New York Divorce Lawyers Explain Family and Matrimonial Law

Tax implications for Military Retired Pay

Before I start, let me state that I am not an accountant or tax attorney. Do not make any decisions regarding taxes based upon this posting. Discuss any tax plans with your accountant.

In a recent decision by the U.S. Tax court, Proctor v. IRS, 129 TC No. 12 the division of military retired pay was treated as alimony not a property distribution. This may also have implications for the New York Police or Fire Department VSF.

Under New York law, any benefit to be paid in the future, but earned during the marriage is subject to equitable distribution. Military retired pay is a perfect example. The right to the pay was earned by 20 years of service. The retiree gets paid after she/he retires and as long as he/she lives. Unlike a 401K, there is no account with money to be drawn upon. New York treats this as property, and is subject to property division.

But, apparently, the tax law treats military retired pay differently. In the Proctor decision, the court stated that under Internal Revenue Code section 71(b) payments to an ex-spouse of her share of military retired pay can be considered alimony, and therefore tax deductible to the retiree. The court stated that “in order to qualify as alimony, payments must meet the requirements of section 71(b)(1) (A) through (D)”.

(b) Alimony or separate maintenance payments defined. For purposes of this section–
(1) In general. The term “alimony or separate maintenance payment” means any payment in cash if–
(A) such payment is received by (or on behalf of) a spouse under a divorce or separation instrument,
(B) the divorce or separation instrument does not designate such payment as a payment which is not includible in gross income under this section and not allowable as a deduction under section 215 [26 USCS § 215],
(C) in the case of an individual legally separated from his spouse under a decree of divorce or of separate maintenance, the payee spouse and the payor spouse are not members of the same household at the time such payment is made, and
(D) there is no liability to make any such payment for any period after the death of the payee spouse and there is no liability to make any payment (in cash or property) as a substitute for such payments after the death of the payee spouse.

The court found that payment order met the requirements of the statute. This is true even if the divorce decree refers to the payments as part of the division of martial property. The court stated the divorce court’s classifications do not matter. “Labels attached to payments mandated by a decree of divorce or marriage settlement are not controlling.” The court went on to say that “while the designation need not mimic the statutory (B) will generally be met if there is no ‘clear, explicit and express direction” in the divorce decree stating that the payment is not to be treated as alimony.” Since the decree in question does not contain such language the requirements of section 71(b)(1)(B) were met.

The key point is that the divorce decree must either be silent as to the designation of the payments, or state that the payments will be treated as alimony. If you already have a decree, please don’t use this decision as license to take the deductions, talk to your accountant and follow his/her advice.

Same Sex Marriages – Martinez v. Monroe- Trends In New York Divorce Law

An appellate court just issued a decision recognizing as valid a same-sex marriage. (Martinez v. County of Monroe). But, there is a caveat: the marriage took place in Ontario, Canada, and not in New York.

The Court of Appeals of the State of New York stated in Hernandez v. Robles that same-sex marriages performed in New York are invalid. Basically, the court held that under the New York Constitution and statutes, there is no positive right for a same sex couple to get married under New York law. The court did not address whether a same-sex marriage obtained in another state would be valid in New York.

The Appellate Division for the 4th Department, which covers Western New York, issued a decision, published in the Law Journal for February 7, 2008, finding that a same sex marriage performed in Ontario, Canada, must be recognized as a valid marriage in New York.

The court observed that such marriages are legal in Ontario, Canada and there is no law in New York prohibiting the recognition of same-sex marriages. Therefore, the court concluded, “the plaintiff’s marriage to Golden, valid in the Province of Ontario, Canada, is entitled to recognition in New York in the absence of express legislation to the contrary.”

The court, finding that the marriage of legal, stated that the failure of the county of Monroe to recognize the marriage constituted discrimination under the New York Executive law.

The decision joins a growing number of decisions recognizing same-sex marriages when performed in a jurisdiction where they are legal.

One interesting note: the court found that failure by the county of Monroe to accord the Plaintiff with all the marital benefits was discrimination. Therefore, the court recognize a right to enforce recognition of the marriage.

Quite frankly, I don’t know where these cases will finally end up. Either the Court of Appeals is going to weigh in the topic or the legislature. If the Court of Appeals upholds this decision, then absent action by the legislature, same-sex marriages performed in other jurisdictions will be valid in New York.

My advise for any same-sex couple seeking to get married in another jurisdiction, hedge your bets and get some type of partnership agreement signed. In the event either the Court of Appeals or Legislature comes down against same-sex marriages, many separating couples could face significant property issues. It’s best to lock down the rules for dividing up the property before you buy that house. In that case, the name of the person on the deed is the owner and the person not on the deed has no property interests.

Child Custody Cases and the Cost

My father, God rest his soul, had a sign over his desk which read “In the law, nothing is certain but the expense.” He told every client that walked in that the sign was not a joke.

That sentiment is doubly true for custody cases. Let me state up front: custody cases are expensive and there is absolutely no guarantee of success. In fact, I’m going to be adding that language to my retainers because no matter how many times and different ways I say it, someone will hear what they want to hear.

Let’s talk expense. The first thing a New York divorce or family court judge does when she hears the words “custody battle” is to appoint a law guardian. The law guardian is an attorney hired by the court to represent the interests of the child in the battle. Guess who pays for the LG? Not the court, the parties. The court could divide it 50/50, 60/40, or 100 percent to one party. It is based upon the financial resources of the parties, and the discretion of the court. I never predict how that will turn out. But, generally speaking the person making the most money will pay the most money.

In the average custody case, the LG can end up billing at least $15,000 and many times will bill more than that.

Next, the court will appoint a forensic psychologist to interview the parties, the child, and whoever is living with the parties. The average price tag for the report is $10,000. If the psychologist needs to testify at trial, expect another $7,000 to be added to the bill.

Before you even pay your lawyer, you can be out of pocket $25,000.

You must also pay your lawyer. I was involved in a particularly nasty custody battle that lasted three years, had numerous courts appearances, several appeals and ended in a three week trial. The legal cost to my client was in excess of $120,000.

So, what do you get for all the money you shell out? This is not a game, the person with the most money is not guaranteed to win. There are many factors that must be weighed and considered by the court. Ultimately, the decision is in the discretion of the court. Any lawyer who claims to be able to predict the result of a custody battle is a fool or liar.

And as tough as a custody battle is, motion to change custody is even tougher. The courts require that there be a strong showing that the custodial parent is unfit, and it is in the best interests of the child to change custody.

In future posts, I addresses some the factors that the courts consider. But, be advised, custody is expense, emotionally draining, and unpredictable. Before you walk this path, consider your options very carefully. Think it through, discuss it with your family and lawyer. Then chose wisely. In the end, it is your decision whether to take this path.

Divorce and Equitable Distribution Where There Are Hidden Assets, Part II

One of the biggest questions in New York divorce actions involves hiding assets. Many times one spouse controls all the money issues and the other spouse is utterly ignorant of the finances. Other times, property “mysteriously” vanishes without a trace. The challenge for the innocent spouse is how to get his/her fair share.

It is very important to remember that New York uses equitable distribution to divide assets, not title. Under New York divorce law, the courts are not concerned with whose name is in the deed to a piece of property or even on a bank account. The courts will look to a true owner.

This is critical when property has been transfered in order to cheat a spouse in a divorce. For example, if the husband owns a house in his own name, but transfers it to his brother around the time or just before the divorce, the court will reach back and provide the wife her share. The court can also adjust the scale and then award the innocent spouse more than 50 percent. In Niland v. Niland, 291 A.D.2d 876, court did just that. Finding a fraudulent transfer of property, the court awarded the wife 60 percent of the asset. Remember, equitable distribution is not “equal.” Therefore, the court can adjust the scales in the interest of fairness.