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.

The Common Law Marriage Trap and 50 Cent

Hip hop star 50 Cent recently was the victim of a judicial drive-by shooting. 50 Cent has been engaged in a high profile family court action in Suffolk County, New York with his former live-in girlfriend and mother of his child.

He began a proceeding to evict her from their Dix Hills home. She then started an action in New York Supreme Court to stop the eviction. Her claim, removing all the legalese, was that they had a common law marriage.

Her attorney is a clever fellow and never actually uses the word “common law marriage” and neither did the judge, but the reality of what the judge did is clear. And if I were a betting man, I would be betting that the appellate court is going to reverse her.

Starting from the beginning, New York has abolished common law marriage. If you are not legally married, you cannot receive the protections afforded to a spouse. If a husband buys a house, the wife is automatically a co-owner regardless of whose name is on the deed. However, if a boyfriend buys a house, unless the girlfriend’s name is on the deed, she has no right to the property.

Turning to 50 Cent’s case, he bought the house in Dix Hills. The girlfriend’s name is not on the deed and she did not contribute money toward the purchase. She should have been out of luck.

But her lawyer devised a clever legal argument and swayed the court with a story of her dutiful sacrifices for 50 Cent. So, the judge accepted the attorney’s novel theories and ordered that the girlfriend can remain in the house.

The girlfriend, Shaniqua Tompkins, argued that she had a contract with 50 Cent, wherein he agreed to take care of her and to share equally in his successes. In return, Tompkins agreed to keep his home and perform other home making services for him.

The court noted that, under New York law, an oral contract that cannot be completed in a year is void. For example, an oral contract to employ someone for six months is valid. On the other hand, an oral contract to employ a particular person as long as he is alive cannot be completed in a year and is void.

After noting this law, the court then ignores it.

The court next notes the law that ”cohabitation without marriage does not give to the property and financial rights which normally attend marital relations…”

The court then noted that an agreement which is not for ”marital” type services is enforceable. However, the rule envisioned a boyfriend having the girlfriend work in his business. Turning the rule on its head, the court found that Tompkins’ housekeeping was not a ‘marital’ function but unconnected to the romantic relationship. Therefore, the judge found a contract between 50 Cent and Tompkins.

What the court did was implicitly find a common law marriage. A promise to provide support in exchange for keeping house cannot be viewed by any stretch of the imagination as anything but a ‘marital relationship.’

Next the court went on to establish a constructive trust. A constructive trust is used when someone in a legal position of trust, known as a fiduciary, causes a person to improperly transfer property. For example, X owns a piece of
property. Y, his attorney, convinces X to transfer the property to him at no cost, but on a promise that the transfer will benefit X. Once Y gets the title, he turns X out of the property. Here the court admitted that Tompkins never owned the property and never paid any money toward it. Instead, the court found that she had transferred her effort in housekeeping and therefore the court found that a constructive trust could exist for the Dix Hills house.

Again, this type of reasoning violates the law against common law marriages. If a paramour can claim an ownership interest in a house by living it in, the common law marriage can be recognized.

Whether 50 Cent will appeal it or not is up to him. I believe that this decision, by seeking a back door to resurrect common law marriages, should be reversed.

Adultery Myths And New York Divorce Law

In order to get a divorce in New York, you must prove marital fault. New York recognizes adultery as one ground to obtain a divorce. However, adultery, as a basis for divorce in New York is misunderstood. In this post, I will try to dispel some of the myths surrounding adultery.

Not a week goes by without someone asking me one of the following questions: (1) If my spouse cheated on me, do I get the house? (2) If my spouse cheated on me, do I get the kids? (3) I don’t have to pay maintenance if my spouse cheated on me, right? and (4) If my spouse cheated on me, can I have him/her arrested?

The law regarding adultery has changed with the times. A hundred years ago, the answer to the above questions would have been an unqualified “YES”. But, divorce laws in New York have changed to reflected the looser morality we inherited from the 1960s.

While we use the term “marital fault” in New York law, it has a very narrow application. It only refers to whether you can get a divorce, not what happens in the divorce. Getting a divorce is easy, the court dissolves the marriage. The hard part is resolving the issues of property and children. These issues are generally unaffected by allegations or proof of adultery.

Let’s first look at property. Under the equitable distribution law, the court is not interested in who destroyed the marriage. The court instead is looking at the length of the marriage, and the property acquired during the marriage. Generally speaking, the court will divide the property in half, regardless of who was at fault. Adultery, by itself will not adjust the scale.

But, what if the cheating spouse spent money on the paramour? That is different. Assume the cheating spouse bought the paramour jewelry. The money used was presumably marital money. That money was wasted and must be returned to the marital pot for distribution. In one case I had, the husband broke an investment plan and deposited it in the girlfriend’s bank account. The judge attached the account and brought the money back.

Child custody and visitation are more problematic because of the emotions involved. The paramour is seen as the cause of the termination of the marriage. So, it is not uncommon to for the innocent spouse to demand custody on a “morals” issue. Or the innocent spouse will demand that the children not be exposed to the evil paramour.

Until the sexual revolution of the 1960s, adultery was evidence of poor morals, and could be used to secure child custody. Now, that is simply not the case. Adultery is no longer the controlling factor in custody. Adultery can come into play if the paramour is an “inappropriate” person, such as a convicted felon or a sex offender. Adultery can also come into play if it is part of a pattern of an unstable lifestyle. For example, going out every night, leaving the children unattended, and then coming home in the early hours, coupled with adultery could be used as evidence of an unstable lifestyle.

The area of greatest conflict involves the presence of the paramour around the children. If the custodial parent is the cheater, the innocent spouse generally cannot understand why he/she can co-habitat around the children. The argument is that the environment is “morally unsafe.” “How can I teach my child what is right, when he sees a negative moral example everyday?” As I stated above, the courts don’t get into assessing morality. If the child has a separate bedroom, many judges will not issue any order prohibiting the paramour from being in the presence of the children.

However, I have had some circumstances where the court has ordered that visitation shall not occur in the presence of the paramour. Generally, this occurs in particularly nasty breakups, and the law guardian and/or the forensic psychologist believe that it is not in the interests of the children to be in the presence of the paramour. There is no hard and fast rule, but will depend on a case by case basis.

Maintenance is generally unaffected by adultery. This may seem like a harsh rule. “She/he cheats on me and I have to pay?” The problem comes from the statutory basis for maintenance. The purpose is to rehabilitate the non-working or underworking spouse into the work force. The societal goal is to create a self-sufficient person who will not be a public charge. So, the issue of adultery generally does not play into an award of maintenance.

Finally, no one goes to jail for adultery anymore. Only the military prosecutes for adultery.

Equitable Distribution of Post Office Pensions Under New York Divorce Law

As I have pointed out else where, under New York divorce law, pensions earned during marriage are subject to equitable distribution. However, since there are a variety of different pensions available from the multitude of employers, the rules are not always consistent.

For example, military disability pay is not subject to equitable distribution.

The Post Office pensions also presents unique challenges and issues. Since the pension comes from the federal government is it needlessly complicated, as least for the divorce lawyer.

One important issue was recently addressed by Nassau County Divorce Judge, Anthony Falanga. Justice Falanga is one of the brighter and more pragmatic judges deciding divorce cases in New York. He spent over 30 years as a divorce lawyer himself, and understands the issues and concerns of the litigants.

In the case of Grimmer v. Grimmer , published in the New York Law Journal on March 21, 2008, on page 31, Justice Falanga addressed the issue of whether all or just part of a Post Office pension is subject to equitable distribution under New York divorce law. He found that as an employee of the Post Office, the husband, was not eligible to contribute to or receive social security. Instead, a part of his Post Office pension would be a replacement for social security. Social Security is not subject to equitable distribution.

Citing the case of Wallach v. Wallach 37 AD3d 707, Justice Falanga observed that under the Federal Civil Service Retirement System (FERS) a court was directed to “deduct from the value of the retirement benefit the portion thereof that substitutes for social security.”

Based upon the Wallach decision, Justice Falanga found that the entire Post Office pension is not subject to equitable distribution. The portion of the pension that substitutes for social security must be removed. Assume the husband is getting $1500 a month in the pension. He worked 30 years, and was married for the entire 30 years. The court orders that the pension be divided in half. Further assume that the social security substitution is 30 percent. So, only $1000 of the $1500 is pension, while the remaining is counted as social security. The wife would get $500 a month (one half of $1000) not $750 a month (one half of $1500).

An important caveat for the holder of the pension is to make sure that your lawyer knows and understands this fact. Typically, in divorce actions, we divorce lawyers hire a pension appraisal service to provide the value of the pension. Make sure that the pension appraisal takes into account the social security replacement.

Adultery and Equitable Distribution Under New York Divorce Law

Under The New York Law, Adultery by A Spouse Will Not Effect Equitable Distribution

No, you don’t get the house if s/he cheated on you.

One of the most frequent questions I get asked is: “If my spouse cheated on me, do I get the house?” To put this question in proper legalese, the question is “if my spouse committed adultery will it effect equitable distribution.”  People believe that cheating spouse (husband or wife) should pay for this misdeed. Sadly, cheating during marriage is a not uncommon. Just as sadly, the New York Divorce Courts are not really interested in the whys of a failed marriage.

The New York Divorce Courts Do Not Punish A Cheating Spouse by Altering Equitable Distribution

The first thing to keep is mind is divorce law, as opposed to criminal law, is not concerned with punishment. The court is seeking to get an equitable resolution and not punishing someone for a moral lapse. While adultery is considered a moral lapse by many religions, it is not punished in divorce.

Under New York divorce law, the courts draw a line between determining the grounds or reason for the divorce, and the division of property.

While infidelity  is emotionally harmful to the marriage, and can have an adverse impact on the children, the courts will generally not consider it as a factor in division of the marital property. Cheating, by itself will not result in you “getting the house.” Equitable distribution is not effect by cheating. The New York Divorce Courts do not take any moral position about adultery. The court is only interested in a fair distribution of property.

While the cheated on spouse may feel it is fair to get more property, the courts did not agree. The New York Divorce Courts view marriage as an economic partnership. Each party puts an economic value into the marriage. It is this economic value that the court divides with equitable distribution. Emotional hurt, such as that caused by adultery is not considered as a factor by the courts.

But, Sometimes Adultery Can Effect Equitable Distribution by The Courts

I know it sounds like I’m contradicting myself.  On one hand I just explained how adultery does not effect equitable distribution. But, I am not. I said, adultery, by itself will not effect equitable distribution.

Now, lets look at other facts of adultery which could effect equitable distribution. For example, if the cheating spouse diverted marital funds or assets to the girlfriend /boyfriend. (We divorce lawyers use the term “paramour”). The typical examples are the purchase of an apartment or of jewelry. This conduct is called “dissipation of marital assets.” Under those condition, a judge can, under New York divorce law, recover the money that the cheating spouse spend on his/her boyfriend or girlfriend. But, remember, the court is not going to give the non-cheating spouse the house as punishment. So, infidelity  is not punished, but is a factor when showing that assets have been wrongfully taken from the marriage.

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.

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.

New York Divorce Law Pre-Nuptial Basics, Part II

This post will bring together a number of concepts visited in other posts, particularly the ones on maintenance and equitable distribution. New York divorce law and the law of property distribution can be a little hairy and not all the pieces of the Domestic Relations law play well with each other. It really is important to try and understand how the pieces of New York divorce and family law work or do not work together. This area on pre-nuptial agreements is a perfect example.

In the equitable distribution posts I have discussed the issue of separate property versus martial property. The purpose of the pre-nup is to ensure that the lines between the two properties do no cross.

As a general rule, property acquired before marriage is separate property and property acquired afterwards is marital property. But, this simple rule rarely remains simple.

For example, a house is acquired before marriage, and the couple lives there for ten years. During the course of the marriage, the house increases in value from $125,000 to $500,000. The increased value could be considered marital property. Or, wife has a stock account before marriage in the amount of $100,000. During the marriage she uses the money to buy a house, and the couple lives there for the next 20 years. An argument can be made that the entire house is marital. Or, wife gets a personal injury settlement, which is separate property. She puts the money into a joint account with the husband. He claims that since she “co-mingled” the money, he is entitled to half of the personal injury settlement. Finally, husband buys a house before the marriage, ten years into the marriage, he sells the house and uses the proceeds to buy another house. The wife now claims the entire house is martial property.

The way to avoid these problems is to get a pre-nuptial agreement. A will drafted pre-nuptial will reduce if not eliminate headaches and legal expenses. A poorly drafted pre-nuptial could put your lawyer’s daughter through college.

The first step to getting a good pre-nuptial agreement is not to do it yourself. Good legal documents do not come from the internet or by the people who make software packages. Also avoid those places which claim that although they are not attorneys, they can help you with drafting your legal documents.

The next step is to be complete on your assets. I like to get a full list of all the current assets. Then I draft clauses ensuring that not only is the property currently held separate but it will remain separate in the future. I specifically address the issues of increased value, co-mingling and transformation. If these issues are not addressed up front, then you will be opening yourself up for a fight at the divorce.

Finally, consider maintenance. A provision waiving or requiring maintenance can be put into the agreement. But be careful to address not only the current needs of the parties but the future ones as well. An agreement to pay $1,000 a week in 2008 may sound generous, but may be completely inadequate in 2038. The ability to actually pay maintenance must be gauged against future events. I’m sure that many executives at Enron thought their futures were secure.

There are a number of other factors that also need to be considered, but they will vary based upon your particular case. No “one size fits all” pre-nuptial agreement will work. That’s why it needs to be crafted to your particular circumstance. Maybe you don’t have a house, but hold a number of copyrights or patents. May you have an inheritance coming, or have a trust which will mature in a few years. Mature marriages have children from the first marriage to consider. Clauses can be placed in an agreement limited what property can be devised under a will.

For these and other reasons, consider a pre-nuptial agreement, but don’t pull one down from the internet.

New York Equitable Distribution, The Former Spouses Protection Act and the National Guard

I just settled a strange little divorce in front Judge Kent, in Suffolk County. On it’s face, it was nothing too strange. A forty year marriage, where the only property was a pension and a house. As I explained in other posts, under New York divorce law, a pension is martial property and is divided according the number of years of marriage by number of years in the pension.

The husband in this case had retired as an AGR New York Guardsman. In 1998 when he retired from the National Guard, he took off for Puerto Rico. Eight years later, the wife decided to get a divorce. Under New York divorce law, the military retired pay is marital property, but under Puerto Rican law, it is not. The question facing Judge Kent was: which law to apply.

Under the Former Spouses Protection Act Congress specifically stated that military retired pay is subject to laws of the state where the divorce is ordered. There is one kicker, the military member must either be a resident of the state or consent to the state’s jurisdiction. If he is a resident of Georgia, and the spouse tries to divorce him in Nevada, the court cannot divide his military pay. It can only be divided in Georgia, or if he consents to the Nevada court.

My case was different. The husband was a Guardsman for 20 years. He never left the state of New York and his boss was the TAG. Upon retirement he moved to Puerto Rico. So, does the Former Spouses Protection Act govern? Is it meant to cover a Guardsman who spent his entire military career in New York working for the TAG, and then moves out of state upon retirement? The answer is: I don’t know. At this time, there is no decision by any judge in the United States that I have been able find on this issue. My argument was that the act should not apply. He worked for 20 years for the Governor, not the President. I argued that the Former Spouses Protection Act was not designed to cover a career Guardsman being sued for divorce in the state where served and retired from. Naturally, my opponent argued the other side. Judge Kent was caught in the middle. Fortunately, the judge,who is a gentleman, and famous for cutting to the heart of an issue, managed to get the parties to settle. So, this question is still unanswered.

The lesson here is to be careful. If you are the spouse of guardsman who is retiring and he intends to leave the state, start the divorce now before he establishes residence in another state. If you are the guardsman, after you leave the state, establish residence and then commence the divorce. Here, because the parties let the matter sit for several years, multiple problems occurred. If we had not settled, the husband was facing 10 years of arrears payments to the wife, if we won. If we lost, the wife was potentially facing not getting any money from the pension.