I have previously blogged about the permanent alimony and lifestyle aspects of the Gnall case decided by the Appellate Division last week. Gnall had another interesting issue, that is, imputation of income. More specifically, the case discussed whether income should be immediately imputed to a stay at home parent.
In Gnall, the trial court imputed income to the wife of $65,000 per year, concluding that she had “done nothing” pendente lite to obtain employment. In her appeal, the wife claimed that immediately imputing this level of earnings, without allowing any period for retraining and workforce reentry, was error.
The Appellate Division affirmed the finding as to the amount of imputation of income but remanded the matter to the trial court to determine the effective date of the imputation, noting that there was nothing in the record to support a finding that the wife could immediately start earning $65,000. The discussion of this issue was fascinating (assuming one gets fascinated reading family law cases).
First, the court discussed the wife’s complaint that income should have been imputed to her as a teacher, which is what she wanted to become (she actually originally told the experts that she didn’t want to work), as opposed to as a computer programmer, her prior career. In rejecting this argumetn, the Appellate Division held:
Imputation must be based on earning capacity, not employment desires. Plaintiff remains free to pursue her dreams as “[a]ny party is free to retire, take a vow of poverty, write poetry or hawk roses in an airport, if he or she sees fit.” Deegan v. Deegan, 254 N.J. Super. 350, 358-59 (App. Div. 1992). However, she may not shed her obligations to contribute as best she is able to her support and that of her children. Ibid.
The Appellate Division, however, rejected the trial court finding that the wife had voluntarily chosen not to become employed, noting:
We are aware of no authority mandating a dependent spouse, absent from the workforce, by agreement, for a significant period of time, to immediately prepare for and return to work pendente lite, absent notice of this expectation presented by motion or court directive. We are not suggesting able spouses do not hold a responsibility to support themselves; we are only finding there is no support in this record for the judge’s conclusion resulting in the immediate imputation of $65,000 annual income.
The court also noted that, “… the issue of plaintiff’s return to work was never broached pendente lite. The pendente lite record contains no request by defendant for plaintiff’s resumption of employment, and there are no orders mandating she secure retraining or allocating funds to enable her to seek training or “prepare herself to re-enter the workforce …”” (Emphasis added).
As a practitioner, what does this tell us? In cases when someone has been out of the workforce for a period of time, proofs must be presented on how fast and what would be needed for someone to re-enter the workforce. Per Gnall, if you don’t want a delayed imputation, you better prove that the person can become immediately employed. Moreover, in a pendente lite motion, the payor may want to ask that the other spouse seek employment and/or training for the dependent spouse to become reemployed, so that at the end of the case, imputation can start immediately, or sooner.
Because this case suggests that imputation should not start right away, is there an implicit suggestion that alimony be tiered, higher at first until an imputed re-entry into the workforce, then lower at that time? This is something that is frequently done when settling case, but seen less when a case is tried (though courts have discretion to award both rehabilitative and permanent (or limited duration) alimony in the same case. Will this case tax (recapture) issues and more importantly, will a court recognize this? Whose obligation is it to pay for the retraining or should it come from marital assets? Also, how does this square with modification cases? When someone loses their job and comes to court for relief, income is often imputed to them at prior levels even though there is nothing in the record which would show that the obligor could start earning what she/he previously earned.
Gnall has proven a treasure trove for posts on this blog. Stay tuned for one last post regarding child support.
Eric Solotoff is the editor of the New Jersey Family Legal Blog and the Co-Chair of the Family Law Practice Group of Fox Rothschild LLP. Certified by the Supreme Court of New Jersey as a Matrimonial Lawyer and a Fellow of the American Academy of Matrimonial Attorneys, Eric resident in Fox Rothschild’s Roseland and Morristown, New Jersey offices, practices throughout New Jersey. You can reach Eric at (973)994-7501, or firstname.lastname@example.org.