Property Settlement Agreements

Once a parenting time schedule is established, parents’ next concern is the logistics with pick-up and drop-off.   Even with a parenting time schedule memorialized issues arise: lateness, inconvenient locations, interference with children’s activities, etc.   Most times these issues can be resolved amicably without judicial intervention.  But occasionally an application must be filed with the Court to address these issues.

Recently, in the unpublished appellate decision of Devorak v. Devorak, A-4325-16T2,the Appellate Court reviewed such a case.  The defendant in Devorak had filed a post-judgement motion to change the previously agreed upon driving responsibilities for visitation, amongst other issues.  At the time of divorce, both parties resided in the same town and they agreed that they would share alternate weekends for parenting time with the child and the defendant would pick up their daughter after he was done with work on Friday evening and bring her back on Sunday.  Defendant further agreed that he would “be responsible for all transportation for his parenting time, unless other arrangements [were] mutually agreed upon by the parties.”

Plaintiff later moved to New York City, but on November 22, 2013, the parties entered into a consent order where she agreed to relocate to New Jersey, and defendant agreed to temporarily provide transportation to and from his weekend parenting time until plaintiff moved back to New Jersey.  However, the consent order did not address the parties’ driving responsibilities upon plaintiff’s relocation to New Jersey.  Thereafter, plaintiff moved to Roseland, New Jersey and defendant moved to Ewing, New Jersey.  On September 20, 2016, defendant filed a motion seeking an order compelling “[t]he parties to share equally the driving responsibilities regarding parenting time,” amongst other issues.  Plaintiff cross-moved  for an order compelling defendant to “be required to do all the traveling in connection [with] his visitations with the parties’ child . . . ,” amongst other things, and argued that defendant received the benefit of his bargain in that he did not have to pay alimony and paid “modest” child support in return for doing all of the driving.

Despite Plaintiff’s arguments, the Judge determined that “it [was] fair and equitable [for them] to share in the transportation responsibility[,]” and granted defendant’s motion for the parties to “equally share driving responsibilities for parenting time . . . .”  The judge further ordered the parties to “agree [to] a pickup and drop off location equidistant between their current residences” of Ewing and Roseland.  In rendering his decision, the Judge reviewed the history of the parties’ residences from the time of the final judgment of divorce, as well as earlier orders dealing with parenting time.  On appeal, the Appellate Court stated that it agreed with the trial court’s decision for the reasons cited by the trial court judge, while also dismissing the appeal on procedural grounds.

Here is case where the parties bargained for a driving schedule at the time of their divorce, but due to subsequent decisions by the parties, including moving, the Court determined that the drop off logistics should be altered, despite the parties prior agreement. Whether or not you agree with the Court’s decision on this, the lesson to be learned is that these issues must be addressed with clear provisions at the time of negotiation.  Being amicable with a former spouse is certainly the best way to co-parent, however it is smart to also be prepared for future circumstances to the extent they can be planned for.  Driving responsibilities is one of those such issues.

Demonstrating yet again that cohabitation cases are almost always a creature of their specific facts and circumstances, the Appellate Division in the recently unpublished, Salvatore v. Salvatore, reversed a trial court’s decision denying a payor former husband’s motion to terminate his alimony obligation based on his payee former wife’s cohabitation in a manner defined by the parties’ Marital Settlement Agreement (MSA).

Here are the facts that you need to know:

  • The parties entered into a settlement agreement and were divorced in early 2011.
  • As to alimony, the agreement provided that the payer’s alimony obligation would terminate upon payee’s remarriage, payer’s 66th birthday, or either party’s death.  As to cohabitation, the agreement provided that payee’s “cohabitation with an unrelated adult in a relationship tantamount to marriage [would] be a re-evaluation event”.
  • In an outright rarity in cohabitation matters, which often involve payee spouses concealing the cohabitation from the payor spouse so as to preserve the support obligation, here the payee advised the payor of her planned cohabitation.
  • Even more rare is that the parties then entered into an addendum to the MSA, wherein: (1) they agreed to the cohabitation; (2) recognized they were “without sufficient knowledge to determine whether the cohabitation [would] be temporary or permanent”; (3) reduced monthly alimony payments by $850 “during the period of cohabitation”; and (4) provided that, “[b]ecause the [p]arties cannot determine the permanency of the cohabitation,” alimony would be reinstated “at the full amount in the [MSA] . . . for the remainder of the term” if the cohabitation terminated.
  • Approximately six years later, the payor filed a motion to terminate his alimony based on the payee’s continued cohabitation.  The trial judge denied the motion, finding that the cohabitation was admitted to at the time of the addendum and, as a result, its continued existence – in and of itself – was not a change in circumstances.  Payor appealed.

Reversing the trial court, the Appellate Division held that the trial judge:

  1. “misapprehended that the change of circumstances involved only defendant’s cohabitation, failing to consider the terms of the MSA that provided cohabitation ‘in a relationship tantamount to marriage’ triggered the ‘re-evaluation event.'”
  2. erred in considering the payer’s failure to allege a financial change in circumstance.
  3. held that financial changes were “of no moment” when considering the MSA language at issue.

In so doing, the Appellate Court reiterated seminal pre-2014 statute case law mandating that the “economic needs” of the payee spouse need not be considered so long as the cohabitation provision meriting an alimony modification is fair.

Addressing the subject addendum to the MSA – really the unique feature of this particular cohabitation case – the Appellate Division found that the trial court:

  1. ignored the cohabitation provision of the MSA by finding that the addendum was the very “re-evaluation” called for by the settlement agreement;
  2. in so doing, relegated the addendum as the benchmark event from which a change in circumstance would have to occur to merit further relief for the payor.  In other words, it was in error for the trial court to find that the payee’s ongoing cohabitation was not a change in circumstance simply because the cohabitation was initially acknowledged by the parties six (6) years earlier in the executed addendum to the MSA.  Specifically, “the trial judge ignored the agreement – and the Konzelman Court’s definition – that more than a casual, perhaps temporary, cohabitation was needed to precipitate a review of the plaintiff’s alimony obligations.”
  3. the cohabitation here was neither short-term, nor temporary.
  4. there was no indication in the executed addendum that it in any way superseded the cohabitation provision of the MSA.

As a result, the matter was remanded to the trial court for a period of discovery and ultimate plenary hearing on the payor’s motion to terminate alimony.  While not shedding further light on the 2014 cohabitation statute (since this matter applied pre-statute case law), the unique factual scenario at issue only further highlights how cohabitation matters are often unpredictable, and rise and fall on the case-specific circumstances at issue.

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Robert Epstein is a partner in Fox Rothschild LLP’s Family Law Practice Group and practices throughout New Jersey and Manhattan.  He can be reached at (973) 994-7526, or repstein@foxrothschild.com.

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Amicably settling your divorce matter is almost always better than taking your chances at a trial before a trial judge who knows almost nothing about your life. Not only can settling save you substantial time and expense as compared to continued litigation, but also it provides you with the opportunity to end the case on your terms while removing the risk associated with an uncertain trial decision.

Spiderman in Lego formTo that end, settling also means potentially agreeing to terms that are not necessarily what the law may provide. As Uncle Ben once said to a young Peter Parker, “with great power comes great responsibility.”  It is critical that you are not only entering into your agreement voluntarily, but also that you actually know what you are agreeing to.  Sounds simple enough, but litigation oftentimes follows when disputes as to the terms of an agreement arise.  This was the situation in T.L.H. v. M.H., wherein the parties’ definition of cohabitation as an alimony-modification event was more expansive than that provided by law. Specifically, the subject settlement agreement there provided that alimony would terminate:

[U]pon the death of either party, or the marriage or cohabitation of [plaintiff]. The term “cohabitation[,”] in addition to its meaning as construed by New Jersey courts, shall also incorporate the scenario if [plaintiff] should take up residence with any family members (other than the children of the parties) or friends.

Solidifying the parties’ respective understanding as to the terms of the agreement, it also provided therein:

In arriving at this agreement both [plaintiff] and [defendant] had an opportunity to obtain the assistance of separate legal counsel and to be advised regarding the legal and practical effects of this [a]greement. . . . The parties have read this agreement in its entirety and each of them has entered voluntarily into this agreement. They have consented to and assume all of the covenants herein contained, having read the same and having fully understood them. They both acknowledge that it is a fair, just and reasonable agreement and [is] not the result of any fraud, duress, or undue influence exercised by either party upon the other or by any other person and that there have been no representations, warranties, covenants, or undertaking other than those as set forth herein.

Post-divorce, the wife moved in with her sister after she was forced out of the former marital home due to a sheriff’s sale. The husband, as a result, stopped paying alimony, which caused the wife to file a motion to enforce the agreement. In response, the husband moved to terminate alimony based on the wife’s cohabitation as defined by the parties’ agreement.

While not necessarily relevant to addressing the unambiguous language of the agreement, the husband argued that he negotiated the cohabitation provision because he knew the wife would ultimately move out of the former marital home and in with family. The wife argued that she negotiated a higher level of alimony because she knew her expenses would increase after she left the home. At the core of the wife’s argument was her position that living with someone is different than cohabitation. Specifically, she argued her understanding that cohabitation meant someone else was, at least to a significant extent, “supporting” her.

Relying on the language of the parties’ agreement, and both public policy and case law supporting the reaching and enforcement of private agreements, the trial court enforced the cohabitation provision and terminated alimony.

On appeal, the wife argued that: (1) a plenary hearing should have been held to address a genuine issue of fact regarding the parties’ intent in agreeing upon the cohabitation provision; (2) the trial court improperly failed to addressed existing economic circumstances at the time enforcement was sought. In affirming the trial court, the Appellate Division reiterated public policy favoring settlement and the enforcement of unambiguous language, while noting how a court cannot rewrite an agreement to provide for terms better than that bargained for by the parties. The Court also referenced cohabitation jurisprudence wherein the voluntarily agreed upon language of an agreement as to such issue can be subject to enforcement even when differing from that provided by law (as to what cohabitation is, the impact of cohabitation on alimony, and the like).

In so holding, the Court noted as to the facts at hand:

Here, there were no compelling reasons to depart from the clear, unambiguous, and mutually understood terms of the MSA. The agreement was voluntary, knowing and consensual, and the alimony-termination event upon cohabitation was fair under the circumstances of the case. We agree with the court’s finding that, while residing with her sister does not rise to the level of cohabitation under Konzelman, supra, plaintiff understood that residing with her sister was an event that could trigger termination of alimony under the description of cohabitation specified in her MSA. In our view, the explicit terms in the MSA obviated the need for a plenary hearing. Accordingly, we find no error in the court deciding the cross-motion on the papers.

The takeaway from this case is that while a litigant has great power to settle a case as the preferred approach over litigation, with great power comes great responsibility to know and understand that to which you have agreed.

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Robert A. EpsteinRobert Epstein is a partner in Fox Rothschild LLP’s Family Law Practice Group and practices throughout New Jersey.  He can be reached at (973) 994-7526, or repstein@foxrothschild.com.

Connect with Robert: Twitter_64 Linkedin

Arbitration – essentially, a private trial in which the parties hire a fact-finder who serves in lieu of a judge – has become an increasingly common means of resolving family law disputes.  Although an arbitration may be conducted with all the formalities of a trial, usually parties can agree to dispense with certain formalities, some of which can be costly for the parties.  Arbitration takes a trial out of the sometimes messy court system, usually guarantees a decision will be made in a timely manner, and ensures that the trial does not become a matter of public record.  In family law matters where the issues can be sensitive and the testimony potentially embarrassing to the parties, this may be preferred by the parties.

Another advantage to arbitration is that the litigants are not beholden to the deadlines of the Court system.  They can move on with their lives and even get divorced, while agreeing to defer certain issues to arbitration on a more relaxed timelines.  But sometimes this can backfire.

In a recent unpublished (non-precedential) decision, Shah v. Shah, the Appellate Division addressed the question:  “What happens to an agreement to arbitrate when nobody arbitrates?”

The answer given by the Appellate Division is an interesting one, especially in light of the facts of the Shah case.  In a nutshell, here they are:

  • The Shahs entered into an agreement resolving at least some of their issues in January 2003.  As to those issues that were not resolved (and there were a whopping seventeen of them), they agreed that they would proceed to arbitration.  They agreed on an arbitrator, paid his retainer, and set a date for arbitration.  However, the arbitration did not go forward and after several years passed, Arbitrator # 1 returned the retainer.
  • In 2008, the parties mutually agreed upon a new arbitrator, Arbitrator # 2.  However, neither of them took any steps to retain him.
  • In 2009, Mr. Shah filed a motion to compel the arbitration, expand the scope of the arbitration beyond the seventeen issues identified in the parties’ agreement, and appoint a new arbitrator.  The Court granted Mr. Shah’s motion and appointed Arbitrator # 3.  The Court also entered a discovery schedule, and entered an order directing the parties as to the manner in which Arbitrator # 3’s retainer would be paid.  Despite Mrs. Shah’s apparent attempts to move forward with Arbitrator # 3, Mr. Shah did nothing.  Eventually, Arbitrator # 3 wrote to the Court to, understandably, advise that he would not arbitrate until his retainer agreement was signed.  Neither party signed it.
  • In 2015 (now twelve years after the parties agreed to arbitrate), Mr. Shah once again asked the Court to compel the arbitration, this time asking that Arbitrator # 2 be appointed.  Mrs. Shah cross-moved.  Among other things, she asked the Court to terminate the parties’ obligation to arbitrate.  The Court granted Mrs. Shah’s request, reasoning that – twelve years later – the parties were in very different financial circumstances and could not be made to arbitrate at this point.  The Court also opined that the parties had waived their rights to arbitrate.
  • Mr. Shah moved for reconsideration of the Court’s Order, which the Court denied.

That brings us to Mr. Shah’s appeal.  In pertinent part, Mr. Shah argued that the decision of the lower court should be reversed because the judge incorrectly concluded that the parties had waived their rights to arbitrate due, essentially, to the passage of time.

The Appellate Division agreed with the judge below and concluded that the parties had waived their rights to arbitrate.  This is an interesting conclusion in light of the definition of a waiver:

Waiver is the voluntary and intentional relinquishment of a known right. The intent to waive need not be stated expressly, provided the circumstances clearly show that the party knew of the right and then abandoned it, either by design or indifference. [internal citations omitted].

Indeed, under the facts of the Shah case, there was no question that the parties had unduly delayed in proceeding to arbitration.  Mr. Shah apparently admitted to the Court that he was unhappy with Arbitrator # 3’s fee and therefore did nothing to move forward with the court-appointed arbitrator he had asked for in the first place.

At the same time, there were efforts over the years to move forward with the arbitration.  The major consideration the Appellate Division seems to have made was the amount of time that had passed, regardless of the fact that the parties had – at various points over that time period – made efforts to move forward with the arbitration.  One can imagine that this could be a closer call under even a slightly different set of facts.  For example, what if the facts were identical, but had occurred over the course of five years instead of twelve?

What is clear is that at some point, if parties do not arbitrate then the right to do so is waived, even if the parties have an agreement in place to proceed to arbitration, and one of them wants to enforce it.


headshot_diamond_jessicaJessica C. Diamond is an associate in the firm’s Family Law Practice, resident in the Morristown, NJ, office. You can reach Jessica at (973) 994.7517 or jdiamond@foxrothschild.com.

They say a picture is worth a thousand words, and in the recently unpublished (not precedential) case of C.S. v. B. S., Judge Jones determined that 25-years’ worth of family pictures destroyed by a scorned ex-wife are also worth $5,000.00.

In C.S. v. B. S., the parties divorced after approximately 25 years of marriage. They had one child, who was emancipated. The parties’ entered into a Matrimonial Settlement Agreement, and agreed, among other things, that the husband would have the right to share in the family photographs and videos that were kept in the in the marital residence, where the wife continued to exclusively reside.

However, shortly after the parties’ divorce, the wife refused to allow plaintiff to have or copy any of the photos or videos of the marriage. The husband sent the wife an email requesting her cooperation to retrieve the photos and videos and she replied that she had disposed of them because he had allegedly been unfaithful during the marriage and no longer wanted to be reminded of him.

24276086 - old letters and antique family photos parents, grandfather; grandmother; children nostalgic vintage pictures from ca 1900

The husband sought enforcement of his rights and damages for the wife’s breach of the marital settlement agreement and the Court scheduled the matter for a hearing. At the hearing, the Court did not accept the wife’s testimony that she returned the husband’s childhood pictures (one torn into pieces), completely skipping over the last 25 years of the husband’s life, due to her interpretation of the parties’ agreement. Further, the wife did not indicate how or when she disposed of the photos, but testified that she believed it was before the divorce. She could not answer why, if she disposed of the photos before the divorce, the settlement agreement provided for plaintiff to share in the photographs and videos. The Court concluded that the wife’s refusal to provide the husband with the photos and videos of the marriage was a violation of the husband’s rights.

So what is the husband’s remedy? Unfortunately, the 25 years of family photographs cannot be replaced, so the Court had the task of fashioning an appropriate remedy.

First, the Court found that, in divorce proceedings, there is an implicit duty of good faith and fair dealing between parties. This means that each party has an obligation to treat the other fairly and respectfully during the divorce process, including honoring each other’s rights to marital property and adhering to terms of settlement agreements and consent orders. Thus, the wife breached the duty of good faith and fair dealing by depriving the husband of the family photos and videos.

The Court came up with three scenarios based on the Wife’s testimony: (1) she disposed of the photos and videos after the entry of the marital settlement agreement; (2) she disposed of the photos and videos before the entry of the marital settlement agreement; and (3) the photos and videos were not destroyed and still exist.

The Court opined that under scenario 1, if the wife disposed of the photos and videos after the entry of the marital settlement agreement, such action is a violation of the husband’s rights under the express terms of the document.

Under scenario 2, if the wife disposed of the photos and videos before the entry of the marital settlement agreement, such action is a violation of the implicit obligation of fair dealing, as the wife could not have possibly honored the agreement regarding the sharing of the photos and videos if they no longer existed. Under this scenario, the wife’s conduct “would constitute more than a mere breach of contract, but an actual misrepresentation”. The court also added that, when parties file divorce pleadings, the property of the marriage is deemed, in custodia legia (i.e. property under control of the court) pending resolution. Thus, the wife’s complete disposal of the marital photos and videos during the divorce process is evidence of a lack of good faith and fair dealing.

Under scenario 3, if the photos and videos were not destroyed and still exist, the wife is committing the tort of conversion (i.e. the intentional exercise of dominion or control over a property which interferes with the legal right of another to possess or control same).

39848897 - old empty photo frame with tape

Regardless as to which scenario was the truth, each entitled the husband to damages from the wife and thus the Court was next tasked with crafting a remedy for the husband. Generally, when a party wrongfully takes another’s property, the aggrieved party is entitled to damages, which are assessed under either a market value analysis or cost replacement analysis. However, in this case, due to the unique nature of the photos and videos neither of these analyses apply, since there is no market value or cost replacement value for personal family photos and videos. Therefore, financial compensation and/or reasonable sanctions are the most logical and available options in the Family Court, even though assigning an amount may prove complicated.

Prior to assessing financial compensation and/or reasonable sanctions in this type of scenario, there must be a foundation of evidence to support that:

(a)        the other party actually did take, damage or destroy the property, in violation of the aggrieved party’s rights;

(b)        the aggrieved party genuinely wanted the items in question; and

(c)        the violating party knew or should have known that the aggrieved party wanted the property and that such property had a particular personal value or significance.

Here, after a consideration of the parties’ testimony and other evidence before the Court, Judge Jones found that the wife, by disposing of or destroying the family photos and videos, met all of these factors and awarded the plaintiff $5,000.00.

Before concluding, Judge Jones reminded us that each case and each issue is fact-sensitive and that damages are to be assessed based on the specific facts of each case.

That being said, revenge comes with a price. Here, it was $5,000.00 and 25 years of lost memories, but let this be a warning: before you act, whether it be out of anger, spite, or revenge, think twice about how much it may cost you for that moment of satisfaction.

It’s a story as old as time in the New Jersey courts. Alimony is set based upon the income of parties to a divorce, but then years later, a spouse loses his or her job and is unable to continue to make the agreed upon or ordered payments. What is a Court to do?

61199328 - the word of alimony on wooden cubes

In the old days, prior to the enactment of the new alimony statute, judges had certain checklists, gathered from all the law that they typically used to assess whether to obligor would gain relief. You can find that checklist I compiled in 2013 here.

However, now that the new statute is in effect, the question becomes, how should judges treat on obligor’s loss of employment?

Mills v. Mills, an opinion by Judge Jones of Ocean County, approved for publication, provides some guidance on the issue.
In the Mills case, the parties divorced in 2013 after a 13-year marriage. At the time of the divorce, the parties agreed that the Husband would pay the Wife alimony in the amount of $330 per week for 8 years, as well as child support in the amount of $200 per week. This award was based upon the Husband’s income as a district sales manager for a company selling residential and commercial flooring services, earning $108,000 per year and the wife’s income as a teacher, earning $59,000 per year.

In January 2015, after 12 years of employment at the flooring company, the Husband lost his job. The job loss was involuntary; it stemmed from his employer’s decision to restructure its business plan and eliminate the Husband’s position.

The Husband began searching for a new job immediately. In April, 2015, he received an offer of employment form another flooring company, but at a significantly lower salary of $70,000, with a $6,000 car allowance.

At this point, the Husband was faced with a difficult decision – does he accept the job at a lower rate, or decline the opportunity and look for another job closer to his prior income? Ultimately, he decided to accept the new job.

Initially after accepting the new job, the Husband continued to pay alimony at the rate of $330 per week. He had received severance pay of $35,000 and was able to temporarily supplement his income from there. However, as the year neared its end, the Husband had depleted all reserves.

The Husband filed a motion on November 24, 2015 for a prospective modification and reduction of his support obligations based upon a substantial change in circumstances. In the meantime, he earned a performance bonus of $6,000, bringing his total compensation t $82,000, which still constituted a $26,000 from his prior income.

The Wife opposed the motion, and questioned the circumstances under which the Husband lost his prior employment, and that even if the loss was involuntary, he had not demonstrated that he could no longer earn at least $108,000. She also stated that the loss of support would create economic difficulties for her.

The parties were unable to resolve their differences and the matter proceeded to a contested hearing. The Husband testified that when he began at the flooring company, he was earning $50,000 and gradually worked his way up to a salary of $108,000. The Court found that he testified credibly that he could not simply walk into a new position at a new company and immediately command the same salary.
Interesting, the Court began its legal analysis by expounding upon a “Catch 22” in which many obligors found themselves under the old statute.

…no matter what decision he or she made in accepting or declining a new position at a lower pay, that decision might subsequently be critiqued, criticized and even legally challenged by an ex-spouse who, in resisting a reduction in alimony, might contend that the supporting spouse made an inappropriate choice and therefore should not receive a reduction in his or her support obligation   … when a supporting spouse lost his or her job and then declined an offer to take a lower paying position…and instead kept searching for a higher paying position while seeking a reduction in support, the supported spouse would often argue that the obligor unreasonably bypassed an opportunity to earn at least some income that could have been used to pay some of the ongoing support obligation…

Reciprocally, if a supporting spouse accepted the offer for new employment at a substantially lower salary and then sought a reduction in support, a supported spouse would often argue that the obligor was underemployed because he or she accepted a position at a significantly decreased level of pay or proven “income potential”…

Judge Jones rejected the suggestion that there is a “one-size-fits-all” legal analysis for approaching and analyzing these types of issues. In that regard, he stated “imputation of income was a discretionary matter not always capable of precise or exact determination”.

After citing the amended alimony statute – N.J.S.A. 2:a:34-23(k) – for guidance as to how to analyze this issue. In doing so, he specifically referenced subsection (2), which expressly references that when an obligor loses his or her employment, a judge may consider the obligor’s documented efforts to obtain replacement employment or pursue an alternative occupation, as well as subsection (3) which provides that a court may consider the obligor’s good faith effort to find remunerative employment at any level in any field.

However, the Judge noted that the amended statute does not expressly establish or provide a specific standard for statutory analysis in situations when an obligor actually obtains new employment at a significantly lower pay, then seeks to reduce his or her support obligation over the supported spouse’s objections.

The Court concluded that as a matter of equity, fairness, as well as the most reasonable, consistent and straightforward analysis would be addressed by the following two-step inquiry:

(1) Was the supporting spouse’s choice in accepting a particular replacement employment opportunity objectively reasonable under the totality of the circumstances?
(2) If so, what if any resulting support adjustment should occur that is fair and reasonable to both parties, given their respective situations?

In applying this two-step inquiry, as well as the statutory mandates, the Court concluded that the loss of income was involuntary and that the Husband made legitimate efforts to obtain new employment in the same industry in good faith.

While the salary in the new position was lower, the Court found that the Husband nonetheless made an objectively reasonable decision in responsibly trying to begin at a new place of employment. In fact, the Court found that the Husband was very fortunate in this economy to find replacement work.

Nor did the Court find any objective evidence that the Husband was deliberately underemployed or unreasonably turned down or avoided other job opportunities at higher income levels.
After considering all the evidence, the Court reduced the Husband’s alimony obligation to $250 per week and his child support obligation to $194 per week.

With this decision, Judge Jones clearly articulated what I have personally heard many obligors say to me when deciding whether to move forward with a first, second or even third motion for a reduction in alimony based upon reduced income. Whatever step an obligor took, the supported spouse had a response; and one that was well supported by case law.

Either way, the supported spouse would argue that the reduction in income constituted underemployment and that the Court should impute income consistent with the obligor’s prior income.

Judge Jones’ decision provides a clearer analysis that Court should undertake in this all-too-familiar situation.
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Eliana Baer, Associate, Fox Rothschild LLPEliana T. Baer is a contributor to the New Jersey Family Legal Blog and a member of the Family Law Practice Group of Fox Rothschild LLP. Eliana practices in Fox Rothschild’s Princeton, New Jersey office and focuses her state-wide practice on representing clients on issues relating to divorce, equitable distribution, support, custody, adoption, domestic violence, premarital agreements and Appellate Practice. You can reach Eliana at (609) 895-3344, or etbaer@foxrothschild.com.

Johnny Depp a.k.a. Capt. Jack Sparrow is in the news again, this time for his failure to pay Amber Heard a $7 million divorce settlement. Heard had promised that any settlement that she received from Depp would be donated to charity. She has chosen two charities, the American Civil Liberties Union and the Children’s Hospital of Los Angeles to be the beneficiaries of her largess. Depp hasn’t made the payout yet because he wants to pay directly to the charities rather than to Heard. At issue is the substantial tax benefits that Depp would reap by making the payments directly to charities rather than Heard.

Johnny Depp in Capt. Jack Sparrow costume
By NJM2010 (Own work) [CC0], via Wikimedia Commons
Tax consequences of divorce disbursements is an important consideration when negotiating a settlement. Often times the client will simply lump all assets together and come up with a value of the marital estate not taking into consideration possible tax issues for each individual asset. For instance, the average couple may have a house with $250,000 of equity, a 401(k) with $500,000, and various bank accounts equal to $250,000. The easy math would suggest that one spouse take the 401(k) and the other take the accounts and the house, right? Not so fast. The spouse who would walk away with the house and the bank accounts could liquidate everything and have $500,000 to spend now. The spouse with the 401(k), however, has significantly less available liquidity. Assume, for example, that the spouse that takes the 401(k) has an overall 30% tax bracket for state and federal taxes. To liquidate the 401(k), that spouse would have to pay not only 30% in taxes, but absent extraordinary circumstances, a 10% penalty to liquidate the retirement early. All too quickly that $500,000 becomes $315,000.

This simplistic example demonstrates the necessity of understanding tax consequences to all of the assets in a divorce. This includes stocks and bonds that may have been purchased at a low price that have gone up substantially in value, retirement accounts, real estate investments which in and of themselves may have tax consequences such as available deductions, and carry forward losses on prior tax returns. In the rush to settle the case, litigants sometimes forget the importance of the careful review of their prior tax returns and asset portfolio. A quick call to your accountant may assist your attorney in protecting your future significantly.

 

MillnerJennifer_twitterJennifer Weisberg Millner is a partner in Fox Rothschild LLP’s Family Law Practice Group. Jennifer is resident in the firm’s Princeton Office, although she practices throughout the state. Jennifer can be reached at 609-895-7612 or jmillner@foxrothschild.com.

As avid readers of this blog know, New Jersey’s recently amended alimony statute has been the inspiration for many blogs posts as cases interpreting same are coming down the pike. Under the amended statute, a party may seek to terminate or modify his or her spousal support obligation based upon an actual or “prospective” retirement. While this was seemingly good news for those seeking to retire, the question many practitioners had was what does “prospective” actually mean?

In the case of Mueller v. Mueller, Judge Lawrence Jones provides some insight as to this very question. The facts in Mueller are simple. The parties were married for twenty (20) years, divorcing in 2006. Under the parties’ Marital Settlement Agreement, the obligor was to pay $300.00 per week in permanent alimony and their agreement did not expressly address retirement or its relationship to the alimony obligation.

The obligor filed a post-judgment motion, under New Jersey’s amended alimony law, seeking a determination that his alimony would end in five (5) years. At the time of the hearing, the obligor was 57 years old. In five years, he would be 62 and entitled to receive his full employment-related pension benefit. The obligor asserted that if his alimony does not end at that time, that he will be unable to retirement at that age.

Judge Jones provides a thorough analysis of the obligor’s claim, specifically discussing the distinction of a pre-September 2014 agreement modification/termination analysis (where the burden is on the obligor to demonstrate why alimony should terminate) vs. a post-September agreement modification/termination analysis (where there is a rebuttable presumption of termination with the burden on the recipient).

He also notes that the amended statute covers the situation where an obligor wishes to retire earlier than “full retirement age” as defined by the receipt of full social security benefits”, which in this particular case would be 66 years and 8 months for the obligor. The rationale behind this provision is to avoid the proverbial “Catch-22” financial situation.

Specifically, if an obligor is considering the possibility of retirement in the near future, he or she logically benefits from knowing in advance, before making the decision to actually leave the workforce, whether the existing alimony obligation will or will not change following retirement. Otherwise, if the obligor first retires and unilaterally terminates his or her primary significant stream of income before knowing whether the alimony obligation will end or change, then the obligor may find him/herself in a precarious financial position following such voluntary departure from employment if the court does not terminate or significantly reduce the existing alimony obligation.

When applying the new law to the facts of the Mueller case, Judge Jones held:
• The spirit of the statute inherently contemplates that the prospective retirement will take effect within reasonable proximity to the application itself, rather than several years in advance.
o Thus, in this specific case, the request for an order prospectively terminating alimony five (5) years in advance does not lend itself to the Court being able to reasonably analyze and consider all relevant information. The Court warns about how an application too far in advance of prospective retirement could in essence be nothing more than an attempt to summarily change the terms of an alimony settlement agreement.

• An order for prospective termination or modification of alimony based upon reaching a certain retirement age inherently contemplates that the obligor not only reaches retirement age, but actually retires at that point. If the obligor reaches the age, but does not actually retire, the “retirement age” provisions do not trigger until such time as the obligor actually retires or submits an application regarding a prospective retirement in the future.

o Here, the obligor did not provide a specific plan but merely stated a desire to potentially retire in five (5) years, without anything more. While this case does not create a bright-line for when such applications should be brought, Judge Jones notes that a prospective retirement application brought, 12-18 months before prospective retirement, may be more appropriate.

The takeaway from this case is that while the amended alimony statute permits a degree of reasonable prospective adjudication by the court for a prospective rather than actual retirement, an attempt to engage in the necessary statutory analysis several years in advance of such retirement would likely be replete with long-term guesswork. Any such effort would essentially ignore the practical reality that the parties’ economic situations, health and other relevant factors may radically change over such a lengthy period of time, before an actual retirement ever takes place. If you are paying alimony and are within 12-18 months of retirement, you should think about consulting with an experienced professional to discuss your options regarding the termination or modification of your alimony obligation.

Signed into law on January 19, 2016, New Jersey’s emancipation law is set to take effect on February 1, 2017 and will apply to all child support orders issued prior to or after its effective date.

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One of the highlights of the new law is that it will dramatically impact when and how child support orders will terminate. Specifically, it provides that unless otherwise indicated in a court order or judgment, the obligation to pay child support shall terminate without order on the date a child marries, dies or enters into military service.

Child support will also terminate automatically when a child reaches 19 years of age unless (a) another age for such termination is specified in a court order, which shall not extend beyond the date the child reaches 23 years of age; (b) a written request seeking the continuation of child support is submitted to the court by a custodial parent prior to the child reaching the age of 19; or (c) the child receiving support is in an out of home placement through the Division of child Protection and Permanency in the Department of Children and Families.

Just ahead of the effective date of the statute, Judge Jones issued an opinion on the effect of one child’s emancipation in Harrington v. Harrington. In Harrington, the parties divorced in 2012. The parties have three children, all of whom were unemancipated at the time of the divorce. As such, the parties’ settlement agreement provided that the father would pay the mother the sum of $240 per week in child support for all three children. In what would become a decisive fact in the case for Judge Jones, he noted that the child support was unallocated, rather than broken down or allocated into specific dollar amounts for each child – either on a one-third per child basis or otherwise.

Following the divorce, the father paid child support as agreed without requesting an modifications, even when their oldest child began college. In September, 2014 the parties mutually agreed to emancipate their two oldest children. Two orders were entered confirming the emancipation, but the amount of child support that the father paid remained the same. Further, neither party submitted or exchanged updated financial information or filed any motion.
In June, 2015, the last remaining unemancipated child graduated high school and decided not to proceed to college. The father continued to pay $240 per week in child support nonetheless, without any objection by either party.

In February, 2016, a year-and-a-half after the first two children were emancipated, the father filed a motion for the retroactive allocation of child support to $80 per child, and downward modification of one-third per emancipated child, effective September, 2104. He also sought to emancipate the youngest child and terminate his obligation. The mother consented to the emancipation of the youngest child, but opposed the retroactive modification that the father sought.
With regard to the issue of retroactive emancipation, the Court initially grappled with which law to apply in this situation: should it apply the anti-retroactivity statute which prohibits the retroactive modification of unallocated child support, or does the case law with regard to retroactive emancipation apply?

In reaching its decision, the Court devised a set of equitable factors that should be examined:

1) How much time has passed between the date of one child’s emancipation and the filing date of the obligor’s present motion for retroactive modification of unallocated child support for the remaining unemancipated child or children?

2) What are the specific reasons for any delay by the obligor in filing a motion to review support based upon emancipation?

3) Did the non-custodial parent continue to pay the same level of child support to the obligee, either by agreement or acquiescence, and of his or her own decision and free will, even after he/she could have filed a motion for emancipation at a prior point in time?

4) Did the custodial parent or child engage in any fraud or misrepresentation that caused the obligor’s delay in filing a motion for emancipation and support modification motion?

5) If the non-custodial parent alleges that the custodial parent failed to communicate facts that would have led to emancipation and modification of support at an earlier date, could the non-custodial parent have nonetheless otherwise easily obtained such information with a reasonable degree of parental diligence and inquiry?

6) If the obligor’s child support obligation was unallocated between multiple unemancipated children of the parties, will a proposed retroactive modification of child support over a lengthy period of time be unduly cumbersome and complicated, so as to call into question the accuracy and reliability of the process and result?

7) Did the custodial parent previously refrain from seeking to enforce or validly increase other financial obligations of the non-custodial parent, such as college contribution for any remaining unemancipated child, because during such time period, the non-custodial parent continued to maintain the same level of unallocated child support without seeking a decrease or other modification?

8) Is the non-custodial parent seeking only a credit against unpaid arrears, or rather an actual return of child support already paid to, and used by, the custodial parent toward the financial expenses of the child living in the custodial parent’s home?

9) If the non-custodial parent seeks an actual return of money previously paid to the custodial parent, what is the estimated dollar amount of child support that the non- custodial parent seeks to receive back from the custodial parent, and will such amount likely cause an inequitable financial hardship to the custodial parent who previously received such funds in good faith?

10) Are there any other factors the court deems relevant to the analysis?

In applying the above factors to the present case, the Court considered the following factors: nearly a year and a half passed between the effective date of the emancipation for the older two children and the filing of the father’s motion; there was no reason provided to explain the delay in filing; during that period, the father continued to pay the same level of child support to the mother; there was no evidence submitted that the mother or the children engaged in any type of fraud; the mother and children communicated facts that would have led to a modification of support; and, a retroactive modification of support to 2014 may be unduly complicated given the fact that no financial information was submitted for the period of time in question – 2014-2016.

The Court noted that a hearing should to be scheduled to examine these factors and weigh the comparative equities to determine whether to exercise its discretion and retroactively modify unallocated child support prior to the motion filing date, based upon a prior emancipation of one or more children. However, the Court was somber in its knowledge that this would not be an easy task – i.e. to recreate what child support *might* have looked like over a two year period of time.
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Eliana Baer, Associate, Fox Rothschild LLP Eliana T. Baer is a contributor to the New Jersey Family Legal Blog and a member of the Family Law Practice Group of Fox Rothschild LLP. Eliana practices in Fox Rothschild’s Princeton, New Jersey office and focuses her state-wide practice on representing clients on issues relating to divorce, equitable distribution, support, custody, adoption, domestic violence, premarital agreements and Appellate Practice. You can reach Eliana at (609) 895-3344, or etbaer@foxrothschild.com.

With summer just beginning, many people have visions of swimming pools, beaches and family vacations. Others in New Jersey have visions of Sallie Mae, tuition bills and book fees.

After four years of what has become obligatory college contribution pursuant to the mandates of Newburgh v. Arrigo, many parents in the state are then faced with the daunting possibility of an additional 3-4 (maybe more?) years of opening their wallets and contribute toward the cost of graduate school; sometimes for their 24, 25, 26 or 27 year old children who are not yet considered emancipated pursuant to our current laws. Many times, child support also continues during that period.

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Indeed, New Jersey courts have recognized that completion of undergraduate education is not the determinative factor for either declaring emancipation or terminating child support. Many times, the determination as to whether child support would continue, and along with it the parents’ obligation to contribute toward the cost of the child’s education, focused largely on the whether the child, is “beyond the sphere of influence and responsibility exercised by a parent and obtains an independent status of his or her own”.

New Jersey is in fact one of the few states in the country that still requires divorced parents to pay for their children’s college educations. Even fewer require contribution toward graduate school. However, New Jersey remained an outlier in that regard.

For example, in the 1979 case of Ross v. Ross, the Chancery Division declared that the parties’ daughter could not be considered emancipated as she was attending law school after obtaining her undergraduate degree.

As recently as 2010 in Mulcahey v. Melici, the Appellate Division upheld a trial court’s determination that a 23 year old child was not emancipation and was entitled to contribution toward her education costs as well as continued child support. Eric Solotoff previously blogged about this case in his post entitled: I Don’t Have to Pay for My Kid’s Graduate School, Do I?

The New Jersey Emancipation Statute, signed into law on January 19, 2016, is set to take effect on February 1, 2017, and may change the way courts view graduate school contribution.

Whereas previously emancipation was a fact specific inquiry focusing on the level of independence of the child, now, child support “shall not extend beyond the date the child reaches 23 years of age.”

Does this mean that the possible obligation to contribute toward a child’s graduate school education is a thing of the past? If emancipation must occur by the age of 23, and the obligation to contribute hinges on the question of whether the child is emancipated, how could a parent be required to contribute to graduate school?

Another interesting question will be whether an agreement to pay for graduate school at the time of the divorce, pre-statute will be enforced.
Recall also the New Jersey Rutgers University professor who was ordered to pay more than $112,000 for his daughter to attend Cornell Law School in 2014 because he had agreed to contribute in his divorce settlement agreement, but failed to place any cap on tuition.

The enforcement of agreements to contribute toward college is extensively addressed in Robert Epstein’s – Appellate Division Addresses Enforceability of Settlement Agreement as to College in New Published Decision – but it will be interesting to see if the same principles are applied when it comes to graduate school.

We will keep you posted as the case law is decided.
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Eliana Baer, Associate, Fox Rothschild LLP Eliana T. Baer is a contributor to the New Jersey Family Legal Blog and a member of the Family Law Practice Group of Fox Rothschild LLP. Eliana practices in Fox Rothschild’s Princeton, New Jersey office and focuses her state-wide practice on representing clients on issues relating to divorce, equitable distribution, support, custody, adoption, domestic violence, premarital agreements and Appellate Practice. You can reach Eliana at (609) 895-3344, or