For the second time in six weeks the Appellate Division, Third Department, reduced an award of spousal maintenance for the failure to adjust for the distributive award based on the husband’s business. In its October 22, 2015 decision in Gifford v. Gifford, the Appellate Division, Third Department, modified a maintenance award because of the trial court’s failure to adjust the husband’s income for computation purposes to account for the distributive award to the wife based on the husband’s business. In September, in Mula v. Mula, the Third Department held that once valued, the income attributable to ownership of a professional practice may not also be the basis on which to award spousal maintenance (see, the September 14, 2015 blog post).

In Gifford, the parties in this divorce had stipulated a resolution of Equitable Distribution issues, including a $210,000 award to the wife based on the value of the husband’s geotechnical engineer business. After a trial on maintenance on counsel fees, Supreme Court Justice Vincent J. Reilly awarded the wife nondurational maintenance of $6,000 per month from January 1, 2014 through January 31, 2020, $3,000 per month from February 1, 2020 through June 1, 2022, and $800 per month thereafter, terminating upon either party’s death or the wife’s remarriage.

The Third Department held that Justice Reilley erred in utilizing the husband’s total average annual income of $332,431 for purposes of calculating a maintenance award, without making an adjustment for the distributive award of the company.Continue Reading Double-Dipping: The Interrelationship of Business-Based Distributive Awards and Spousal Support

The award of maintenance to the divorcing unemployed or under-employed spouse in his or her 50s may be one of the more challenging exercises of a judge’s discretion in a divorce action: too old to develop a lucrative career; too young to collect retirement assets built up over a lengthy marriage.

Although not exactly on

A professional practice is an asset which may be valued and equitably distributed in a divorce. Generally, that value is a function of the income generated by the practice after deducting reasonable compensation being paid to the professional. However, once valued, the income attributable to ownership of the practice may not also be the basis on which to award spousal maintenance.

Take the September 10, 2015 decision of the Appellate Division, Third Department, in Mula v. Mula. There, after 42 years of marriage, the husband commenced this action for a divorce. The wife counterclaimed for divorce and, by agreement, the parties were awarded mutual divorces on the grounds of irretrievable breakdown. During the marriage, the husband earned his C.P.A. license in 1981 and became the sole proprietor of an accounting practice in 1997. During the course of the marriage, the wife was primarily involved with the upkeep of the parties’ home and raising their three children.

Among other rulings, Ulster County Supreme Court Justice Anthony McGinty awarded the wife durational maintenance of $1,500 per month.

On appeal, the Third Department reduced this award to $1,000 per month, holding that Justice McGinty had double-counted the value of the husband’s professional practice. The lower court had valued the income generated by the practice as an asset and equitably distributed that asst. However, Justice McGinty also deemed the husband’s income to include the entire income generated by the practice when calculating the maintenance award to the wife.

The accounting practice was valued at $255,000. Apparently, the husband’s C.P.A. license was separately valued at $39,000.The husband contended on appeal that Justice McGinty had erred when calculating maintenance by failing to reduce his available income to reflect the court’s distributive award of his professional practice and license.

At issue is the rule against double counting, which provides that once a court converts a specific stream of income into an asset, that income may no longer be calculated into the maintenance formula and payout.

The husband’s solely-owned accounting firm was a service business for purposes of this rule.Continue Reading Double-Dipping: Using an Income Stream as Both an Asset and to Calculate Maintenance

Calculator formulaOn June 24, 2015, the New York State Senate passed Bill A7645-2015 relating to the duration and amount of temporary and post-divorce spousal maintenance. The bill passed the State Assembly on June 15th. It awaits approval by Governor Cuomo.

The law’s formulas apply to actions commenced on or after the 120th day after they become law (except for the temporary maintenance formulas which apply to actions commenced on or after the 30th day after they become law). The new law may not be used as a basis to change existing orders and agreements.

The law will undoubtedly be the subject of numerous articles and legal seminars. Years of decisions will be forthcoming that particularly focus on matters of discretion, just as they followed the enactment of the Child Support Standards Act in 1989.

Before getting to the new formulas, the law eliminates a major thorn in side of the matrimonial bench and bar: When equitably distributing the assets of the parties, the court is no longer to consider as a marital asset the value of a spouse’s enhanced earning capacity arising from a license, degree, celebrity goodwill, or career enhancement (however, it may be condidered when making other distributive awards).

As to maintenance, the following highlights may be noted, many of which are contained in the Sponsor’s Memo:Continue Reading Legislature Passes Spousal Maintenance (Alimony) Formula

Particularly in the Second Department, the last few years have brought a host of cases threatening the enforceability of prenuptial agreements. To review a few just type “prenup” in the keyword search at right. It’s going to get worse.

New York’s Domestic Relations Law §236(B)(3) provides that prenuptial and other marital agreements executed with proper formalities are valid and may include

(1) a contract to make a testamentary provision of any kind, or a waiver of any right to elect against the provisions of a will;

(2) provision for the ownership, division or distribution of separate and marital property;

(3) provision for the amount and duration of maintenance or other terms and conditions of the marriage relationship, subject to the provisions of section 5-311 of the general obligations law, and provided that such terms were fair and reasonable at the time of the making of the agreement and are not unconscionable at the time of entry of final judgment;

and (4) provision for the custody, care, education and maintenance of any child of the parties, subject to the provisions of section two hundred forty of this article.

The December 24, 2014 decision of the First Department in Anonymous v. Anonymous, is a case in point.

In this matrimonial action the wife had sought, among other things, to set aside the parties’ prenuptial agreement.Ruling on several motions, Supreme Court, New York County Justice Ellen Gesmer upheld the validity generally of the the prenuptial agreement, but held the issue of the current unconscionability of the spousal support provision would be resolved at trial.Continue Reading Litigating Prenuptial Agreements Is Going To Get Messier

A couple that used “employment” of the ex-wife by the ex-husband as a device to provide post-remarriage support to the ex-wife was bound to employment rules. The wife could be fired for misconduct. So held the Appellate Division, Fourth Department, in its September 26, 2014 decision in Anderson v. Anderson.

The Separation and Property

The parties were divorced in August, 2012 pursuant to a judgment that incorporated a September, 2008 Memorandum of Understanding. The Memorandum provided for maintenance payments to the wife in a specified sum until, as pertinent here, “[the wife] cohabits with an individual for any period in excess of 75 days within any 6-month period of