Firm Succeeds in a Reopened 28-Month Old Divorce Judgment

Pashman Stein Walder Hayden has received a ground breaking affirmance of a trial court reopening of a 28-month old Judgment of Divorce and Incorporated Settlement Agreement. In a unanimous 25-page opinion, the court upheld the rights of a wife raised in China who had not immediately perceived the unfairness embedded in her initial Judgement of Divorce. The court reopened the proceeding for a trial even though the Petition to do so was filed more than 28 months after the original Judgement was entered. The Appellate Division affirmed the trial courts 1.4 million dollar judgement for the plaintiff who contended that her husband had cheated her out of her rightful 50% share of the family company assets including those in China and that the out of state matrimonial lawyer hired by her ex-husband to represent her in the initial divorce appearance had failed to protect her interests.

“By affirming the trial courts order award of $1.4 million, including $234,000 in attorney fees, the Appellate Division applied equitable principles of fairness and justice over the rigid interpretations of statutory deadlines that would have created an injustice” said James Plaisted, partner at PSWH, who handled the matter for the firm.

Court Recognizes “Economic Abuse” as Type of Domestic Violence

By Robert B. Kornitzer, Esq. and Zach Levy, Esq.

When one thinks of “domestic violence,” the first (and perhaps only) thought that typically comes to mind is physical abuse. Indeed, this State’s Prevention of Domestic Violence Act (“PDVA”), N.J.S.A. 2C:25-19, lists out eighteen (18) specific offenses that constitute domestic violence under the statute, and as one may expect, nearly all of them pertain to acts of physical abuse (e.g. assault, false imprisonment.) In a recent opinion, however, the court addressed the interesting issue of whether non-physical abuse, such as economic harassment and coercion, are also domestic violence that would warrant the issuing of a restraining order under the PDVA.

The case of C.G. v. E.G.,[1] dealt with whether a permanent restraining order should be issued against the defendant husband for his interference with the plaintiff wife’s employment. More specifically, the plaintiff, who had been collecting Social Security Disability, received an offer to return to her previous employment as a waitress. While there were no present allegations of physical abuse towards the plaintiff,[2] the defendant, who did not desire that the plaintiff return to work, took steps to thwart her efforts to hold her new job. For example, the defendant would make repeated harassing phone calls to the plaintiff’s place of work. He would also harass the plaintiff’s boss and his wife, as well as spread malicious (and completely unfounded) rumors that the plaintiff was having an affair with her boss.

The court’s analysis focused on whether the defendant’s conduct could be considered harassment and/or coercion, which are both included in the PDVA’s expansive definition of domestic violence. In sum, the court agreed that there was simply no purpose for the defendant’s actions besides interfering with the plaintiff’s employment and to improperly influence her not to work, and such as was domestic abuse under the PDVA. The court recognized that “[i]n the context of domestic violence, an ex-partner’s acts of obstructing, interfering with, or threatening to endanger one’s job and economic stability can be as fear-inducing to a victim as physical abuse.”

Domestic violence of any kind is deplorable, and should be tolerated by any victim. The decision in C.G. express recognition that physical abuse is not a requirement to find domestic violence represents a positive trend in this State’s approach to protecting victims of domestic violence.

[1] Opinion available at http://www.judiciary.state.nj.us/decisions/C%20G%20%20v%20%20E%20G%20%20MX.pdf

[2] The defendant had been physically abusive in the past.

Being Proactive with Retirement Planning: New Jersey Alimony Statute Permits Court to Terminate or Modify Alimony Obligation based on Obligor’s Prospective Retirement Date

By Robert B. Kornitzer, Esq. and Zach Levy, Esq.

While one should always seek to responsibly manage their finances throughout their entire life, at no point is prudent financial planning more critical than at the time of retirement. As a result of leaving the workforce one often loses a significant source of their income, and therefore one must think carefully about all their expenses and debts (e.g. mortgage, food, alimony, etc.) that they will continue to have after retirement, and ultimately decide whether they can actually afford to retire at a certain age. Therefore, the age of retirement is a natural time for an alimony obligor to seek termination or modification of their alimony obligation to their former spouse based on their changed financial circumstances, and in consideration of the factors set forth in New Jersey’s Alimony Statute, N.J.S.A. 2A:34-23(j).

Of course, an obligor is free to wait until the time they actually retire to petition the court to have their alimony terminated or modified, but this approach comes with one notable drawback. Indeed, if the obligor first retires and then seeks termination of their alimony obligation, they are taking the chance that the court will disagree with their position and decline to modify the alimony obligation. An outcome like this can place a heavy financial burden on the alimony obligor, as they must continue to make alimony payments notwithstanding their reduced income. Thankfully, this State’s Legislature provided an alternative approach to have one’s alimony obligation modified in consideration of their retirement. To avoid situations like the above, the New Jersey Alimony Statute actually permits alimony obligors to petition the court in advance of retirement to have their alimony obligation terminated or modified. The court can then make ruling as to what the alimony obligation will be at the future date of retirement based on the reasonably anticipated post-retirement circumstances of the parties. Accordingly, the alimony obligor will be able to know in advance of retirement whether they must continue with their alimony obligation, or whether the alimony obligation will be reduced or terminated. This can be extremely important information when it comes to retirement planning; the obligor will be able to whether they must be financially capable of affording continued alimony payments before actually leaving the workforce. As explained by the Honorable L.R. Jones, J.S.C., in the recent case of Mueller v. Mueller:[1]

The amendment permitting a court to presently consider an obligor’s prospective retirement, as opposed to an actual retirement, is logically designed to avoid placing an obligor in a “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 (and if so to what degree, i.e., termination vs. modification), then the obligor may find him/herself in a precarious financial position following upon such voluntary departure from employment if the court, for whatever specific reason, does not terminate or significantly reduce the existing alimony obligation.

For this reason, when an obligor reasonably approaches retirement age, and files a motion setting forth a specific proposed plan for a prospective and projected retirement in the near future, a court may now address and consider the merits of same under the amended alimony statute, and render a prospective ruling regarding a proposed termination or modification of alimony, to take effect upon the obligor’s actual retirement in accordance with the proposed plan.

At the end of the day, alimony obligors should consider whether making use of the Alimony Statute’s prospective retirement provision is right for them. Having advanced knowledge of whether one will need to be able to afford alimony payments after leaving the workforce can be critical knowledge when it comes to planning for retirement.

[1] Opinion available at http://www.judiciary.state.nj.us/decisions/Mueller%20opinion%20X.pdf

Can I Pay Less Child Support While I Go Back To School To Earn A Degree?

By Robert B. Kornitzer, Esq. and  Zachary Levy, Esq.
rkornitzer@pashmanstein.com and zlevy@pashmanstein.com

Child support obligations are not set in stone, and courts have broad discretion to set aside or modify such obligations for several reasons, including simply because the circumstances of one or both of the parents have changed since the support order was originally entered. A parent losing their job or suffering a significant reduction to their income are likely good reasons for the court to modify a support order, but it is also well established that relief from support obligations should not be granted if a party is voluntarily unemployed. The same rule is also applicable in instances when a parent is voluntarily under-employed; for example, a highly skilled computer programmer who could earn $100,000 per year in that field choosing to work as a substitute teacher instead and earn just $30,000 per year.  Most would probably agree that a parent should not be permitted to escape their child support obligation because they made the decision not to work or not work up to anywhere near their full potential. Notwithstanding this general rule, consider the following: A husband and wife have a child; upon divorce, the parents enter a consent order requiring the husband to pay the wife an amount each month for child support; a few years later, the husband, who is still in only in his late-twenties and working two jobs, realizes that neither of his jobs have any opportunity for growth and he has no long-term future with either company; the husband concludes that if he is to establish a well-paying career and be a good provider for his child he must earn his Bachelor’s Degree; therefore, in order to better himself and provide a better future for his child, the husband decides to leave both jobs in order to attend college full time to earn a degree; the husband believes attending school full time, rather than keeping one or both jobs and attending school part time, is the better choice for himself and the child because he will be able to earn his degree much faster, and therefore be able to generate more income for the child’s benefit in a shorter period of time; accordingly, the husband asks the court to have his child support obligation substantially reduced while he is attending school and not working.

A request to have a child support obligation modified based on the above facts seems a lot more legitimate and genuine than when the same request is made by a parent who doesn’t want to be employed simply because they are lazy, unmotivated, or just don’t care. Perhaps many would agree that reducing child support on a short term basis in order to permit a parent to earn a college degree, which will likely result in that parent earning a much higher income, is actually in the child’s best interest, albeit for the long term.  After all, in this day and age it is very difficult to establish a well-paying career for one’s self without (at least) a Bachelor’s Degree, and having a higher income will be very helpful for paying expenses such as the child’s college education and other necessaries.   Recently, however, a court rejected, and the Appellate Division affirmed, an application to temporarily reduce child support based on very similar circumstances to the above hypothetical in the case of Zavaglia v. Bray. The trial court noted that the husband’s loss of employment while he would be attending college was not only voluntary, but also temporary, and therefore no modification of the support order was justified.

Overall, while one’s desire to better themselves and increase their earning potential for the benefit of their child is certainly commendable, based on Zavaglia, it does not appear that courts will permit parents to forsake their child support obligations, even on a short term basis, for this reason alone.

Courts Cracking Down on Bad Faith Negotiation of Non-Relocation Clause

By: Robert B. Kornitzer, Esq. and Zachary Levy, Esq.
rkornitzer@pashmanstein.com and zlevy@pashmanstein.com

Physical custody of the children is often one of the most contentious issues that must be resolved during a divorce. The desire to be named the primary custodial parent is sometimes so great, unscrupulous litigants may negotiate the Marital Settlement Agreement (“MSA”) in bad faith and make false representations to the other parent in order to convince them to concede primary custody of the children. Along these same lines, a parent may only be willing to concede primary custody of the children under the condition that the other parent not relocate the children to a distant geographical location that makes regular visitation impracticable. Accordingly, a non-relocation clause will be included in the MSA.

Even if a non-relocation clause is included in the MSA, our courts realize that “life happens,” and the primary custodial parent may very well need to relocate with the children despite the agreement (i.e. they need to move to a different state for a new job). When an application to relocate by the primary custodian is made to the court, the court will generally permit the move to occur upon a showing by the primary custodial parent that: (1) there is a good faith reason for the move, and (2) the move will not be inimical to the child’s interest. Baures v. Lewis, 167 N.J. 116-17 (2001). However, if there is no good faith reason for the move, or if the non-relocation clause was not negotiated in good faith, the application must survive greater scrutiny, and the court must determine whether permitting the move would actually be in the child’s best interest (as opposed to simply not being inimical to the child’s interest). The former is a much easier showing for the primary custodial parent to make, and therefore there is a tremendous incentive to do whatever is necessary to be awarded primary custody of the children, and then just ask the court to permit the move later on, even if the parent secretly knew the relocation would be necessary and likely to occur all along during the negotiation of the MSA. This is exactly what happened in the recent unpublished case of Bisbing v. Bisbing.

In Bisbing, the Father agreed to let the Mother have primary custody of the children under the conditions that he have a great deal of regular visitation time with the children, and also that a non-relocation clause be included in the MSA – the Mother agreed to these conditions, and was granted primary custody of the children pursuant to the parties’ agreement. Just nine months after the Final Judgment of Divorce was issued, the Mother filed, and the court granted, a motion seeking to relocate the children to a far-away state so she could live with a man who would eventually become her new husband. Notwithstanding some very suspicious circumstances which would cause many to think the Mother planned on relocating all along, the trial court did not hold a plenary hearing[1] to determine whether the Mother negotiated the MSA in bad faith, and simply opted to apply the lenient analysis set forth in Baures.

On appeal, the Appellate Division reversed and remanded the matter for a plenary hearing, so a determination could be made as to whether the Mother had negotiated the MSA in bad faith, and set forth the analysis courts should use when an accusation of bad faith MSA negotiation is made. The Bisbing Court explained that the lower court must first determine whether the primary custodial parent negotiated the non-relocation clause of the MSA in bad faith. If so, a “best interests of the child” analysis must be conducted. Second, if bad faith is not demonstrated, the trial court must then consider whether the parent proved a substantial unanticipated change in circumstances warranting avoidance of the agreed-upon non-relocation provision and simultaneously necessitating a Baures analysis. If the MSA was negotiated in good faith, yet the parent fails to satisfy her burden of proving a substantial unanticipated change in circumstances, the court must apply the same “best interests” analysis as required in the first step. Only if the noncustodial parent is unable to demonstrate that the custodial parent negotiated the MSA in bad faith, and the custodial parent is able to prove a substantial unanticipated change in circumstances occurred, should the custodial parent be accorded the benefit of the Baures analysis.

The Appellate Division’s holding is significant, as it provides valuable instruction on how trial courts should address colorable accusations of bad faith negotiations of MSAs, particularly non-relocation clauses. It is also demonstrative that this issue is now something our courts are on the lookout for, and will not tolerate. While it may be tempting to do so, divorce litigants should not attempt to game the system and trick their ex-spouse into giving up primary custody of their children based on bogus promises not to move out of the state.

[1] A plenary hearing is necessary when one party makes a motion and the court needs additional facts and information beyond what the parties have provided in their pleadings to make an informed decision.

Can I Pay Child Support Directly to My Child?

By Zachary Levy, Esq.
zlevy@pashmanstein.com

When children are involved in a divorce, determining an appropriate child support obligation for the non-custodial parent is a key function of Family Court judges. In cases where child support is necessary, the judge will typically order the non-custodial parent to pay a specific amount each month (or other predetermined amount of time) to the custodial parent to ensure that there are adequate funds available to meet the child’s needs. A recent opinion authored by the Honorable L.R. Jones, J.S.C., however, addressed an interesting alternative approach: if the child is over the age of eighteen, can the non-custodial parent can make child support payments directly to the child rather than to the custodial parent.[1]  It is called child support after all.

In the case of Kayahan v. Kayahan, the defendant/father (the non-custodial parent) requested that the court modify his child support obligation, and permit him to make payments directly to the parties’ daughter, who was over the age of eighteen and attending college at the time, instead of to the plaintiff/mother (the custodial parent). Although the father’s request to make payments directly to the child was ultimately denied in this case, Judge Jones noted that such a payment methodology could be permissible in certain circumstances, and identified three main factors that should be considered when determining if direct parent-to-child support payments should be permitted. The first factor is the child’s maturity and history of responsibility. Otherwise put, can the child be trusted to use the support money for its specific intended purpose? If the court feels that the child does not possess the requisite fiscal responsibility or would be too susceptible to the temptations typically associated with being eighteen years old and being away at college, direct payment to the child should not be permitted.

The second factor is the non-custodial parent’s history of paying timely child support. This factor is important because if the non-custodial parent fails make a support payment to the child, the child is far more likely to succumb to guilt or other pressures not to seek recourse for non-payment than the custodial parent would be. Finally, and perhaps most importantly, the court should consider whether there would be sufficient remaining child support funds for the custodial parent to continue reasonably maintaining the child’s primary home without significant economic hardship. In Kayahan, Judge Jones recognized that if the court were to permit a portion of the child support to be paid directly to the child, the remaining portion paid to the mother would not be enough for her to maintain the home and basic budget for the child’s benefit. This, of course, would not be in the best interest of the child, because even though the child was a college student, she was still dependent on her mother for support at this stage in her life.

At the end of the day, Family Court judges have broad discretion to fashion unique remedies based on the specific circumstances of the controversy before them. Although not the norm, direct parent-to-child support payments might be a worthwhile alternative option if appropriate based on the facts and circumstances of the case.

[1] Judge Jones’s opinion can be found here: http://www.judiciary.state.nj.us/decisions/kayahan%20%20opinion%20P.pdf

Recent Case Provides for Increased Child Support to Pay Motor Vehicle Insurance Premiums for Newly Licensed Teen Drivers

By Zachary Levy, Esq.
zlevy@pashmanstein.com

Every teenager dreams of the day they are able to get their driver’s license. On the other hand, parents may loath this day. While the cost of purchasing a new vehicle for a new driver can easily be avoided by simply sharing a car with their parents, the same is not true for motor vehicle insurance costs. In New Jersey, the State requires that all drivers carry a minimum level of insurance, and it is a crime to operate a motor vehicle without such insurance coverage. Insurance companies, wary of the new driver’s lack of experience behind the wheel, can charge tremendous premiums, sometimes approaching or exceeding $1,000 per year. Typically, parents subsidize or pay their children’s insurance costs, but the situation becomes a bit more unclear in instances when the child’s parents are divorced and a child support order is in play. More specifically, to what extent must the non-custodial parent, who is already paying guideline-level child support, contribute additional support to cover the cost of insurance for their child who is a newly licensed driver?

In Fichter v. Fichter,[1] the court was faced with a not unusual, but previously unaddressed situation involving this very issue. In that case, the plaintiff and defendant had two children at the time of divorce – one age seventeen and another age thirteen. The seventeen year-old already had his license, and support contributions were already being used to pay for his car insurance premiums. It seemed, however, that neither parent had contemplated that the thirteen year-old would also be getting her license in a few years, and there was no provision in the divorce settlement for this future expense. When the thirteen year-old turned seventeen and obtained her driver’s license; the custodial parent petitioned the court to increase the amount of support the non-custodial parent, who was already paying guide-line level support, needed to contribute in order to cover this new cost.

Interestingly, the State’s Child Support Guidelines (the “Guidelines”) expressly include “all costs involved with owning or leasing an automobile,” including costs related to “insurance,” among the expenses to be considered when crafting a support order. Based on this language, however, it is unclear if future motor vehicle insurance costs for a newly licensed driver would have been included in the award amount, or whether this is something that would warrant a support adjustment once the child obtains their license. Although a literal reading of the Guidelines would suggest that all motor vehicle insurance costs (current and future) would be accounted for in a Guideline support order, the Fichter Court rejected this interpretation, noting it would lead to the nonsensical result of the custodial parent receiving the exact same amount of support both before and after their teenage child obtains a driver’s license, irrespective of the sudden need to insure the driver and the related costs to do so. The court also noted that requiring an increase in support to pay for car insurance is in the best interest of the child, which is always the paramount consideration in child support determinations.

Alternatively, the court also explained that even if one were to interpret the Guidelines as already including future car insurance costs for a newly licensed driver in a support order, the Guidelines themselves also permit the court to deviate from the Guidelines in order to reach an equitable result based on the specific facts and circumstances of the case. Motor vehicle insurance costs are atypical from most other items on a family’s budget in that the law expressly requires it be had. Furthermore, the court touched upon important public safety concerns, noting that car insurance offers protection to members of the public at large who may be in the wrong place at the wrong time and fall victim to the new driver’s lack of experience behind the wheel.

Ultimately, the court required that the non-custodial parent’s support contribution be increased to cover fifty percent of motor vehicle insurance costs for the youngest child. Although foreseeable future expenses should always be considered when crafting a support order, Fichter provides important guidance on an issue that many divorced parents may encounter years later when their young children grow up and obtain their driver’s licenses.

[1] Opinion available at http://www.judiciary.state.nj.us/trial_court_opinions/Fichter-v-Fichter.pdf

Is Nesting Right For Your Family?

By Valerie Jules McCarthy, Esq.
vmccarthy@pashmanstein.com

For anyone with children thinking about divorce, one of the most important issues to address is how time will be divided with their children, both during the divorce process and once the divorce is finalized. The most common way for parents to address parenting time is for one parent move out of the marital home and the children to go back and forth between their parent’s homes.  While this may be the most common time-sharing method; for some, due to their financial constraints, it may not be financially feasible for one parent to secure a separate residence during the divorce. In other circumstances, neither parent may be willing to move out of the marital home, for non-financial reasons. For example, both parents may want to maintain the home after the divorce; therefore, neither parent may be willing to move out.  Whatever the reason, parents may be forced to continue to live together and share parental responsibilities during the divorce proceeding.  Doing so, however, may result in heightened conflict in the home, which ultimately impacts the children.

There is, however, a middle ground between one parent moving out and transporting the children back and forth, and parents continuing to live together.  This option is known as “nesting” or a “bird’s nest co-parenting arrangement”. This arrangement is uniquely child-centered, as it involves the children remaining in the marital home full-time and the parents rotating in and out.  This arrangement is usually temporary, but it allows the children more time to adapt to having one parent care for them at a time, as well as the other changes in the family that stem from the divorce.  For those parents interested in minimizing the disruption to the children’s lives caused by divorce, nesting may be an option to consider.

In order to successfully implement a nesting arrangement, parents may live in separate areas within the home or, more commonly, in another location when they are not caring for the children.  Some parents share an off-site location, such as a studio apartment. Others stay with friends or family in order to avoid the expense of obtaining a second residence.

Nesting may seem extreme, however, this arrangement allows both parents to experience first-hand what it will be like for their children when they have to go back and forth between their parents’ homes.  This perspective may make it easier to relate with the children once the divorce is finalized and the family transitions to a more traditional parenting time arrangement.

Clearly, a nesting arrangement will not work for every family. In order for nesting to be successful, parents must make a significant sacrifice and truly be willing to place their children’s needs above their own. Anyone considering a nesting arrangement should consider the following tips:

  1. Determine if Nesting is right for your children: The children’s ages and maturity levels are of utmost importance. Parents should consider seeking the advice of a therapist to assist in determine whether nesting will benefit the children.
  2. Parents must be able to communicate with each other regularly about the children. Parents do not have to like each other or even get along to accomplish a nesting arrangement, they just need to act rationally (rather than emotionally) and put the children’s needs first.
  3. Develop a written agreement regarding time-sharing, household duties and payment of household expense. Parents must develop and agree on the parameters of the arrangement.  This agreement should include not only a schedule for when each parent will be at the family home, but also who will pay the bills, do the laundry, purchase groceries, transport the children to activities, etc.
  4. Secure an off-site location near the family home where you and/or your spouse will stay when you are not in the family home with the children. In order for nesting to work, it is best that the off-site location is near the family home. Parents should consider their finances and whether they can afford to rent a separate residence. Parents must also decide whether they will share an offsite location or if each will have his/her own space. Those who have family nearby have the option to use the home of family members as an off-site location. For others, the off-site location may be another part of the family home.

Divorce is very difficult even for mature and emotionally-healthy adults; therefore it goes without saying that it can be extremely difficult for children who do not have voice in the decision to divorce and do not have the life skills and maturity level to handle the significant changes that divorce inevitably brings.  For this reason, in certain cases, a nesting co-parenting arrangement should be considered when determining an appropriate time-sharing arrangement for the children. While nesting does not work for everyone, under the right circumstances, nesting may be an option that addresses the children’s needs, the parents’ financial constraints and/or other interests.

Cohabitation Facts To Consider – Part 2

By Valerie Jules McCarthy, Esq.
vmccarthy@pashmanstein.com

Prior to the enactment of the alimony statute,  N.J.S.A. 2A:34-23(n), New Jersey Courts relied on the standards set by previous case precedent to determine whether a party was cohabiting and its impact on alimony.  Essentially, the new statute consolidates many of the standards developed in prior case law to simplify the inquiry as to whether a particular romantic relationship amounts to cohabitation.

The New Jersey Legislature defines cohabitation as a “mutually supportive, intimate personal relationship in which a couple has undertaken duties and privileges that are commonly associated with marriage or civil union.” To further assist in determining whether a relationship fits the above definition, the new legislation identifies eight factors for Courts to consider in determining whether cohabitation is occurring:

  1. Intermingled finances, such as joint bank accounts and other joint holdings or liabilities;
  2. Shared or joint responsibility for living expenses;
  3. Recognition of the relationship in the couple’s family and social circle;
  4. Living together, the frequency of contact, the duration of the relationship, and other indicia of a mutually supportive intimate personal relationship;
  5. Shared household chores;
  6. Whether the alimony recipient has received an enforceable promise of support from another individual within the meaning of subsection h. of R.S.25:1-5;
  7. The relationship’s length; and
  8. Any additional relevant evidence.

If you are paying alimony, after reviewing these factors, you may come away thinking, “How in the world am I supposed to prove most of these factors?  I have no idea if my ex-spouse shares a bank account or household chores with his or her significant other.”  Don’t fret, because if you believe that your ex-spouse is cohabiting, you only have to provide the Court with evidence that, at first appearance, suggests cohabitation.  This can come in the form of showing that your former spouse is spending most nights at the home of his or her significant other. In the legal field, this is called making a “prima facie” case. Once you have successfully done so, you will be given the opportunity to obtain discovery from your ex-spouse.  This discovery includes obtaining bank records, proof of living expenses, taking depositions of your ex-spouse, and other witnesses to determine the true extent of the relationship. It is in the discovery stage that you will be able to obtain the information to prove the foregoing factors.

If you are in a serious relationship and receive alimony, you should look closely at the eight factors and determine if any of them apply to you.  If you find that any of the above factors are applicable, your romantic relationship may have an impact on your entitlement to alimony.

Whether you are receiving or paying alimony, the issue of cohabitation can be tricky, as it is fact-sensitive and often not clear cut. You should contact an attorney to assist you in determining whether or not your current living arrangement or your spouse’s relationship may have an impact on your entitlement to alimony or your responsibility to pay alimony.

 

Cohabitation Facts To Consider – Part 1

By Valerie Jules McCarthy, Esq.
vmccarthy@pashmanstein.com

It is becoming more and more common for couples to cohabitate; that is, live together, in a relationship without the bond of marriage.  Many couples find this arrangement to be a great way to “test the waters” before jumping into marriage.

If you are divorced, receiving alimony from a former spouse and are thinking about “testing those waters,” you should read this article carefully, because your romantic life may have a significant impact on your financial future.  If you are paying alimony, you should be aware of the changes to the law, as they may impact your obligation to continue to pay alimony.

Most divorcees are aware that if they receive or pay alimony, the obligation will automatically terminate if the recipient remarries (in most cases).  Many divorcees also know that if the recipient of alimony lives with their significant other, it may impact alimony.  The new alimony statute, N.J.S.A. 2A:34-23(n) enacted on September 10, 2014 provides clarification to help Courts and practitioners to determine if a party is cohabiting.

A noteworthy addition to the law regarding cohabitation is the Legislature‘s overt recognition that some couples may be cohabitating without living together full-time. The new statute specifically states that a Judge cannot find the absence of cohabitation based on “grounds that the couple does not live together on a full-time basis.” This language certainly changes the game, as many people may have believed that if a couple was maintaining two separate households, that factor would carry the day in defining whether or not cohabitation was occurring. The moral of the story is that a person may be deemed to be cohabiting even if he/she maintains a separate residence from their significant other.

Holiday Parenting Time: Tips to Survive the Holidays During a Divorce

By Valerie Jules McCarthy, Esq.
vmccarthy@pashmanstein.com

The holiday season brings a mixed bag of emotions.  Some people find it to be a time when they can slow down the normally hectic pace of everyday life, take a vacation, spend time with family, make great memories and enjoy traditions. Others find the holidays to be a time when stress is at its peak, as the holiday season often brings unwelcome guests, an exhausting list of demands; including shopping, parties, baking, cleaning and entertaining, to name just a few. No matter which camp you may belong to, going through a divorce will probably put a damper on the holiday season.

In New Jersey, when couples with children decide to divorce, one of the first issues which must be addressed is custody of their children, at least on a temporary basis until the divorce is finalized. After the parents agree or the Court makes a determination on custody of the child(ren), parenting time and visitation will also need to be determined. In some cases, parents reach a suitable agreement without having to battle it out in court. However, in other instances, a Judge must determine parenting time.

Among the many obstacles parents must overcome when going through a divorce, one of the more difficult challenges is often figuring out how to share time with their children during the holidays. This is particularly difficult if parents have spent years creating holiday traditions and routines, which have to be abandoned or modified when parents no longer live in the same household.   This challenge often leads people to overlook or ignore the issue until the last minute.  However, doing so can lead to even more stress and costly litigation.

As attorneys who practice family law know, the holiday season can be one of the busiest times in the profession. This surge in litigation is often due to last-minute disputes regarding holiday parenting time with children.  In 2013, I had to participate in a telephonic hearing on Christmas Eve to address Christmas Day parenting time for one of my clients.  This type of nail biting suspense is great at the movies, but created an extremely difficult and unpleasant experience for my client, who had to wait until Christmas Eve to find out if she would be able to spend time with her children on Christmas Day.

Unfortunately, these situations occur every year during the holidays, and make it very difficult for parents to plan activities and enjoy the holiday season with their children.   However, proper planning and communication can alleviate these issues and allow people to enjoy the holidays (as much as possible, given the circumstances). Here are my four tips on surviving, and even possibly enjoying, the holidays with your children during the divorce process:

1- Think Ahead-Discuss & Create A Holiday Time-Sharing Schedule With Your Spouse

People often wait until the last minute to make holiday plans.  We are all guilty of procrastination.  But, if you are going through a divorce, you no longer have this luxury. When parents reside in two different households, they must share time with the children and cannot simply make unilateral plans, as they may have done when the family was intact.

Many divorcing couples make the mistake of addressing their general time sharing arrangement when they commence the divorce process, but ignore the holidays, especially when holidays are relatively remote. I recommend that parents address holiday parenting time early in the divorce process, in conjunction with addressing their general parenting plan.  Failing to do so may result in one party enjoying the bulk of the holidays if there is only one general schedule in place.  This scenario leads to last-minute litigation.

If, after discussing holiday parenting time, the parents are unable to agree on a schedule, at least they will still have plenty of time to address the issue.  Parties can seek the assistance of counsel to negotiate a settlement or the assistance of a mediator to resolve these disputes.  If all else fails, they can file an application with the Court and request that a Judge make a final decision.

2- The Child(ren)’s Needs Come First

It is understandable that parents want to spend every holiday with their children; however, the holidays should not become a battleground.  When deciding how to share holiday parenting time, the children’s needs should be the first consideration.  If a parent has extended family coming to visit or a special event has been planned for the holiday, these scenarios should be taken into consideration when determining the holiday parenting time schedule. Placing the children’s needs above the parents’ desires may simplify the task of preparing a holiday time-sharing schedule.

3- Be Flexible and Don’t Focus on the Day

Which parent celebrates Christmas Day and Thanksgiving with the children seems to cause a lot of problems.  It is often recommended by family law practitioners that parties alternate holidays each year; for example, one parent will have Christmas in odd years and the other in even years.  However, the issue of who celebrates a particular holiday with the children during the first year is always a problem.

It may be helpful to view holidays as a season, rather than a particular day.  If there is a dispute over who enjoys Christmas with the children, think about celebrating Christmas (or any holiday) on a different day with your children. Family and traditions make Christmas special, not December 25th.  Once you are divorced, it is likely you will not spend every holiday with your child(ren) every year anyway; therefore, it is beneficial for you to plan ahead and develop alternate ways to celebrate the traditional holidays on different days.  Thanksgiving, Hanukkah and Christmas holidays often coincide with school recess, so there is ample opportunity to celebrate each holiday on a different day with your children.

4- Memorialize a Holiday Time-Sharing Schedule

Once a holiday time-sharing schedule has been agreed upon, it is important to memorialize it in a written agreement or consent order.  If the divorce is mutual and unhostile, it may seem tempting to ignore this tip, but I highly recommend that you do not do so.  Placing the schedule in writing will avoid misunderstandings and will prevent one parent from reneging on the previously agreed-upon schedule out of spite or animus later in the litigation, not to mention saving both parties counsel fees and costs incurred to re-address parenting time in the absence of a written agreement.

Holidays can be a stressful time for “intact” families.  For families going through a divorce or custody dispute, holiday stress can become intolerable.  Consulting a family law attorney to discuss the specifics of a situation can avoid adding additional stress to the holidays. We hope to hear from you so that we may help alleviate your anxiety during the divorce process and assist you in ensuring that you and your children enjoy the holidays.

If you have any further questions on this topic, please email Valerie at vmccarthy@pashmanstein.com.

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Disability Status and Its Effect on Support: Does It Ever End?

As published in the New Jersey Law Journal, October 26th, 2015

This article explores the impact that a determination of disability may have on support obligations, discusses the Social Security Administration’s (SSA) requirement for disability status, surveys the case law, and makes recommendations for practitioners handling such matters.

When an individual is deemed disabled by the SSA, that status creates a rebuttable presumption of a limited ability to work. This reduces the ability of the nondisabled spouse to argue that the disabled spouse should be imputed income commensurate with that spouse’s earnings capability, were he or she not disabled.

For the rest of the article, click here.

Social Security Disability and Alimony

By Robert B. Kornitzer, Esq. and Caitlin Dettmer

The previous blog mentioned that when courts impute income, they consider the earning capacities of each party.  One of the things that can affect the way a court perceives earning capacity is a disability.  If a party has been declared disabled by the Social Security Administration (“SSA”), the court assumes that they are unable to work and will impute a lower income; however, the court allows the other party to challenge that presumption.  Golian v. Golian, 344 N.J. Super. 337, 342 (App. Div. 2001).

Such a challenge can be an important tool for litigants because a declaration of disability does not mean that an individual is entirely incapable of producing income.  The SSA allows disabled individuals to work so long as the work is not “substantially gainful.”  20 C.F.R. § 404.1571.  Substantially gainful activity is defined as work which “involves doing significant physical or mental activities . . . for pay or profit.”  20 C.F.R. § 404.1572.

Proving that a disabled spouse is able to do non-substantially gainful work may increase the amount of income that a court imputes to the spouse seeking support.  For payors whose former spouses are declared disabled, this may lead to paying less alimony.  For payees whose former spouses become disabled, a successful challenge may lead to receiving a lower alimony payment.

Parties whose spouses obtained Social Security disability benefits during the marriage may have a difficult time challenging the presumption that their former spouse is unable to work.  In Gilligan v. Gilligan, the court emphasized that it would be unfair to “permit a divorce litigant to . . . challenge his or her spouse’s disability after (a) having previously assisted the spouse in obtaining [their disability] status, and (b) having previously spent the [disability] funds during the marriage.”  428 N.J. Super 69, 78 (Ch. Div. 2012).

Litigants should also be aware that  Social Security disability status is not necessarily permanent.  The SSA reviews those who receive benefits periodically.  Individuals with disabilities that are expected to improve with time are reviewed more frequently than those whose conditions are not expected to improve.  If an individual’s disability status were changed or revoked by the SSA, this would surely constitute a change in circumstance, as is required to modify alimony awards.

Though highly influential, an individual’s disability status is still just one of many factors which will be considered by a court when imputing income (to both supported spouse as well as supporting spouse) for the purpose of determining an alimony award.

If you would like to speak with an attorney about disability or alimony in New Jersey, please contact Robert B. Kornitzer.

Considerations When Imputing Income to Determine Support

Robert B. Kornitzer, Esq. and Caitlin Dettmer
rkornitzer@pashmanstein.com

Courts consider a variety of factors when determining what amount of alimony is appropriate.  Among these factors are the actual needs of the person requesting the support, the financial wherewithal of each party, and the earning capacities of each of the parties.  N.J.S.A. 2A:34-23(b).  This last factor may require the court to consider what income, if any, should be imputed (assigned) to a spouse who is either not working or underemployed.  This “imputation of income” is important in determining the extent to which the party requesting support can contribute to his/her own support, as well as the ability of the other party to pay support.  For a party seeking alimony, a higher imputed income to her/him may result in a lower alimony award, so this issue is the subject of much litigation.

An interesting illustration of one way the courts approach imputation of income in the unreported (non-binding) 2014Maine v. Maine. This case discusses an alimony request by a spouse who has some vocational training, but who was not employed in that field  during the marriage.  The wife in Maine sought support and explained that during the marriage, her husband had been the primary financial provider, earning $68,000 a year while she earned only $10,000 a year as a part-time custodian.  The husband argued that the wife should have a higher income “imputed” to her because she was capable of earning more money ($32,400 according to the N.J. Department of Labor (“DOL”)), having trained as a medical assistant during their marriage.

The court determined that while it would impute income to the wife, it would not do so without further inquiry and blindly use the average income of a medical assistant as reported by the DOL.  Instead, the court took into consideration the time it may take the wife to find work at the average income level of a medical assistant, due to her minimal work history in the field.  The wife was assigned an income of $23,000 which the court found she could earn immediately if she were to work forty hours a week at her current hourly rate.  The wife was also given four months to demonstrate that she had sought and was unable to obtain employment at a higher income level, before the court would reconsider her imputed income.

While the DOL’s averages provide helpful guidelines for determining what income should be imputed to someone who has training in a particular field, they are not necessarily representative of the income that a court will impute to a spouse who has a spotty work history in that field.  The Court will examine all specific circumstances surrounding the spouse for whom income is sought to be imputed and will not solely rely on a government statistic offered in a vacuum.

The Reality of “Changed Circumstances” and the New Alimony Reform Act

By Robert B. Kornitzer, Esq., and Caitlin Dettmer
rkornitzer@pashmanstein.com

When the spouse paying alimony seeks to reduce his support, the New Jersey Supreme Court requires the lower courts to consider (among others) two factors set out in Lepis v. Lepis, 83 N.J. 45, 157 (1980): (1) whether there is an initial of “changed circumstances” and (2) whether the supporting spouse has the ability to pay what he was previously paying.   Examples of changed circumstances include unemployment of the supporting spouse, changes in the supporting spouse’s income, illnesses, and changes in the dependent spouse’s living arrangements.  Courts will not modify alimony if the change in circumstances is only temporary.  Unfortunately, there is no perfect rule by which to measure when a changed circumstance is severe enough and has endured long enough to warrant a modification of support.

While there is no set amount of time that constitutes changed circumstances, recent changes to New Jersey’s alimony law (N.J.S.A. 2A:34-23) establish that an application for modification of alimony may be filed once a party has been “unemployed, or has not been able to return to or attain employment at prior income levels” for 90 days. The law maintains that factors other than the amount of time a party has been involuntarily unemployed or subject to a reduction of income are to be considered, but in theory, the law now recognizes that changed circumstances may exist after only three months of continued unemployment or inability to return to the level of income that existed at the alimony was set.  This three-month rule was considered to be a major reduction in the burden carried by the supporting spouse.

However, any celebrating by supporting spouses seeking to reduce support may have been somewhat premature.  In the recent unreported (meaning non-binding) case of Beschloss v. Beschloss, the court seemed to place more weight on factors other than length of time being unemployed when considering an application for downward modification of support.  In Beschloss, the Appellate Division upheld the denial of the defendant’s request for downward modification even though his income had been reduced by approximately one-third of his former income and despite a period of unemployment.

It therefore remains unclear as to how meaningful the impact of the revised alimony statute will be in determining future support modification applications.  We can look forward to many new cases continuing to define the issue of what constitutes “changed circumstances.

Rabbis Can Help Jewish Women Obtain Gets

Publish by the Jewish Link
By Robert Kornitzer, Esq.
Link to article

Obtaining a Get in New Jersey

Published by the New Jersey Jewish Standard
By Robert Kornitzer
Link

You Can’t Take It With You, But Can Your Spouse?

When a party in a divorce action dies during litigation, the right to equitable distribution disappears. This is because equitable distribution is specifically awarded upon final dissolution of a marriage. The courts, however, have allowed exceptions to this principle; crafting equitable relief to prevent clearly unfair results, such as to prevent one party (or estate) from being unjustly enriched or to prevent fraud by one party upon the other.

In the 1990 case of Carr v. Carr, 120 N.J. 336, our Supreme Court reviewed the equitable distribution claim of a wife following the death of her husband. Despite the couple having been married for seventeen years, the husband’s will left the entirety of his estate to his children from a prior marriage. Because there was also divorce pending, the wife’s rights to at least a spousal share of the estate were in question. Reviewing the probate and equitable distribution statutes, the court concluded, “the principle that animates both statutes is that a spouse may acquire an interest in marital property by virtue of the mutuality of efforts during the marriage.” It thus held that, “if warranted by the evidence,” a court can act to prevent unjust enrichment where equitable distribution becomes unavailable because of the death of one party prior to the entry of a Judgment of Divorce.

Twenty years later, the Supreme Court revisited these principles in the case of Kay v. Kay, 200 N.J. 551 (2010). In that case, the roles were reversed somewhat, as the deceased spouse’s estate was seeking relief from the surviving spouse, who was accused of having improperly diverted assets. Once again, the court authorized equitable relief to promote fair dealing and to ensure that, “marital property justly belonging to the decedent will be retained by the estate for the benefit of the deceased spouse’s rightful heirs.”

This brings us to the Appellate Division’s recent unreported decision in Beltra v. Beltra, 2014 WL 8096146, decided just last month. In this case, plaintiff-wife filed for divorce after a thirty-four year marriage. She was subsequently diagnosed with a terminal illness and tragically died six months into litigation, and prior to a final hearing. The estate was permitted to substitute in and the parties had a five-day trial to determine equitable distribution. The trial court’s written opinion was scathing in its assessment of defendant’s behaviors. It noted that defendant’s, “non-verbal actions were extraordinary in demonstrating his lack of candor with the court.” It noted he was “evasive” and that his testimony was “inconsistent.” More still, the trial court found he had made substantial deposits of cash generated from his business into foreign banks, purchased foreign assets with cash payments, and had interests in a number of spin-off businesses – much of which remained undisclosed to the wife/estate even after multiple contempt orders for his failure to disclose.

The trial court entered an award of assets and husband appealed. The appellate division vacated the order and remanded the matter for further findings. Following additional argument from the parties, the trial court specifically noted that exceptional circumstances warranting equitable relief existed and reinstated the original order for distribution. The judge further imposed a constructive trust on defendant’s assets.

Defendant again appealed, this time challenging the trial court’s imposition of a constructive trust, and arguing that because the estate failed to demonstrate “the nature or value of the subject assets,” it was error for the trial court to order distribution.

Unmoved by defendant’s arguments, the Appellate Division noted that, “[t]he facts were so flagrant and defendant’s offered explanation so unbelievable, the [trial] judge reported the apparent unreported income to regulatory and law enforcement agencies.” Moreover, the appellate court called out defendant’s extreme bad faith in arguing wife’s inability to ascertain the value of the assets. It highlighted the fact that because of defendant’s efforts to hide assets, plaintiff provided what information she could obtain. Thus, it was unreasonable to place a burden of proof on the party not having access to evidence to support that burden. Finally, the Appellate Division affirmed the use of a constructive trust to remedy the inequity caused by defendant’s clandestine efforts, and to “protect the right to claim marital assets in a matrimonial action.”

This case is an extreme reminder of the complexities that can arise in matrimonial litigation. The conflicting intersection of estate and divorce law clearly shows the potential for clients to be left in a legal “black hole” of sorts. To the extent that case law has developed to limit the possibility of parties being left without recourse, it is instructive that the Appellate Division first remanded the matter back to the trial court for specific findings in support of its imposition of equitable relief. That is, the ability to avoid this possible black hole is not guaranteed. As a practical matter, then, it is important that the right to relief is not simply assumed because of one party’s untimely death.

While death itself may seem to beg the question of inequity, this is clearly not the case. It is, therefore, critical that the court be presented with an explicit basis on which to find that equitable remedies are necessary to avoid injustice. There are a myriad of scenarios where the interests of justice might suggest leaving the parties “as is,” such as insolvency, or where a surviving spouse must continue to care for an unemancipated child, or where the parties each have substantial independent wealth, to name but a few. On the other hand, where one party acts to obstruct discovery, the Beltra court’s understanding with regard to burdens of proof counsels that the other party should not be penalized for being unable to present proofs beyond that to which they had reasonable access.

As is so often the circumstance in matrimonial matters, the specific facts of any given case matter. While Beltra reinforces important guiding principles for a serious, yet infrequently occurring, situation, more than anything it highlights that ensuring fairness between the parties is what matters most.

 

 

 

Litigating Discretionary Trusts in The Afterglow of ‘Tannen v. Tannen’

January 26, 2015 , New Jersey Law Journal
By Robert B. Kornitzer and Kristi L. Terranova

Trusts are often established to protect a beneficiary from third-party creditors, or simply to create a future cash stream for the intended beneficiary. In the context of family law litigation, this form of protection, principally in the form of a “discretionary trust,” is often used to protect the beneficiary from the economic reach of his/her future ex-spouse. This article explores the impact of various forms of discretionary trusts in family law in the afterglow of the New Jersey Supreme Court case, Tannen v. Tannen.

The Tannen court addressed the issue of whether a court can compel distributions from a discretionary support trust and include those distributions as a source of income for the beneficiary-spouse in calculating alimony. While other states previously addressed the issue presented in Tannen, this case was one of first impression in New Jersey.

Discretionary Trusts

A discretionary trust grants the trustee the discretion to determine if, when and how much to distribute from the trust. Pursuant to the Restatement (Second) of Trusts, which is recognized in New Jersey, a discretionary trust exists “if by the terms of [the] trust … the trustee shall pay to or apply for a beneficiary only so much of the income and principal or either as the trustee in his uncontrolled discretion shall see fit to pay or apply.…” Restatement (Second) of Trusts § 155(1); see also, §155(1) comment b. “[T]he beneficiary [of a discretionary trust] c[an] not compel payment to himself or application for his own benefit.” The limited nature of the beneficiary’s rights serves to limit the rights of any “transferee or creditor” of the beneficiary who similarly “[could] not compel the trustee to pay anything to him.…”

In Tannen, the parties married in 1988. In 2000, the wife’s parents settled the Wendy Tannen Trust (WTT), an irrevocable trust with the wife as the sole beneficiary and the wife and her parents as co-trustees. There was no question that the WTT funded a substantial portion of the marital lifestyle, and generated at least $124,000 per year in income for the family.

The creation and wording of the WTT was critical to the court’s analysis. In relevant part, paragraph 3(A) of the WTT provided the trustees “sole discretion to pay out the principal and income for the benefit of defendant’s health, support, maintenance, education and general welfare after taking into account the other financial resources available to defendant.” Tannen, at 264. Paragraph 3(C) provides that “it was the express intention of the grantors that defendant shall not be permitted under any circumstances to compel distributions of income and/or principal prior to the time of final distribution.” Paragraph 14, the spendthrift clause, of the WTT states that “defendant had no ability to alienate, anticipate, pledge, assign, sell, transfer or encumber distributions from the trust.”

The Appellate Division in Tannen noted that N.J.S.A.2A-34-23(b) sets forth a list of factors that the trial court should consider in making any alimony award, including “income available to either party through investment of any assets held by that party.” The Appellate Division narrowed its inquiry as to whether the wife’s beneficial interest in the WTT was properly considered in the alimony calculation. It held that the trust income could not be imputed to the wife in calculating alimony. Accordingly, the wife’s “beneficial interest in the [WTT] was not an asset held by her.” The income that the wife received from the trust could not be looked upon as income to the wife for support, which would have reduced her financial needs.

The Tannen decision affirmed that in New Jersey, “a purely discretionary trust will be honored as giving the trustee unfettered discretion to distribute or not distribute, regardless of the support needs of the beneficiary.” E.g., Martin M. Shenkman, “Recent NJ Case Upholds Protection of Trust,” 30 The Matrimonial Strategist 2 (February 2012).

The court did not fully explore that the trust was partially self-settled by the wife, as the wife gifted the home to the WTT. Arguably, this fact should have opened the door to impute some level of income from the trust to the wife.

The Tannen court points out the importance of the exact language in discretionary trusts. The language used in discretionary trusts varies. The obligations of the trustee and the rights of the beneficiary are affected by such language variations.

Discretionary Trusts and the Reciprocal Trust Doctrine

In certain cases, parents may establish a discretionary trust for each of their children, with siblings serving as trustees for each other’s trust. In theory, this is a discretionary trust because each beneficiary does not have sole authority to require distributions from his own trust. In practice, the beneficiary compels distribution from his own trust by using his discretion over his sibling’s trust to refuse distribution to the sibling if he/she does not cooperate with the beneficiary. In essence, a quidproquo is created, whereby “you will receive your funds only if I receive my funds.” Courts have pierced these trusts through the “reciprocal trust” doctrine. This legal doctrine addresses the establishment of similar trusts and unwinding and/or uncrossing them. Bruce D. Steiner and Martin M. Shenkman, “Beware of the Reciprocal Trust Doctrine,” (April 2012) www.trustandestates.com. If the trusts are “un-crossed,” they are treated as a self-settled trust for each sibling. Once treated as self-settled, the income from the trust can be imputed to the beneficiary spouse.

In examining the penetrability of a reciprocal discretionary trust, we need to examine the historical conduct of the parties. For instance: Did the beneficiary select the fund manager? Does he/she dictate the distributions? Have his/her requests been denied? Do all siblings withdraw similar funds for his/her “needs”? As would be expected, the more control the beneficiary exerts over his/her own trust, the less likely that the trust would be considered “discretionary” and out of the beneficiary’s control.

Support Trust

A support trust is a form of discretionary trust that obligates the trustee to make distributions to the beneficiary for her support. In a support trust, the trustee could be required to distribute as much of the net income or principal as is necessary for the beneficiary’s health, education, maintenance or support. N.J.S.A. 3B:11-1. The trustee is obligated to make distributions to the beneficiary for her support; thereby removing the trustee’s discretion over whether such distributions are necessary for the beneficiary’s support. Not only is the trustee’s discretion over these distributions removed, but since the beneficiary of a support trust is entitled to receive these distributions, the beneficiary can compel distributions from the trustee of a support trust to the extent those distributions are necessary for his/her support.

The Tannen case presents an example of a “hybrid trust” because it mixes elements of a support trust with a purely discretionary trust. The practical impact is that by attempting to mix uses of support and discretion in creating certain trusts, the estate planner may have weakened both if there is a challenge to the use of funds from the trust.

Impact of Discretionary Trusts on the Supported and the Supporting Spouse

The impact of payment of alimony/child support when one party is a beneficiary of a discretionary trust falls on the supported spouse as well as the supporting spouse, as illustrated below:

Practical Points If You Represent the Non-Beneficiary Spouse

Review the prenuptial agreement to determine if the parties anticipated that all income from all sources would be utilized during the marriage;

Review the tax returns to determine whether the trust income was included in joint tax returns;

Analyze the usage of the trust to determine if it was utilized for essential needs of the marriage, as demanded by the beneficiary spouse;

Analyze the details of the language of the trust to determine whether it is a discretionary trust, a support trust or a hybrid trust;

Analyze the historical transactions, actions of the trustee and the beneficiary to look for actions inconsistent with the terms of the trust;

Determine whether the trust was funded by a third party or whether it was self-settled (in whole or in part); and

Determine whether the trust can be pierced vis-à-vis the “reciprocal trust” doctrine.

Practical Points If You Represent the Beneficiary Spouse

Review the prenuptial agreement for language clarifying that any use of exempt assets (corpus or income) must be considered a nonrecurring “gift” to the marriage and not a part of marital lifestyle;

Determine whether the trust income was ever included in joint tax returns;

Determine whether the trustee consistently followed the requirements of the trust;

Verify that the beneficiary spouse does not exert indicia of control over the trust; and

Determine whether the trust can be pierced on account of the “reciprocal trust” doctrine.

When representing the nonbeneficiary spouse, it can be a frustrating task to penetrate the wall created by discretionary trusts. However, if one diligently chips at the wall around the various forms of imperfect discretionary trusts, there is opportunity to argue the appearance of complete discretion is a façade and the trust is an asset that is eligible as a source of imputed income to the beneficiary spouse.

Reprinted with permission from the January 26, 2015 issue of The New Jersey Law Journal. © 2014 ALM Media Properties, LLC. Further duplication without permission is prohibited. All rights reserved.

New Jersey Alimony Law Increases the Need for Financial Planning During Divorce

By guest author: Rosemarie Moeller

There has been much discussion in recent weeks about the legal implications the new alimony bill will have on current and future cases. However, changes to the law which impact the tenure and certainty of alimony are particularly detrimental to the payee spouse, increasing their need to understand the longer term implications of the settlement before signing a Property Settlement Agreement.
Consider the major components of the bill – Permanent alimony has been eliminated; there is a limitation on the duration of alimony for marriages of less than 20 years; more clarity around modification or termination of alimony upon retirement; the potential for retroactive relief in cases of changes circumstances; and potential of suspension or termination of alimony in cases of cohabitation – all of these threaten the income stream that the payee spouse needs to maintain a suitable lifestyle.

Merely obtaining an alimony settlement that meets the expenses necessary to allow the payee spouse to remain in the marital residence doesn’t set the payee spouse up for success in the longer term of what happens when the stream of alimony ends. What this means in financial terms is that the money is going to run out at some point and payee spouses have to plan for that eventuality.
Consider the demise of a 15 year marriage which involves a payee spouse, in their mid-30’s with three school age children who will not be attending college for at least another 8 years. Let’s say this spouse has been getting pendete lite support for the 2 year period during the divorce process. At most, the payee spouse will be awarded 15 years of alimony which can now be reduced by the pendete lite support if any, paid during a divorce proceeding. So in this case, by the time alimony ends, this payee will only be their late 40’s, too young to retire and perhaps out of the workforce too long to obtain gainful employment that will enable them to support themselves.

The duration of alimony is even threatened in marriages of over 20 years by the retirement or loss of employment of the payor spouse. What does the payee spouses financial life look like in the circumstance where the payor retires at normal retirement age of about 67? So a 50 year old who has been married for 30 years with emancipated children may have to plan for a change in their income about 17 years after their divorce. This is a challenging task when mortality tables expect that individual to live for another 30 years in retirement.

Another threat to post marital lifestyle is the prospect of alimony being suspended or terminated if the obligee spouse cohabits with another person. “Cohabit” is defined as involving a “mutually supportive, intimate personal relationship in which a couple has undertaken duties and privileges that are commonly associated with marriage or civil union but does not necessarily maintain a single common household.” Dating is defined as: “a process whereby two people meet socially for companionship, beyond the level of friendship, or with the aim of each assessing the other’s suitability as a partner in an intimate relationship or marriage”. Not a huge distinction between the two with the only remedy being that alimony will end either for a period of time or permanently as a result.

The bill makes significant changes to the alimony laws which are effective immediately upon signing and is applicable to current and future cases. Decisions made during this settlement period will affect the payee spouse for many years to come. The decisions need to be made in the context of long term planning which allocates alimony to both the short and long term needs of the payee spouse. Financial planning during the divorce process will give the payee spouse the guidance they need to make informed decisions that are pivotal to their post marital lifestyle and allow the payee spouse the confidence to sign the settlement having some indication of its longer term impact under various scenarios.

Rosemarie Moeller CFP®, CLU©, CFDP is Managing Director of Freedom Divorce Advisors a division of AEPG® Wealth Strategies located in Warren, NJ. She specializes in matters related to divorce. She can be reached at rmoeller@aepg.com or (908) 727 3594.