In addition to providing a guideline for the amount of a maintenance (alimony) award, New York’s relatively new maintenance (alimony) statute includes a presumptive range for the period of time maintenance is to be paid based upon the length of the marriage. Particularly with short marriages, what should be the impact of the length of the marriage on the award of maintenance while the divorce action is pending? Put differently, should a spouse be able to increase support, just by keeping the divorce action going?

In her August 31, 2017 decision in Barlik v. Barlik, Acting Queens County Supreme Court Justice Elisa S. Koenderman was faced with that issue.

Among the temporary relief sought by the parties in this divorce action, the parties husband cross-moved for exclusive use and occupancy of the marital residence. The wife moved, in part, for temporary maintenance and child support and for an order directing the husband to pay 100% of the carrying costs of the marital residence; an order appointing a forensic accountant to value the income from the husband’s business as well as a real estate appraiser to value the marital residence, both at the husband’s expense; and for counsel fees.

Justice Koenderman first denied the husband’s motion for exclusive use and occupancy, but granted the wife’s cross-motion for exclusive use and occupancy of the marital residence.

The Court then granted the wife’s motion for temporary maintenance and child support. As required by the statute, the court calculated the guideline amount by applying the statutory formula to the payor’s income up to the statutory cap of $178,000 (see DRL § 236[B][5-a][b][5] & [6]). Then, the court may adjust the guideline amount of temporary maintenance if it is “unjust or inappropriate” (DRL § 236[B][5-a][h][1]). The court must consider certain enumerated factors, including but not limited to the health and age of the parties; the present or future earning capacity of the parties; and care of children during the marriage that inhibits a party’s earning capacity, as well as any other factor which it finds just and proper to determine “whether and to what extent it will apply the statutory formula” to the payor’s income which exceeds the statutory cap.

Continue Reading Considering the Length of the Marriage and Other Factors on Temporary Support Awards

It may be difficult to reconcile two recent decisions of the Appellate Division, Second Department, as they relate to awards of interest on delayed equitable distribution payments due under a divorce stipulation of settlement. The first raises questions as to the impact of failing to expressly include the payment obligations in the judgment of divorce as opposed to merely incorporating the stipulation by reference. The second decision raises questions as to the date from which interest should run.

In O’Donnell v. O’Donnell, the parties had entered into a stipulation of settlement of their divorce action in March, 2014. Among other terms, the stipulation obligated the husband to “pay the Wife a lump sum of $1,000,000 on or before September 30, 2014.”

The judgment of divorce, entered in March, 2015, incorporated, but did not merge the stipulation. At the time the judgment was entered, the husband had not paid the $1,000,000 distributive award.

After the entry of the divorce judgment, and by order to show cause issued June 5, 2015, the ex-wife moved, inter alia, to compel the ex-husband to execute a confession of judgment, or in the alternative, for leave to enter a money judgment against him in the principal sum of $1,000,000 plus interest at the statutory rate of 9% per annum.

In opposition to the motion, the husband produced the confession of judgment he signed in March, 2014, which rendered academic the branch of the motion which was to compel him to execute a confession of judgment. The confession of judgment made no provision for interest.

The husband stated that he paid the $1,000,000 in full on June 19, 2015 (two weeks after the order to show cause was issued). He claimed that he had been unable to pay the $1,000,000 until that time because he had to secure those funds by mortgaging the real properties which remained in his name.

Nassau County Supreme Court Justice Jeffrey A. Goodstein denied the wife’s motion for an award of statutory interest on the $1,000,000, because the stipulation of settlement did not provide for such interest. The wife appealed.

Continue Reading Interest on Asset Payments Due Under Divorce Stipulation of Settlement

If the IRS determines that as between spouses only one is liable for a tax debt, should that finding be binding on a divorce court determination as to whether the marital tax debt should be allocated to only one spouse?

Married couples who choose to file a joint tax return are jointly and severally liable for the tax and any additions to tax, interest, or penalties that arise from the joint return, even if they later divorce. Joint and several liability means that each taxpayer is legally responsible for the entire liability. Thus, both spouses on a married filing jointly return are generally held responsible for all the tax due even if one spouse earned all the income or claimed improper deductions or credits. This is also true even if a divorce decree states that a former spouse will be responsible for any amounts due on previously filed joint returns.

In some cases, however, a spouse can get relief from being jointly and severally liable. Such “Innocent Spouse Relief” relieves a spouse from additional tax owed if based upon the other spouse’s failure to report income, improper reporting of income, or the claiming of improper deductions or credits.

In order to qualify for Innocent Spouse Relief:

  • The understatement of tax (deficiency) must be solely attributable to the other spouse’s erroneous item (omitted income, or incorrectly reported deductions, credits, or property basis);
  • The innocent spouse must establish that at the time the joint return was signed the spouse didn’t know, and had no reason to know, that there was an understatement of tax; and
  • taking into account all the facts and circumstances, it would be unfair to hold the innocent spouse liable for the understatement of tax.

Justice Catherine M. DiDomenico, in her August 29, 2017 Richmond County (Staten Island) Supreme Court opinion in S.M. v. M.R. (the subject of last week’s blog post on the effect of an attorney retainer agreement cap), appeared to hold that a Tax Court innocent spouse finding should, conclusively, result in the equitable distribution of the entire tax debt to the other spouse.

Continue Reading IRS Innocent Spouse Relief’s Impact on Equitable Distribution in Divorce

In a lengthy, thoughtful August 29, 2017 opinion in S.M. v. M.R., Richmond County (Staten Island) Supreme Court Justice Catherine M. DiDomenico resolved the financial issues incident to the parties’ divorce. Among the issues were those that arose from parties’ family and financial ties to Egypt, the absence of proof on various financial matters, and the wife’s 1999 medical degree in Egypt, all but abandoned since moving to the United States in 2002 resulting in her current need for rehabilitative maintenance.

The final issue tackled by the Court was the wife’s request for an award of counsel fees in the sum of $43,000 for her attorney’s handling of the entirety of this divorce proceeding. The wife based her claim upon the fact that she was the non-monied spouse in this action (D.R.L. §237[a]). In support of her claim, the wife submitted a copy of her attorneys’ retainer agreement, together with legal billing.

The husband objected to any award on the basis of the language of that retainer agreement: the wife and her attorney had agreed to “cap” counsel fees at the sum of $10,000.

You agree to pay Your Attorney for legal services at the rate of $250.00 per billable hour and $750.00 per each half-day appearance in Court by Steven Scavuzzo Esq. The foregoing rates are valid for services rendered in calendar years 2013 and 2014. In the event that such rates are modified you will be advised and requested to execute an amendment reflecting the new rates. Legal fees in this matter shall be capped at $10,000, not including costs, disbursements, post-judgment enforcement and any appeal You wish to pursue.”

The husband argued that this cap should inure to his benefit; that as the wife can never be charged more than $10,000 for the divorce proceeding, as a matter of law he cannot be responsible for any more than that amount. The wife’s attorney should be prohibited from seeking an award of counsel fees by the clear language of his own retainer agreement

Continue Reading Husband Benefits From Wife’s Retainer Agreement Cap On Counsel Fees

I’ve never really thought about it.

And although not exactly on point, the August 24, 2017 decision of Kings County Family Court Judge Javier E. Vargas in S.G v. B.G. sheds light on some of the issues a court may face when a child support payor his being “hidden.”

The parties were married in May 1993, and had two now-emancipated children. The father had been a successful diamond dealer and jeweler; the mother was a homemaker and caretaker of the children. In 2002, the parties divorced under a judgment that had incorporated a Separation Agreement. The father was to pay child support of $4,004.60 per month, as well as the children’s insurance, tuition and other educational expenses.

The father complied with his child support obligations until 2008 when he was arrested for fraud in “massive gem heists.” He was incarcerated between 2008 and 2011. Upon his release in May, 2011 until May 2014, the father apparently cooperated with the United States government and was purportedly placed in a safe house by the U.S. Witness Protection Program, under which he had assumed a new identity in another state.

Continue Reading When the Child Support Payor is in the Witness Protection Program

At times, a court must delicately balance the best interests of the children and their parents with contract rights, religious matters, ethical and social values, and constitutional principles and individual rights. That balance is remarkably reflected in the August 16, 2017 decision in Weisberger v. Weisberger, of the Appellate Division, Second Department. There, the Court concluded:

Courts do not always have the perfect solution for all of the complexities and contradictions that life may bring — the parties must forge a way forward as parents despite their differences.

The Weisbergers were married in 2002. In 2005, the mother told the father that she could not tolerate having sexual relations with men, and that she was sexually attracted to women. The parties were divorced in 2009. The judgment incorporated a stipulation of settlement under which the parties agreed to joint legal custody of the two daughters and one son of the marriage, with the mother having primary residential custody. The father would be with the children for a two-hour period once per week after school (to be increased to twice per week for the son when he turned eight years old, for the purpose of religious study). The father would also have overnight visitation every other Friday after school until Saturday evening for the observance of the Sabbath; for two consecutive weeks every summer; and an alternating schedule for holidays.

Central to the issues raised on appeal, the stipulation contained the following religious upbringing clause:

“Parties agree to give the children a Hasidic upbringing in all details, in home or outside of home, compatible with that of their families. Father shall decide which school the children attend. Mother to insure that the children arrive in school in a timely manner and have all their needs provided.”

In 2012, more than three years after the divorce, at which time the children were nine, seven (the son), and five years old, respectively, the father moved (1) for sole legal and residential custody of the children, as well as final decision-making authority over medical and dental issues, and issues of mental health; (2) limiting the mother to supervised therapeutic visitation with the children; and (3) to enforce the religious upbringing clause so as to require the mother to direct the children to practice full religious observance in accordance with the Jewish Hasidic practices of ultra Orthodoxy at all times and to require the mother, herself, to practice full religious observance in accordance with the Hasidic practices of ultra Orthodoxy.

Continue Reading Balancing the Best Interests of Children with Religious, Contract, and Individual Rights

In its July 5, 2017 decision in Decillis v. Decillis, the Appellate Division, Second Department, recognized, but significantly reduced a credit against a formula child support obligation for the father’s extraordinary visitation travel expenses.

The parties were the parents of a child born in 2003. The mother filed a petition for child support. After imputing annual income of $43,000 to the mother, Suffolk County Family Court Support Magistrate Kathryn L. Coward determined that the father’s formula basic child support obligation would be $572 biweekly (grosses up to income of $94,729 per year). However, after gaving the father a $168 biweekly credit to compensate him for the “extraordinary” expenses associated with visitation, the Magistrate directed him to pay child support in the sum of $404 biweekly.

The Second Department first found that the Support Magistrate properly imputed $43,000 of income to the mother based upon her prior income, her choice to engage in only part-time employment, and her current living arrangement, in which she did not pay rent or related housing expenses.

However, the appellate court found that the Support Magistrate improvidently exercised its discretion in awarding the father a $168 credit against his child support obligation $168 for the “extraordinary” expenses associated with visitation, including $67 for travel expenses.

Continue Reading Travel Expenses Credit Against Child Support Reduced on Appeal

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

In a recent decision of the Appellate Division, Fourth Department, in Holeck v. Beyel, 145 A.D.3d 1600, 43 N.Y.S.2d 816, the court upheld a direction to a disabled father (the non-custodial parent) to apply to the Social Security Administration to change representative payee of the children’s social security disability (SSD) benefits from the father to the custodial mother. The appellate court also upheld the denial of the father’s request for a reduction in his support obligation by virtue of his loss of the SSD benefits for the children.

Generally, when a disabled parent is qualified for Social Security disability benefits, the children may also qualify to receive benefits on the disabled parent’s work-record. Eligible children can be a biological, adopted or stepchildren. Normally, benefits stop when the child reaches age 18 unless they are disabled. However, if the child at age 18 is still a full-time student at a secondary (or elementary) school, benefits will continue until the child graduates or until two months after the child becomes age 19, whichever is first.

Continue Reading Child Support and Social Security Disability Payments Received for the Children’s Benefit

It appears that the tremendous burden placed on the Appellate Division, Second Department, to work through its caseload has often led to opinions which leave you wanting to know a little more of the facts so you can put the case into perspective.

Take the the Second Department’s May 31, 2017 decision in Fiore v. Fiore, where the lower court’s opinion was modified to increase a father’s college obligation and which determined summer camp to be the equivalent of child care.

After nine years of marriage and one child, the parties settled their divorce action by an amended agreement that was incorporated into their 2000 Judgment of Divorce. Included among the settlement’s provisions were that the father would pay $12,289 annually for basic child support; that the parents would each pay their pro rata share of unreimbursed medical expenses; and that the father would pay 58% of the cost of day care.

In 2014, the mother moved for upward modification of basic child support, and other child support-related relief, including contribution toward the child’s summer camp and college expenses. Supreme Court, Nassau County Justice Julianne T. Capetola denied the upward modification, denied summer camp expenses, and limited the father’s obligation to pay college expenses to $5,000 per semester.

On appeal, the Second Department upheld the denial of an increase in the basic child support obligation. The mother had failed to meet her burden of proving that there had been a substantial, unanticipated, and unreasonable change in circumstances resulting in a concomitant need, or that the settlement was not fair and equitable when entered into. This was the required burden as the amended stipulation of settlement was entered prior to the effective date of the 2010 amendments to Domestic Relations Law §236(B)(9)(b)(2), when the burden was lessened.

Continue Reading Appellate Court Increases College and Child Care Expense Obligations