In its October 22, 2024, decision in Szypula v. Szypula, the Court of Appeals held that if marital funds are used to purchase premarital pension service credits, those premarital credits are marital property. But …

Mr. Szypula joined the Navy nine years before the parties married. He left the Navy two years later. The Court noted that, in general, members of the armed services become entitled to retirement pay only after they complete 20 years of service. Therefore, when the husband left the Navy, he was not entitled to retirement benefits.

After working in the private sector for 14 years, the husband joined the Foreign Service (diplomatic service personnel under the Department of State). The husband enrolled in the Foreign Service Pension System.

Veterans who enter the foreign service may add their years of military service to their Foreign Service pensions by making additional contributions for the years they served in the military. The husband purchased his 11 years of Navy service by having $9,158.00 withheld from his Foreign Service pay over seven years through 2018.

In 2019, the wife filed for divorce. The parties could not settle whether the husband’s purchased premarital pension credits were separate or marital property. After the nonjury trial, Tompkins County Supreme Court Justice Joseph A. McBride held the credits to be marital property.

The pension rights at issue in this case were the product of both his pre-marriage service and the contribution of marital assets.

The Appellate Division, Third Department, reversed, finding that the premarital credits were separate property. However, the Third Department held the funds used to purchase those credits were marital property to be equitably distributed.Continue Reading Premarital Pension Credits Purchased with Marital Funds are Marital Property, But …

In his June 13th decision in E.J. v. M.J., Nassau County Supreme Court Justice Edmund M. Dane resolved the complex financial issues arising when a divorce action is commenced after a child begins attending a private university, but before the child turns 21 or graduates. The fact pattern presents a blend of Equitable Distribution and child support add-on issues.

Here, the parties were married in 1997 and had two children born in 2001: a son who by the time of the decision had turned 21 and had just graduated from Quinnipiac College and a daughter with developmental disabilities for whom the parties had agreed to adult dependent support.

The wife commenced this divorce action in May 2021. The parties entered a Settlement Agreement resolving most of their issues. However, issues of their son’s college education expenses and counsel fees remained to be decided upon written submissions.

The wife alleged that in the year prior to commencement of the action, the husband signed a series of Parent Plus loans for their son, totaling approximately $141,000. She argued that the Court should consider the husband’s financial ability to contribute to those expenses, as well as the academic backgrounds of the parties and the best interests of the child. The wife further contended that if she were to be obligated to contribute to the Parent Plus loans, her obligation should be capped at a SUNY rate. The wife maintained that there was no prior agreement between the parties regarding the payment of college expenses for their child.Continue Reading Apportioning a Child’s Pre- and Post-Divorce Action Commencement Private College Expenses

For 13 years, Mr. De Niro and Ms. Hightower failed to account annually for their commingled separate and marital property when making investments or acquiring assets as required by their 2004 Prenuptial Agreement (PNA). In effect, the decisions in their 2018 divorce action have now interpreted this annual accounting requirement as an agreement to forever arbitrate and not litigate the marital and separate property issues of the divorce.

In his March 15, 2023 decision in Anonymous v. Anonymous, Supreme Court New York County Justice Ariel D. Chesler directed the parties to immediately provide to the parties’ chosen accountant those 13 years of disclosures . The accountant, and not the Court, would make the separate/marital property determinations. In doing so Justice Chesler applied the 2021 Appellate Division affirmance of a 2021 Order of now-retired Justice Matthew F. Cooper.Continue Reading Lessons to be learned from the De Niro/Hightower divorce and prenuptial agreement

Generally, a transfer of a judgment debtor’s real property interest is not effective against a creditor whose judgment was recorded prior to the debtor’s transfer (C.P.L.R. §5203). However, that rule will yield to the equitable interests of a former spouse. So held the Appellate Division, First Department, in its August 19, 2021 decision in Tiozzo v. Dangin.

There, the parties’ 2004 Judgment of Divorce incorporated their surviving Stipulation of Settlement. Under the Stipulation, the wife was “entitled to sole ownership and exclusive use and occupancy” of the marital residence. The husband was to “provide a quitclaim deed to [the wife] only if doing so would not jeopardize the existing mortgage.” In the meantime, the husband was solely responsible to continue to pay the mortgage. The Stipulation further provided:

In the event that the Husband is unable, for any reason, to execute and/or record such quitclaim deed, the Husband agrees and covenants that notwithstanding the joint ownership of the Jane Street property, he will not act in any way or manner or through any deed or omission, whether directly or indirectly, to interfere with the Wife’s exclusive use and occupancy of the said property, including the sale of the said property by the Wife should she so choose.

The wife did not demand a quitclaim deed from the husband until 2019, almost 15 years after the divorce. The wife had then decided to sell the residence when the husband went into default of his obligation to make the mortgage payments.

By then, in February 2019, Lenz Capital Group, LLC (Lenz) had entered a two million dollar judgment against the husband upon his confession of judgment.Continue Reading Ex-Husband’s Judgment Creditor Subordinated to Ex-Wife’s Unrecorded Equitable Realty Interest

Please indulge me; it’s one of my pet issues. And I apologize in advance for what may be my most boring blog post to date.

Writing math narratively is very difficult. When drafting a divorce settlement agreement, I try to include examples whenever formulas are written out. When reading decisions, I often draw a flow chart to help me follow the calculations.

Calculations done by the court establish rules of law. When an appellate court does it, that’s the way it’s going to be done in all cases like that in the future. All the more reason that the reader be able to follow and understand the calculations made by the court. For each calculation, you need to know how much went from where to where and why.

Sometimes, I can’t follow those calculations made by the court. Take the February 26, 2020 decision of the Second Department in Alliger-Bograd v. Bograd. The Court modified the equitable distribution credits awarded by retired Suffolk County Supreme Court Justice Carol MacKenzie; reducing from $81,829.15 to $23,350.00 the amount to be paid by a husband to the wife, in addition to the wife acquiring the husband’s interest in the marital residence.

I am not sure whether the decision provides all the numbers used to get to the final result. The marital residence being acquired by the wife was worth $545,000.00 There was a mortgage and a Home Equity Line of Credit (HELOC) that totaled $321,000.00. At first look, there was $224,000.00 in equity.Continue Reading Math in Divorce Decisions: How Much Goes from Where to Where and Why?

In a divorce, to what extent may a court award property rights to the parties’ cryopreseved embryo?

In its June, 2018 decision in Finkelstein v. Finkelstein, the Appellate Division, First Department, determined that the parties’ agreement with the fertility center they used would control. That agreement enabled the husband to withdraw his consent to the use of the embryo. Accordingly the Court enabled the center to dispose of the embryo as required by that agreement.

The parties were married in 2011. In 2012, they engaged the services of the New Hope Fertility Center (NHF) in the hope of conceiving a child via implantation of cryopreserved embryos in the wife’s uterus. They signed an agreement with NHF entitled “Consent for the Cryopreservation of Human Embryo(s)” (the Consent Agreement) in which the parties agreed “to the cryopreservation of embryos for our own use.”

Paragraph 7 of the Consent Agreement, entitled “Voluntary Participation,” provided, “I/We may withdraw my/our consent and discontinue participation at any time . . . .” Paragraph 16, entitled “Authorization,” provided, “This consent will remain in effect until such time as I notify NHF in writing of my/our wish to revoke such consent.”

After five or six further unsuccessful IVF attempts with NHF, the husband, then 58 years old, filed for divorce and requested sole custody of the one remaining cryopreserved embryo. He also moved to enjoin the wife, then 47 years old, from destroying, using, or preserving the embryo. The husband obtained an ex parte temporary restraining order embodying that relief. However, Supreme Court New York County Justice Deborah A. Kaplan later found that the husband had not demonstrated a likelihood of success on the merits, as there was nothing in the Consent Agreement that would prevent the wife from going ahead with implantation unilaterally. Justice Kaplan issued a preliminary injunction enjoining NHF and the wife from “destroying or transferring the cryopreserved embryo to anyone other than the wife.”Continue Reading Divorce Award of Frozen Embryo Based on Agreement with Fertility Clinic

What happens on divorce when during the marriage, the marital residence that had been owned by one spouse prior to the marriage is conveyed during the marriage to the parties jointly? That was the issue addressed by the Appellate Division, Second Department, in its decision this month in Spencer-Forrest v. Forrest.

The parties were married on March 31, 1984. There were no children of the marriage, but children from each of the parties’ prior marriages resided with the parties in the marital residence during the children’s respective minorities. Both parties were employed for the majority of the marriage, and the wife provided care for the husband’s children, who were younger and resided in the marital residence longer than her children.

The husband had purchased the marital residence prior to the marriage, and transferred the property to himself and the wife as joint tenants in 1989. Other than the marital residence, the parties’ assets were held in their respective names. Both parties contributed to the household expenses, although the husband contributed a larger sum to household expenses and maintenance of the marital residence, and the wife ceased financial contributions in 2006 or 2007, after she retired.

In August, 2012, the wife commenced this action for a divorce and ancillary relief. The wife was 68 years old and the husband was 67 years old at the time of trial.

Except for the marital residence, Nassau County Supreme Court Justice Stacy D. Bennett divided the marital property) equally (other than the vehicles and personal items) regardless of the party holding title. As to the residence, Justice Bennett awarded the wife 20% of the appreciation in the value of the marital residence from 1989 (when the husband conveyed the home to the parties jointly) through the date of the commencement of the action, an award amounting to $30,000. The court declined to award the parties credits sought for assets allegedly secreted or wasted by the other party and denied the wife an award of maintenance.Continue Reading When One Spouse Transfers Sole Title to the Home to Both Spouses Jointly

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

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