New York Divorce Lawyers Explain Family and Matrimonial Law

Professional Licenses and Divorce

Professional licenses can be one of the more contentious pieces of property in a divorce. A professional license, whether it is a medical license, law license, CPA or architect’s license has been declared to be marital property. The New York Court of Appeals made that determination over 20 years ago in the landmark decision of O’Brien v. O’Brien, 66 N.Y.2d 576; 489 N.E.2d 712; 498 N.Y.S.2d 743 (1985).

The facts in O’Brien were simple: the parties were married for nine years. At first, both were teachers. In September 1973 the parties moved to Guadalajara, Mexico, where plaintiff became a full-time medical student. While he pursued his studies defendant held several teaching and tutorial positions and contributed her earnings to their joint expenses. The parties returned to New York in December 1976 so that plaintiff could complete the last two semesters of medical school and internship training here. After they returned, defendant resumed her former teaching position and she remained in it at the time this action was commenced. Plaintiff was licensed to practice medicine in October 1980. He commenced this action for divorce two months later. At the time of trial, he was a resident in general surgery.

The Court appeals ruled that the license was martial property: “A professional license is a valuable property right, reflected in the money, effort and lost opportunity for employment expended in its acquisition, and also in the enhanced earning capacity it affords its holder, which may not be revoked without due process of law (see, Matter of Bender v Board of Regents, 262 App Div 627, 631; People ex rel. Greenberg v Reid, 151 App Div 324, 326). That a professional license has no market value is irrelevant. Obviously, a license may not be alienated as may other property and for that reason the working spouse’s interest in it is limited. The Legislature has recognized that limitation, however, and has provided for an award in lieu of its actual distribution.”

Remember, in O’Brien, the husband started the divorce only two months after he received his degree. Since he had no medical practice, all that the court could value was the license. But, what if the huband had been practicing medicine for 20 years and had a thriving practice? Would not the license merge with the practice? In other words, would there be only one piece of property to value: the practice? Or would the court value the license and practice?

That question was answered by the court ten years later in McSparron .v McSparron 87 N.Y.2d 275; 662 N.E.2d 745; 639 N.Y.S.2d 265 (1995). The facts are more detailed as this was a long term marriage.

The parties were married in 1969. At the time of their marriage, both parties had undergraduate college degrees and neither possessed any appreciable assets. Defendant husband attended law school during the first three years of the marriage, gaining admission to the Bar in 1973. He thereafter practiced law and was earning an annual salary of $ 97,000 as a Deputy First Assistant Attorney-General when the parties separated in mid-1989.

Plaintiff wife acquired a master’s degree in psychology during the early years of her marriage. Over the next 12 to 13 years, she worked as a school psychologist, taking time off occasionally to care for the couple’s children or to attend graduate school. In 1984, plaintiff began attending medical school. She graduated in 1988 and, after completing a one-year internship, she received a license to practice medicine in July of 1989. Plaintiff commenced this matrimonial action on September 1, 1989, four months before the completion of her second internship.

The Court specifically rejected the concept that the license merges with the career after a period of time. “Such a narrow approach is inconsistent with the equitable goal of assuring both spouses a fair share of all of the assets that were produced by the marital partnership. Application of the merger doctrine is particularly inimical to the statutory purposes because it generally favors the non licensed spouse in a shorter marriage over the non licensed spouse who is faced with rebuilding his or her economic life after the breakup of a long-term marriage.”

Splitting the House – When The House is Bought Before Marriage

The biggest question in divorce, after children, involves the house. Who gets the house and how is it divided? First, as I stated elsewhere on this site, the name on the deed is irrelevant to the question of who gets the house. If the house was acquired during marriage, with marital funds, it is a marital asset. If the house was acquired before marriage, it is a separate asset. But, the lines can blur.

Judicial Hearing Officer (these are retired judges) Stanley Gartenstein recently faced one such situation. He published his decision on March 27, 2009 in the Law Journal, in Li v. Li. Husband acquired the house before the marriage. Clearly, then the house was separate property. However, during the course of the marriage, he executed a new deed conveying a half interest to the wife. The question JHO Gartenstein was tasked in determining was the wife’s interest and value in the house. First, he found that the conveyance converted the separate property into marital property. Next, he found that the husband was entitled to “a dollar for dollar credit for his separate property contributions.” Since the property was $375,000 at the date of conveyance and worth $500, 000 on the date of trial, the husband was provided with $375,000 of credit, leaving $125,000 as marital property.

The next question is want happens when the house is not conveyed to the other spouse. Let’s assume the house was bought for $80,000. Over the course of the marriage, the house increases in value to $160,000. Is the increase separate or marital property?

The big case on this point is Price v. Price 68 NY2d 8 (1986). The Court Of Appeals held that increased value of separate property can be marital property:

The Equitable Distribution Law broadly defines the term marital property, very narrowly defines “separate” property (see, Domestic Relations Law § 236 [B] [1] [d]; Majauskas v Majauskas, 61 NY2d 481, 489) and seeks to achieve the fairest result for both parties upon dissolution of the marriage (see, O’Brien v O’Brien, 66 NY2d 576, 584-585). In the seminal case of O’Brien v O’Brien (id.), this Court held that a medical license acquired during the marriage was marital property under Domestic Relations Law § 236 (B) (1) (c) subject to equitable distribution under section 236 (B) (5). In Price v Price (69 NY2d 8)), we held that where separate property appreciated during the marriage, in part due to the efforts and contributions of the nontitled spouse, the amount of the appreciation was marital property subject to equitable distribution. It follows that where the nontitled spouse has contributed to the appreciation of the titled spouse’s interest in a partnership, even though the spouse was already a partner at the time of the marriage, the appreciation constitutes marital property subject to equitable distribution.”

While this case would seem to say that any increase value would be marital property, the court later took a stricter view. The court said that if the appreciate value is not marital if it was the result of “pure market forces.” Burns v. Burns 84 N.Y.2d 369, 374 (N.Y. 1994).

With respect to the condominium, defendant contends that Supreme Court abused its discretion in not equitably distributing the appreciated value as marital property. We do not agree. The condominium, having been purchased by plaintiff prior to the marriage, was clearly separate property (see Domestic Relations Law § 236 [B] [1] [d] [1]) and, therefore, any increase in value remains separate property “except to the extent that such appreciation is due in part to the contributions or efforts of the other spouse” (Domestic Relations Law § 236 [B] [1] [d] [3]; see Hartog v Hartog, 85 NY2d 36, 45-46, 647 N.E.2d 749, 623 N.Y.S.2d 537 [1995]; Price v Price, 69 NY2d 8, 15, 503 N.E.2d 684, 511 N.Y.S.2d 219 [1986]). Defendant, as the nontitled spouse claiming such interest, bore the burden of establishing that the increased value was due in part to his efforts as opposed to market forces or other unrelated factors (see Golub v Ganz, 22 AD3d 919, 922-923, 802 N.Y.S.2d 526 [2005]; Lawson v Lawson, 288 AD2d 795, 796, 732 N.Y.S.2d 753 [2001]; Burgio v Burgio, 278 AD2d 767, 769, 717 N.Y.S.2d 769 [2000]).

Turning to the proof, defendant testified regarding the general maintenance that the parties performed at the condominium, which included painting, caulking, arranging for carpet installation and replacement of appliances, and also his dealings with the Boston Housing Authority in regard to tenant matters. We have also considered that it is undisputed that no renovations or structural changes to the condominium were made during the course of the marriage. Notably, plaintiff’s testimony established that property values have increased dramatically as a result of revitalization of the neighborhood due in large part to the recent construction of luxury condominiums across the street from the condominium. Under all the circumstances, we cannot say that Supreme Court abused its discretion in finding that the increase in value resulted from market forces.

The Appellate Division, Third Department addressed the issue of renovations, and improvements to the property in Bonanno v. Bonanno, 2008 NY Slip Op 10084, 2 (N.Y. App. Div. 3d Dep’t 2008)

Under the Domestic Relations Law, there are two categories of property: marital property and separate property. Upon divorce, marital property is subject to equitable distribution and separate property is not (Domestic Relations Law § 236[B][1][c],[d]). The statute defines marital property broadly as “all property acquired by either or both spouses during the marriage” (Domestic Relations Law § 236[B][1][c]). The income of both spouses throughout the marriage is considered part of the marital estate and is utilized to calculate an equitable distributive award (Domestic Relations Law § 236[B][5][d][1]). By contrast, separate property, which is not subject to equitable distribution, is explicitly defined as property excepted from the marital estate. It is “property acquired before marriage or property acquired by bequest, devise, or descent, or gift from a party other than the spouse” (Domestic Relations Law § 236[B][1][d][1]). Separate property also includes “property acquired in exchange for or the increase in value of separate property, except to the extent that such appreciation is due in part to the contributions or efforts of the other spouse” (Domestic Relations Law § 236[B][1][d][3]). The concept of separate property is interpreted narrowly (see Hartog v Hartog, 85 NY2d 36, 48, 647 N.E.2d 749, 623 N.Y.S.2d 537 [1995]), and there is a presumption that property is marital until one of the parties proves otherwise (LeRoy v LeRoy, 274 AD2d 362, 712 N.Y.S.2d 33 [2000]).

The court took testimony from a number of witnesses and considered the valuations of the parties’ experts. It then made a detailed itemization of the parties’ property and a detailed distributive award. The court properly considered the factors set forth in Domestic Relations Law § 236(B)(5)(d), including the parties’ respective contributions to the family economic enterprise (see Price, 69 NY2d at 14-15; O’Brien v O’Brien, 66 NY2d 576, 587, 489 N.E.2d 712, 498 N.Y.S.2d 743 [1985]).

The court determined that on the date of marriage, the value of the Claverack main house and land was $ 556,000 and the tenant house was worth $ 357,000. The husband was properly credited these amounts as separate property. The court then determined that on the date of trial the main house and property were worth $ 1,985,000 and the tenant house $ 516,000. These values were based upon the court’s acceptance of the wife’s expert’s appraisals. This was proper given the record evidence that the wife’s expert was far more experienced in making the type of appraisals necessary here. Further, the wife’s expert’s report was full and accurate, while husband’s expert’s report was replete with errors and omissions (see Cash-Scher v Scher, 299 AD2d 193, 193, 748 N.Y.S.2d 868 [2002]; Charland v Charland, 267 AD2d 698, 700-701, 700 N.Y.S.2d 254 [1999]).

The court appropriately held that extensive renovations accounted for the vast increase in value and that all improvements were 100% marital. Evidence in the record reveals that the Claverack property, as renovated, bears little resemblance to the former modest country house possessed by the husband when he entered into the marriage. Virtually all of the structures on the land, and the property itself, have been transformed. In awarding the wife half of the property’s appreciated value, the court considered both the wife’s work implementing the renovations as well as the fact that the improvements were paid for with marital funds (see Price, 69 NY2d at 11 [where separate property appreciates "due in part" to efforts of non-titled spouse as parent and homemaker, amount of appreciation is marital property subject to equitable distribution]). The Court of Appeals in Price held that where the non-monied spouse contributes to the appreciation of the separate property of his or her spouse (through either direct efforts, or by taking care of domestic responsibilities while renovation is in process), he or she is entitled to an equitable share of the value of the appreciation.

The Domestic Relations Law considers spouses as participants in a family economic enterprise. Here, both spouses spent a large amount of time and money refurbishing the country house in Claverack. The wife spent many weekends and vacations with her husband and son in Claverack, and she contributed to the renovation of the property.

However, the court’s award to the wife of 50% of the appreciation of the Claverack property was disproportionate (see Ritz v Ritz, 21 AD3d 267, 799 N.Y.S.2d 501 [2005]). Market forces over the approximately 11 years of marriage accounted for some of the property’s increased value. The wife was not entitled to a credit for any portion of this “passive” appreciation. Thus, a 75%/25% division of the appreciation of Claverack is a more equitable apportionment in the circumstances.

The rule appears that if the appreciation was purely from market forces, then the appreciation is separate property. If the appreciation was the result of some investment, money and/or sweat, then it might be marital.

College Tuition

Here’s a quick one: There is no legal obligation to pay college tuition.

This simple statement often upsets one set of parents and makes another set happy. However, under the Child Support Standards Act, there is no requirement that a parent pay college tuition.

The only way to secure tuition is to place the obligation into the divorce agreement. Many times we use what is called the “SUNY CAP.” The SUNY cap is an obligation to pay tuition up to the level of a specified SUNY school. Being based on Long Island, I base it on SUNY Stony Brook, which is about$5,000 a year. Some agreements use the clause “the parents will contribute to college education.” This clause can lead to further disputes down the road. For example, what if the child is accepted to NYU, which is about $37,000 a year? Must Dad shell out $18,500 per year? Good drafting can save future trouble. If you cannot agree on a SUNY Cap, it is perhaps wise to have some other limiting factor.

Child Support -When Each Parent Has a Child

A question which tends to come up is: how does child support work when each parent has one of the children?

Logic would dictate that neither parent pays child support to the other. However, that is not always the case. What actually happens is that the child support responsibility is calculated on both sides, and then we see if the numbers balance.

Let’s look at a couple of examples to see how this actually works.

Example #1: 2 Children. Mom and Dad each take one, and both parents earn $50,000 a year. The child support obligation is not 25 percent, but 17 % for each parent to each child. So, Dad’s obligation to Mom is $8,500 and Mom’s obligation to Dad is $8,500. The numbers balance. No money chances hands.

Exampe #2: 2 Children. Mom and Dad each take one, but Dad makes $75,000 and Mom makes $50,000. Dad’s obligation is $12,750 to Mom and Mom’s is $8,750 to Dad. Dad should pay $4,000 back to Mom. Now, Dad’s lawyer can try to claim that since Dad has custody of one child, he should get a credit. There is support for that position. But, I’ve seen courts not give credit as well.

Frequently, in agreements where the children are split, the parties agree that no money should change hands. However, the court will not accept such an agreement unless the numbers balance. I had a case where Dad was getting two children and Mom was getting one. Mom made more money than Dad. In order to arrange a “no-pay” deal, we worked out a series of “add-ons”. Basically, we said that Mom is paying additional out-of-pocket costs relating to child care, and that should result in no money changing hands.

There was a recent Family Court decision where this issue came up. In a decision published on March 30, 2009 in the Law Journal, Family Court Judge Hanuszcak, Onondaga County, denied a Father’s request for support. Mother originally had both boys. Custody of the youngest was changed to the Father. Mother made $164,000 a year, and due to the economic downturn, Father was only making $32,000 down from $95,000. The court denied his motion to compute child support for an amount below $32,000. The court further denied his motion for child support from the mother.  The monthly child support on $165,000 should have been $2323.23 a month. With Father’s child support obligation of $453.33, the offset would have been $1869.90. However, the court stated that because the Mother (1) purchased a car for the child; (2) paid for the gas; (3) paid for the auto insurance (4) paid for the child’s cell phone; and (5) provided medical coverage, the Father was not entitled to child support.