moms. Wondering if only women can have the essential “mother’s touch” during the child’s “tender years”.

Check out this article in the Wall Street Journal. I represent many wonderful parents, male and female. Most see the value in co-parenting. And once in a while, one parent is just not terribly fit. But more often, efforts to deprive one parent of time with the other is about pay-back and control. I ask the question “what circumstance requires that the children be deprived of time with one parent in favor if extra time with the other”. Often there is no good answer, no matter how “best interests” is dressed up.

As one psychology professor in the article put it, “If dad is subject to the typical ‘Wednesday dinner and every other weekend’ arrangement, ….he is basically reduced to an Uncle”.  Substitute the word “Dad and Uncle” with “Mom and Aunt” and the import is the same.

Big shift pushed in custody disputes to give fathers more control…read the article at the Wall Street Journal by clicking on this link:  http://on.wsj.com/1IxcvaY

Addressing Issues of Business Valuation When Getting a Divorce

Often the thorniest and most complex economic issue in resolving a divorce is protecting the family business or a closely held entity. Frequently one spouse owns all or part of a business that has been the source of income for the family throughout the marriage. Sometimes the business has been in one spouse’s family for generations. The person who owns a share in the business is the “titled spouse”.

The non-titled spouse is frequently entitled to a portion of the business value…but seldom a piece of the actual business, received typically through a “buy-out”. That claim to a share in a business remains even if the spouse did not do any real work in the business. Such an interest is created in the law through the spouse’s “indirect contributions”.  Examples of such indirect contributions would include caring for children, caring for the household matters, freeing up the spouse from other duties to allow more time to be spent building the business, brainstorming and commiserating with a spouse about business matters, entertaining employees and clients, etc.

In order to determine a non-titled spouse’s claim to a piece of the action, an expert is hired to value the business. Once a value is established, discussion will begin to negotiate the percentage of that value to which the non-titled spouse would be entitled (seldom as much as 50%) and whether that sum will be paid through a trade- off of other assets, a straight buy-out, or payments structured over time. If part of the business was acquired during the marriage, but another part either existed before or was obtained as a gift or inheritance, only the marital portion will be considered.

Having experienced professionals navigate this challenging component of divorce is vital to a fair and reasoned outcome. 

Do You Need a Postnuptial Agreement – USA Today Article

Link

USA Today has done a good “fundamentals” article on who needs a post-marriage Agreement for the division of asset and debt in the event of future marital strife. It is a good starting point for consideration of such a document by anyone with substantial non-marital assets, an interest in a closely held business, or who anticipates receiving funds by trust, gift or inheritance.
USA Today - Postnuptial Agreement Article - AJ Smith – February 15, 2015

Does Collaborative Divorce Work for Everyone?

No. That is why I use my collaborative training when I can, but my 34 years of trial experience in a litigated model when that is the better choice.

But it works in more circumstances than one might think. The key is the willingness of the parties to be guided by a process. The motivation is often to come to a resolution with dignity, and one of which both parties can be proud. Where there are children involved, no matter their ages, often-times the motivation is to do what parents do…..display behavior for their children, even when it is hard, that will make their children do better and be better.

In my practice, I have seen parties overcome very real obstacles and achieve collaborative agreement. Infidelity, unequal bargaining power, anger, sadness, confusion, fear, and mistrust are all part of the divorcing process. Each can be managed in collaboration.

So what makes collaboration nearly impossible?  Violence, drug abuse, unmanaged mental illness, urgency to act to protect persons or property.

I urge clients to consider the collaborative method fully, as a “better way” to divorce. Only they can decide if it will work in their particular circumstance. Where it will, we help them get that going. Where it will not, we affirm their choice and help them by using traditional tools and methods.

What is the Latest on Maintenance in Central New York?

In 2010, the New York State legislature did what it does well…it got half the job done, then “kicked the can down the road” to decide “later” what the law on maintenance should be in NY. Then….they never got back to us. If they do, some people will be happy they finally did, other will wish they had not.

Pre-2010, an informal formula served as a rule-of thumb for courts and practitioners.   For longer term marriages, usually maintenance would be 1/3 the disparity in income for 1/3 the length of the marriage. Shorter term marriages would trend toward ¼ in length and disparity.

In 2010 the statute was changed to create a maintenance calculator for the life of the divorce action. A promise was made to return in 2011 with a formula for maintenance after the divorce was finalized. No such law was ever passed. Abhorring a vacuum, courts have tended to use the formula for temporary maintenance as a guide for the long term amount, and the old formula for the length of term to fill the void. The calculator on the amount to be paid can be found at the NY Courts Website.

Proposals have surfaced, none having made it out of committee yet. Some provisions are scary, at least to payers. No automatic termination on remarriage for instance. Large caps on calculating disparity. And life-time maintenance for long-term couples. Add to that factors that contemplate the ex-spouse caring for the ex-mother-in-law as a factor in setting maintenance, and, well, maybe no news is good news on the legislative front.

Collaborative Law v. Traditional Divorce: Which is Right for Me?

Increasingly individuals faced with the prospect of seeking an orderly and fair dissolution of their marriage are beginning to consider non-traditional methods to resolve disputes and complete the divorce process. They are beginning to ask, “What is collaborative law?” “How does it differ from traditional litigation-based methods?” “Is it for me?” “And, how does it differ from mediation?” Read more….

Special Considerations For Same Sex Couples Considering Prenuptial Or Post-Nuptial Agreements

Prenuptial and post-nuptial agreements can become a particularly interesting way of addressing perceived unfairness or imbalances created by the laws surrounding same sex marriages.  As same sex couples rejoice at the willingness of a legal system to recognize their union, it is important that we pause to note the special circumstances surrounding the short time that such marriages have been legally available, and the special problems that may arise in the event of divorce.

It would not be at all uncommon for a now married same sex couple to have considered themselves as a family unit for many years or decades.  That same sex couple may have acquired real property, personal property, bank accounts, and other assets, and indeed may have adopted or given birth to children during their relationship.  One partner may have paid for the other to attend advanced schooling, earn a degree or license, or may have created a business with the indirect support of the other partner.  In the minds of the couple, and in their hearts, they have long been a unit.  But in the eyes of the law they became so but a short time ago.

Were a couple to become divorced today that became married twenty-four months ago, but who lived together for twenty years, they would have participated, legally, in a “short-term marriage”.  The opportunity for the person earning less income to receive maintenance from the higher bread-winner would be limited to a period of months.  There would be no recognition of property acquired prior to the legal union of the couple in one party’s name, no recognition of sacrifices made in indirect contributions in the growth of one partner’s business, or assistance provided in one partner obtaining an advanced degree or license.

A piece of real property acquired by one as a matter of convenience, or bank account opened in the name of the other simply because that person was closest to the bank that day, could result in a distribution of property that would be vastly different than the traditional married couple next door experiencing similar circumstances.

The Domestic Relations Law, as set forth above, welcomes persons to fashion their own “marriage deal” so long as it complies with statute.  A couple whose physical union has been of long duration, but whose legal marriage has been short could decide that Domestic Relations Law Section 236 would not be “fair” in their eyes.  At a time when the marriage relationship seemed strong and healthy, the couple could project how they would handle future discord.  One partner who, prior to a “legal marriage”, became a doctor, professor, lawyer or accountant could prepare an agreement that would recognize, in the event of divorce, the other partner’s contribution.  Partners could state that they would ignore the law of title, and instead embrace the idea that even if only one partner holds title to property after a certain date, that the value of that property would be split in an ultimate divorce.

While parties could not provide in a prenuptial agreement how they would handle custody or child support for unborn children, they certainly could address issues regarding existing children, and  imagine a schedule of maintenance (alimony) that would extend beyond what the court would provide, in recognition of a long standing relationship and sacrifices made by one partner during their relationship.

A prenuptial agreement is a tool, and that tool can meet many purposes.  While traditionally used to limit or at least clearly define within the context of “traditional marriage” how assets should be distributed and disparities in income addressed, this statute could also be used to recognize the longstanding existence of a union only recently recognized in law.

 

 

 

Marriage Is About Collaboration; Shouldn’t Drafting A Prenuptial Agreement Be Collaborative As Well?

Some of the challenges to broaching the topic of a prenuptial are the anxiety, fear, and resentment that such a discussion can have, particularly in the heart of the prospective spouse who “has less”.  Either or both parties may worry that damage to the relationship on the eve of the “best day of their lives” might be occasioned if money is talked about, future circumstances anticipated, and cogent thought actually applied to the idea, as they anticipate this happy day, someday being under such emotional strife that one party might “pull the trigger” on a no-fault divorce.

Traditionally, prenuptial and post-nuptial documents have either been fully negotiated with each party obtaining separate counsel, and having that counsel exchange letters, phone calls, and various drafts of agreements in negotiating in the best interests of their client, or alternatively the more powerful “future spouse” presenting a document to the less well-heeled prospective spouse and cajoling them to sign a document so that the wedding may proceed.

There is, thankfully, a different option; the method of Collaborative Law. Used to cooperatively fashion end of divorce opting out agreements for many years, Collaboration can also be used in friendlier circumstances to craft a satisfactory

Under collaboration, the image of negotiation between attorneys in their respective offices, jockeying for maximum advantage, is replaced with the image of persons gathered around a conference table, discussing together their wishes and worries, aspirations and anxieties, about their financial future.  The “cards can be put on the table”, assets and liabilities “white-boarded” and a full conversation had as to what will serve both person’s interests better than what the legislature has created, resulting in an agreement neither hope to use, but which addresses the vagaries of life.

The result of such collaboration is a calm, well informed and fair agreement that is acceptable to both parties.  It is an agreement that is very unlikely to be rejected by a court.  Claims of duress, overreaching, unconscionability, or the failure to share fully information regarding assets and liabilities frequently are raised as reasons why courts should reject prenuptial or post-nuptial agreements.  In the collaborative setting there are two attorneys, each representing one of the parties, and a coach/therapist to assist the couple in grappling with difficult issues.  Disclosure is complete, analysis full, and participation equal.  The product of such a process will in most instances be exactly what the courts and legislature intended when they encouraged parties to fashion their own agreement.

While preparing a collaborative prenuptial or post-nuptial agreement will still not be as much fun as planning the guest list, venue or honeymoon, nonetheless it can be an important element to a complete marriage plan, particularly where one of the parties has obligations from a prior marriage, or where there is a substantial imbalance in wealth and future economic opportunity.

The Importance of Prenuptial and Post-Nuptial Agreement for Persons owning an interest in a Closely Held Business

Prenuptial and post-nuptial agreements (signed sometime after the marriage vows have been taken) should be of particular interest to persons who are owners or part owners in a small business.  There are sound and substantial business reasons for married couples and those contemplating marriage to consider the preparation of a prenuptial or post-nuptial agreement.

Under existing law, a business that is acquired by one party to the marriage during the marriage constitutes marital property.  In divorce a valuation of that business will be done by one or more professionals to determine the value of the business to the spouse who holds a direct interest in that business, and some portion of that interest will then be allocated to the non-titled spouse in recognition of his or her “indirect contribution” to the business owner’s success. A common example is a spouse who may never have set foot on the business property, but nonetheless cared for the children, the household, entertained prospective clients, and in other ways created an environment that assisted in the business owner’s success.  Obviously, where the marriage is long term and the business successful, the amount owed to the non-titled spouse can be quite significant.  That circumstance can cause liquidity issues for the business holder.

In many instances the titled spouse is only a part owner in the business.  While being a part owner will suppress the value assigned to the business, and while it is very unlikely that the non-titled spouse will actually be invited to a place at the table as a part owner themselves, particularly if the closely held business has followed generally accepted business management policies in the drafting of legal documents pertaining to the business, nonetheless the non-titled spouse’s share can be sufficiently high so that it is impossible for the titled spouse to produce the necessary cash immediately to occasion “the buy out” of the non-titled spouse.

Additionally, the business valuation process by its nature requires an intrusive interference with the day to day functions of the business.  Accounting and business valuation experts pore over years of business records, visit the facility, and undertake other tasks in the exercise of due diligence in order to properly value the business as if it were to be sold in the open market.

Even where the business is owned by the titled spouse prior to marriage, the examination may well proceed to determine the non-titled spouse’s interest in the appreciation of the business since marriage. That requires an expert to express an opinion as to the date of marriage value of the enterprise, and the business owner’s share therein, and to compare that with the value of the business owners’ share at the time of the filing of the divorce action.

Therefore, appreciation on the business may still be a marital asset subject to distribution, even though a business may have been in the titled spouse’s family for generations.

Business owners increasingly wish to avoid such a lengthy and obstructive process, and seek to “make their own deal”, in advance, to be pulled from the drawer and dusted off only in the event of ultimate divorce.

Just as closely held businesses find it valuable to purchase life insurance sufficient to buy out a deceased partner’s share in the business in order that business operations may move along in his or her absence, business owners would do well to consider the preparation of a prenuptial or post-nuptial agreement that addresses the similar issue of the divorcing partner.  Such agreements may be self-tailored to address only the business interests themselves, or more broadly crafted to address other property interests and maintenance as well.

While it is certainly the case that a prenuptial or post-nuptial agreement can be written in draconian fashion so as to exclude one party and empower the other, fairly and properly crafted documents may instead attend to each person’s interests  and sense of what is fair and just.

There is much case law to support the principal that courts welcome a couple’s effort to fashion their own deal.  Such agreements, introduced at the time of divorce, will be read according to standard principals of contract law, albeit with some of deference to the “special relationship” that the marriage “business” entails.  Those agreements that include full and honest disclosure prior to the execution of the agreement, sufficient opportunity for both parties to operate with the advice of counsel, and under circumstances that do not in and of themselves create undue pressure on the later divorcing couple will be enforced.

Divorce is a difficult, emotionally charged, and stressful undertaking. A prenuptial or post-nuptial agreement will not alleviate all of this stress and little of the emotion.  But such an agreement, crafted in the light of happier times, may make far more simple the effort of fairly establishing one’s rights to maintenance and the appropriate allocation to a non-titled spouse of his or her share in both pre-marital and post-marital business interests.