Drafting divorce settlement agreement provisions to dispose of the marital home is not easy. Anticipating how things will play out can be very difficult.

In some cases, one spouse may be remaining in the home with the children for a stated period of time, or until a stated event (such as the children’s graduation). How are bills to be paid in the interim? Will either spouse be entitled to credits?

What will be the procedures when the time/event happens? At the end of that period of “exclusive occupancy” (or perhaps immediately), the parties will be selling the home. Alternatively, one party may want to buy out the other. If the home is to be sold to a stranger, how is the broker to be selected, if there is to be one? How is the initial listing price determined? Must a certain bid be accepted? What happens if there are no bids?

If one spouse wants to buy out the other, how is the other’s interest to be valued? Should the amount of a broker’s commission be factored in? May one spouse have a “right of first refusal,” the right to match a bid from a third party? How will that work?

Take the April 28, 2022 decision of the Appellate Division, Third Department, in Martin v. Martin. There, the parties’ 2012 divorce settlement agreement granted the husband the right to buy out the wife’s interest. The agreement provided that if the husband elected that option, the parties would obtain three appraisals, The husband would pay the wife half the “mean” (average) of those three appraised values minus a commission.Continue Reading Agreements to Dispose of Marital Home Interests

If you were fortunate enough to buy stock in Apple Inc. in early 2009, you might have paid $13 per share. It’s now worth $150.

If you’re getting a divorce holding Apple shares with a substantially lower-than-market cost basis, you must plan your trial evidence or settlement to deal with the embedded capital gains tax exposure. In the example above, the gain would be $137 per share. When sold, under current tax laws, a capital gains tax of perhaps tens of thousands of dollars or more could be incurred.

If you settle this issue, you may negotiate the impact of capital gains on the spouse retaining the shares. It will always be easier, fairer, to simply divide the shares, but care must be taken to divide it “traunch” by traunch; to divide each group of shares purchased at any one time. In that way, the spouses will be assured that not only will today’s fair market value be the same, but so will the embedded capital gains issue.

If you don’t settle, the issue will be far more difficult. The court may not recognize nor account for the potential tax liability incurred if and when the stock as sold. The transfer from one spouse to the other incident to the divorce itself is not viewed as a taxable event. Even if the court computes the transfer using the current fair market value, the transferring spouse reports no capital gains; the recipient spouse keeps the original cost basis. If and when the recipient sells the shares, the recipient will bear the entirety of the capital gains tax, computed on the gain over the original cost basis.Continue Reading Considering Potential Capital Gains Tax Liabilities in Divorce

The ever-changing landscape of Equitable Distribution case law makes it difficult, if not impossible, to rely on the “law.” A parent cannot (or rather, should not) make a gift to a married child without bringing the lawyers into it.

Take the April, 2016 decision of the Appellate Division, Second Department in Mistretta v. Mistretta. There, the parties had been married in 1991. During their marriage they lived in a home, at first owned by the husband’s mother, and deeded to the husband in 1996.

At the trial of this 2010 divorce action, the husband claimed that the residence was a gift from his mother, and therefore constituted separate property. However, he acknowledged that for many years, he paid his mother $500 per month “rent” (the opinion does not state whether rent was paid after the property was deeded to the husband). The husband and his sister both acknowledged that rental income from the subject premises was paid to the husband’s mother pursuant to the written agreement between the husband and his mother that was introduced into evidence.

Supreme Court, Suffolk County Justice Joseph Santorelli held that the home was marital property subject to equitable distribution. He directed the sale of the premises, with the parties to share equally in any net proceeds or deficiency from such sale.Continue Reading You Can't Make A Gift To Your Married Child Without Getting The Lawyers Involved