Special Needs Trust and Child Support

no picture

Divorcing parents are responsible to support their children until emancipation.  But what if you have a disabled child who is never likely to be emancipated?  Should a Special Needs Trust be created?

It is important to note that disabled children may be entitled to certain governmental benefits, which may be compromised if the child is eligible for child support from his or her parents.

In a recent New Jersey Supreme Court case, J.B. v. W.B., the divorced father of an autistic child sought to modify the Property Settlement Agreement reached between him and his Wife years earlier.  According to the Agreement, the father had an obligation to pay child support for this child, and it was acknowledged that the child may never be emancipated.  The Agreement deferred some financial issues relating to their son for a later date, and the father filed a motion to determine the allocation of financial responsibility for their son's post-secondary education and to establish a special needs trust.

The Lower Court denied the father's motion stating that the parties' agreement provided that he pay support and because his proposed trust plan lacked sufficient detail to allow the Court to make a decision about whether the trust would be in the best interests of the child.  The Appellate Division agreed with the Trial Court.

The Supreme Court of New Jersey addressed the case since it was its first opportunity to consider the role of a special needs trust for the benefit of an adult, unemancipated disabled child.

The Supreme Court felt that the parties' Agreement could be modified since maturation of a child and his or her changing needs may satisfy the threshold requirement for modification due to a change in circumstances.  In this particular case, the father didn't have to meet this requirement of change in circumstances since their Agreement deferred future financial arrangements for their child to a later date.  The best interests of the child should have been taken into consideration.

In this particular case, the Supreme Court agreed that the father did not provide enough information with regard to a special needs trust; however, the Court did set forth guidelines for future consideration regarding such trusts.  At a minimum, the Court must have a complete understanding of the following:

  1. The current physical, psychological, educational, vocational and recreational needs of the child.
  2. The cost to support those needs.
  3. The resources available to fund those needs.
  4. If the plan relies on government benefits, the eligibility rules, the time it will take to gain eligibility and how long it will take to access benefits once eligibility is established.
  5. The means of defraying costs without compromising the child's benefits' eligibility.
  6. The terms and conditions for disbursement from the trust and the designation of a trustee.

This is a complicated area of law, and if you have a special needs child, you should seek the appropriate legal advice to assure that your disabled child will benefit from all available government aid in addition to your financial support.


The Division of a 401(k) Plan Through Equitable Distribution

no picture

Aside from the marital residence, I find that my clients' 401(k) plans are the second largest asset to divide through equitable distribution.  With pension plans becoming all but extinct, individuals are depositing larger sums than ever into their 401(k) plans. 


Below are some tips regarding the division of this retirement asset through equitable distribution.


Tip One: Identify the Pre-Marital Portion of the Account


Notwithstanding some very limited exceptions, a spouse’s interest in your 401(k) plan begins on the date of your marriage.  It is likely that you were contributing to your plan prior to the marriage and it is important to identify the value of your account prior to the marriage.   With many retirement plans only keeping records for seven years, it may be in your best interest to print out an account statement that corresponds from the date of your marriage.


In addition to retaining the funds in the account prior to the marriage, the growth on this portion of the account is also excluded from equitable distribution.  With the compounding nature of interests within retirement accounts, it is important to remember to apply an appropriate growth rate the premarital portion of your account.  The growth rate can be established by reviewing the account’s historic investment performance and simply compounding this level of growth to the exempt portion of the asset.


Tip Two: Identify the Post-Complaint Portion of the Account


Similar to the pre-marital contribution into your retirement plan, in most scenarios, the post-Complaint deposits into your 401(k) account are usually exempt from equitable distribution.  With some divorce litigations spanning more than one year, the exclusion of these deposits can have a significant impact on your final equitable distribution scenario.


Tip Three: Make Sure to Take Into Account the Tax Status of the Asset


One of the key benefits of a 401(k) plan remains the pre-tax nature of the contributions.  This tax deferral is useful for many individuals to lover their effective tax liability.  However, it is a common mistake to utilize the value of a 401(k) plan to offset an after-tax asset such as the value of bank account.  Due to the differing tax classifications, comparing the two is similar to comparing apples to oranges.


If you are going to offset the value of your retirement account to a cash asset, you need to first reduce the value of the 401(k) plan value by your effective tax rate.  For purposes of example, if your effective tax rate is 25%, if you have $100,000 in your retirement account, the actual cash value of the account would need to be reduced by 25%, for a cash value of $75,000.  Cash assets (bank accounts, equity in a primary residence, etc.) have already been taxed; therefore you do not need to reduce the values of these assets for tax purposes.


With pension plans falling out of favor or many of our employers, the protection of your 401(k) assets are more important than ever.  I strongly recommend that you consult with an experienced matrimonial attorney prior to entering into an agreement to divide this asset through your divorce.


Using Qualified Domestic Relations Orders (QDROs) to Collect Alimony and Child Support Arrears

no picture

In the world of family law, few problems compare to a person’s failure to receive court-ordered alimony and/or child support on a regular, recurring basis.  The enforcement and collection of support arrears can be difficult, expensive and time consuming. One overlooked remedy is to tap a non-custodial parent’s retirement plan for unpaid support.  The technical term is a Qualified Domestic Relations Order or QDRO. Such QDROs apply to both Defined Benefit Plans (traditional pensions) and Defined Contribution Plans (401-K Plans and the like). Even if the non-custodial parent has lost his or her job, a QDRO remains available for support collection purposes.  At the same time, since every Plan is different, a court cannot instruct the Plan Administrator as to when or how to make a support distribution (for example, under some Plans a lump sum distribution is prohibited).

Since this area of family law is technical and detail oriented (including income tax consequences depending on how the QDRO is written), anyone seeking to utilize a QDRO as a means of collecting support arrears is well-advised to consult with an experienced family law attorney. 


Teen Sues Parents for Child Support

no picture

An interesting case in Morris County has taken hold of the headlines.  An 18-year-old brought her parents to Court on an emergency application to compel them to pay for child support and her private school and college tuition.

While the issue of child support and allocation of educational costs for children is often raised to the Court when there is a divorce, there is no precedence for such a case where the family is intact.

In this particular case, the daughter claimed she moved out of her parents' home because they wanted her to stop seeing her boyfriend.  Her parents stated that she refused to abide by their rules, and she was disrespectful to them.  There were many conflicting allegations brought by the parties with frequent disagreements over the facts.  After a two hour hearing, the Court did not grant the teen's request for emergency support but did schedule the case for another hearing towards the end of April.

It remains to be seen what the judge will do in this case.  Will the Court agree that married parents should pay their child financial support if their child moves out, or will it continue to be a matter for married parents to decide how they will support their children without Court intervention?


Mediated Agreements Must Be in Writing

no picture

Mediation is becoming more and more popular in divorce cases for several reasons:  (1) the cost of litigation is too high, (2) the parties wish to keep their animosity toward each other at a minimum, (3) the anxiety and pressure of fighting over these issues can be stressful, and (4) the courts compel the parties to go to mediation for parenting issues as well as for financial issues during the litigation process.     Therefore, if the parties can start out by mediating, they may be able to get divorced quicker and at a lesser expense, both financially and emotionally.

What you must know about mediation is that the mediator is not acting as a judge.  He or she is a facilitator and is also not there to give legal advice.  Each party should have their own lawyer in the wings that they can call or meet with to find out the legal ramifications of any agreements reached in mediation.

Once understandings are reached, the mediator will draft a Memorandum of Understanding (MOU), which will spell out in writing the tentative agreements reached by the parties on the relevant issues.  This MOU is not signed by the parties.  The parties then take that MOU to their respective attorneys to review it and to make sure each party understands what they have tentatively agreed to in relation to the law.  One of the attorneys will then draft a Marital Settlement Agreement (MSA) which sets forth those agreements, which MSA must be signed in order to be valid.

Sometimes attorneys are present at mediation, if invited, and it may be possible to reach a binding agreement at mediation.  If this is the case, then the agreement must be in writing and signed by the parties before mediation comes to a close.

If the parties reach an agreement at mediation and it is not reduced to writing and signed, the court will not enforce it.


Uncontested Divorces and Equity

no picture

In a case approved for publication on February 12, a family court judge ruled that simply because a person fails to participate in a divorce action, his or her legal rights are not trumped at final hearing.  In Clementi v. Clementi, (approved for publication), Mr. Clementi failed to respond to his wife’s Complaint for Divorce and was defaulted out of the case. Prior to the final hearing, Mr. Clementi was served with a “Notice of Final Judgment’ as required by New Jersey law in which Ms. Clementi sought to retain the mortgage- free marital residence free and clear of any claims by Mr. Clementi.  The Court ruled that simply because Mr. Clementi had ignored the Complaint and Notice of Final Judgment, this outcome was not a “given” but rather that Ms. Clementi still had to meet her burden of proof that the outcome was more fair than unfair. The Judge rescheduled the case so that a hearing could occur in such regard; however (and ironically), Mr. Clementi subsequently retained an attorney and the couple settled the case, including disposition of the marital residence, to their mutual satisfaction.

The “takeaway” from Clementi is that the court, consistent with its inherent equity jurisdiction, must adjudicate cases based upon the particular facts and applicable principles of law rather than simply grant whatever relief is sought against a defaulting party. 


Where Should the Children Attend School?

no picture

It is not uncommon for divorced parents to relocate within New Jersey with the children.  In the vast majority of cases, parents are able to resolve such matters as where the children will continue to attend school; however, there are, from time to time, circumstances where courts are called upon to determine the issue.

One such case, Beller v. Beller, was decided by the Appellate Division of the Superior Court on January 27, 2014.  In Beller,  Mr. Beller opposed his former wife’s enrollment of the parties’ two children in the school district where she had moved after the divorce. The proceedings began when Ms. Beller filed a motion seeking permission to transfer the children from the Denville school system to the Roxbury district. The trial judge permitted the transfer, a ruling from which Mr. Beller appealed.  Mr. Beller stated that the court had failed to apply the factors contained  in  the Appellate Division’s 1999 decision of Levine v. Levine; i.e. that there was a lack of proof that the child’s best interests was not being served in her present school system. 

The Appellate Division made short work of Mr. Beller’s appeal by ruling that Levine was inapplicable. Instead, the Court relied upon the testimony of the parties’ parent coordinator that, in her opinion, Mr. Beller had attempted to “alienate” Ms. Beller from the Denville school system, that Mr. Beller was in the process of a divorce from his new wife and that his circumstances were “less stable” than those of Ms. Beller.  The trial judge also interviewed the children which he obliquely referenced in his decision. Based on the above, the Appellate Division affirmed the trial judge’s ruling that the children be permitted to enroll in the Roxbury school system.

Beller is a particularly interesting case since it does not appear anyone testified that the children’ best interests were not being served in the Denville school system.  Levine remains the legal standard despite the above outcome.


Domestic Violence and Due Process

no picture

The issuance of a Domestic Violence Final Restraining Order carries a good deal of legal freight in terms of the proscribing a defendant’s conduct, providing for serious sanctions in the event of a violation of the Order and imposing important financial and non-financial obligations on a defendant.  Coupled with the statutory mandate that domestic violence cases be heard quickly following the issuance of a Temporary Restraining Order, such hearings may within ten days or sooner in some counties. This makes the defendant’s task of understanding his or her legal rights and mounting a proper defense very time sensitive.  How, in such circumstances, should a domestic violence defendant be expected to proceed?

In   S.C. v. A.C., decided by the Appellate Division on January 23, 2014, the Court held that a defendant’s constitutional  rights were violated by “rushing into a final hearing without giving him time to seek legal advice [and] prepare a full defense”. The case was fast-tracked even by domestic violence standards, with the hearing held one business day after the issuance of a Temporary Restraining Order. The charges against the defendant were serious, involving allegations of terroristic threats.  To compound problems, the victim was permitted to testify concerning other alleged prior acts of domestic violence at trial.  The appellate court found such events to have violated the defendant’s constitutional due process rights, reversed the decision and remanded the case for a new trial to afford the defendant  adequate time “ to prepare and present his defenses fully to the court”  pending which the Temporary Restraining Order was to remain in effect.

The S.C. v. A.C. decision represents a balancing of a victim’s need for temporary protection with a defendant’s right to understand and adequately defend the charges against him or her. As such, it is a worthy addition to the body of domestic violence law. 


Reconciliation After Filing for Divorce: Success or Sorrow

no picture

Filing the Complaint for Divorce often signifies the end of a marriage. It carries with it a certain stigma that the notion of love has gone and that a married couple will never be together again. However, it is not uncommon for parties in divorce to eventually reconcile and continue their marriage, whether because they did not want to get divorced before but felt forced in some way and/or they have decided to give the marriage another try.


Whatever the reason, reconciliation is possible, but parties should be wary of pitfalls that could ultimately hurt them if their attempt at reconciliation fails.


First, in many cases, the filing of the Complaint for Divorce is the date that, combined with the marriage date, is seen as the bookends of the marital period. Defining the marital period is very important, both for division of assets as well as for a support analysis.


If you and your spouse choose to attempt to reconcile after the Complaint was filed, the Complaint will be withdrawn. While this withdrawal is "without prejudice," meaning that you would not be precluded from later filing another Complaint for Divorce if needed, you may lose that cut-off date bookend and the marital period will be extended to the second Complaint. The consequences could be very detrimental.


The second issue, which is related to the first, is that sometimes a party wishes to inappropriately alter the various analyses in the divorce process under the guise of an attempt to reconcile. As stated above, if the Complaint for Divorce is withdrawn and the parties continue the marriage, the cut-off date for the marital period disappears.


However, this reconciliation in lieu of continuing the divorce litigation may also allow your spouse to avoid scrutiny while he/she inappropriately hides money or other assets, reduces or negates their income, or perform other actions in efforts to improve their outlook in the divorce. These actions, often referenced as "divorce planning," may lead to your ultimate detriment when you find out your spouse had no intentions in reconciliation after all, and you end up in a less advantageous position in the divorce.


When both parties are acting in good faith and wish to remain married for the right reasons, it could lead to success and happiness. However, you must be wary of the sad alternative.


Protect yourself! Often the signs of divorce planning may be visible to experienced counsel, and, if there is any doubt, you can be protected. A reconciliation agreement may be drafted which could counteract any potential negative consequences should your attempt at reconciliation go awry or if your spouse intends on "divorce planning."


Each agreement is unique and is specially tailored to the specific issues in each case. As with all blogs on this site, none of the above represents legal advice. If you encounter any of these issues, I strongly advise you to consult with experienced legal counsel immediately. 


High Net Worth Divorce Issues

no picture

When parties have significant net worth and income, there are usually a multitude of specific challenges that present themselves in divorce litigation.


One issue that frequently arises in high net worth and income cases concerns the division of assets through equitable distribution. In many high net worth cases, the parties are frequently recipients of a sizable inheritance or receive income as a beneficiary of a trust.  New Jersey case law provides that both inheritances or trust interests are not automatically subject to distribution to your soon-to-be ex-spouse.  As this is the case, many issues need to be examined to determine the true nature of the possible exemption of either an inheritance or trust from equitable distribution. 


The most relevant factor for purposes of equitable distribution of either an inheritance or trust interest remains whether or not the funds received from either instrument were “commingled”.  Funds are often deemed commingled when they moved from a separate account interest into a joint account or into a joint asset.  One example of commingling would be the deposit of inherited monies into a jointly held account or utilizing inherited funds to make improvements for a residence that is clearly jointly held by the parties. Courts will often look at such decisions as affirmative steps that classify once exempt monies into jointly held assets.


An additional issue that frequently arises in high net worth and income cases concerns the establishment of an appropriate child support obligation.  The New Jersey Child Support Guidelines only establish a support amount for parties that earn less than a combined net yearly income of $187,200.00.  Once the Child Support Guidelines reach their annual net income threshold, the Court has the discretion to enter an appropriate amount of child support that is commensurate with the additional financial needs of the children. 


For example, if a child has specific medical needs or is involved in an extracurricular activity that requires a significant financial commitment, the Court will factor this in when assigning a supplemental child support award.  It is important to note that both parties will more than likely need to recreate and isolate a budget for the children’s portion of the family expenses to properly development a child support obligation when the parties’ combined net income exceeds the threshold amount of $187,200.00 per year.


These are just two brief and limited examples of issues that may arise in high net worth divorces.  Our family law group at Stark & Stark has decades of experience of handling the complexities and challenges that present themselves in high net worth divorces.  With our experience and relationships with the most qualified financial experts, trusting our firm to represent you in your divorce matter will ensure that you receive the best results.  


Older Entries

January 7, 2014 — New Jersey Child Relocation Overview

December 31, 2013 — How Do You Equitably Distribute A Closely Held Business Interest Owned Prior to Marriage

December 13, 2013 — College Contribution

December 5, 2013 — Sharing Time with the Kids in Your Post-Divorce Life

December 3, 2013 — What Percentage of a Business Subject to Equitable Distribution is a Non-Owning Spouse Entitled To?

December 2, 2013 — Grandparent Visitation--A High Hurdle Gets Higher

November 27, 2013 — Hawaii Legalizes Same-Sex Marriage and New Jersey Surprises

November 26, 2013 — Terminal Illness and Custodial Fitness

November 25, 2013 — Alimony & Retirement

November 21, 2013 — Consider All Issues Prior To Filing A Family Law Motion

November 14, 2013 — Does Cohabitation Automatically Terminate Alimony In New Jersey?

November 13, 2013 — Equitable Distribution of Professional Practices

November 6, 2013 — New Jersey to Recognize Out of State Same-Sex Marriages

October 31, 2013 — Same Sex Marriage and Taxes

October 24, 2013 — Same Sex Marriage (and Divorce)

October 18, 2013 — Business Evaluations in Divorce Cases Must Reflect Fair Value, Not Fair Market Value

October 10, 2013 — Marital Settlement Agreements- It's all in the Details

October 9, 2013 — Divorcing the Dolittles: Sharing Time with Pets

October 8, 2013 — New Jersey Judge Rules in Favor of Marriage Equality

October 4, 2013 — Business Evaluations in Divorce Cases

September 26, 2013 — New Legislation Strengthens Enforceability of Premarital Agreements

September 16, 2013 — The Effect of Social Security Disability Determinations on Child Support and Alimony

September 10, 2013 — Treasury and IRS: All Legal Marriages are Equal Under Tax Code

September 5, 2013 — Requirements for Special Needs Trust in Lieu of Child Support

August 28, 2013 — What Issues Are Followed by Divorce?

August 16, 2013 — Does Alimony Terminate Upon Cohabitation of Ex-Spouse?

August 13, 2013 — Waiting Is [Almost] the Hardest Part

August 9, 2013 — Montgomery County Makes a Move for Marriage Equality

July 25, 2013 — ACLU Sues PA Over Marriage Equality, Attorney General Won't Fight It

July 5, 2013 — Adjustments to a Base Child Support Award Based Upon Additional Expenses for a Child

July 3, 2013 — Specifics of the Expense Categories Included in New Jersey Child Support

July 1, 2013 — What is "Imputed" Income?

June 28, 2013 — Can You Extend Limited Duration Alimony?

June 27, 2013 — U.S. Supreme Court Lets Marriage Equality Forge Ahead

June 27, 2013 — Expenses That May Be Added to the Basic Child Support Obligation

June 27, 2013 — What is "Income" for the Calculation of Child Support in New Jersey?

June 14, 2013 — Beware of What You Post Online- Especially If You Are Involved In Litigation

May 21, 2013 — Grandparent Deemed "Psychological Parent" of Child

May 15, 2013 — Equality Getting Closer to Home

May 13, 2013 — When Does Cohabitation Affect Alimony?

May 10, 2013 — Emancipation of Child Occurs if Child Working Full Time

May 8, 2013 — Dismissing Final Restraining Orders

April 25, 2013 — Hearing Required to Disestablish Paternity

April 16, 2013 — Economic Basis of Child Support Guidelines

April 12, 2013 — Marriage Equality Updates in the Region

April 10, 2013 — Do the New Jersey Child Support Guidelines Apply to My Case?

April 8, 2013 — "Why Can't I Pay My Child Support Directly to My Child"

April 5, 2013 — Impact Of Exempt Assets On Child Support

April 4, 2013 — What are Income Shares in New Jersey Divorce?

April 3, 2013 — Obama Administration Declares Support for Challenges to Same-Sex Marriage

April 1, 2013 — With the Possible Repeal of DOMA, Couples Need to Act

March 29, 2013 — How is Child Support Determined in New Jersey?

March 25, 2013 — Pending Bill in New Jersey Assembly on Alimony

March 22, 2013 — State and Republican Senator Give Support to Same-Sex Couples Ahead of DOMA Decision

March 20, 2013 — New Jersey Child Support Guidelines: Underlying Rationale

February 27, 2013 — Can Accounts in a Child's Name be Used for Their College Education Expenses?

February 18, 2013 — Relocation Update

February 13, 2013 — Can a Court Prohibit Me from Moving?

February 12, 2013 — Stark & Stark Associates to Present at Dinner Seminar Series Tonight

February 11, 2013 — College Students and Child Support

February 7, 2013 — "Palimony" Update

February 4, 2013 — Alternatives to Legal Separation in New Jersey

January 31, 2013 — Can a Child be Emancipated Over a Parent's Objection?

January 18, 2013 — Joint Legal Custody Demands Cooperative Parents

November 30, 2012 — Does Estrangement Between a Parent and Child Eliminate a Parent's Obligation to Contribute to College Education Expenses?

November 14, 2012 — Child Support and Emancipation in New Jersey

November 5, 2012 — Egregious Financial Fault as a Potential Bar to Alimony

October 17, 2012 — Recent New Jersey Appeals Court Issues Decision of Interest to Divorce Lawyers, Alimony Payers, and Recipients

September 17, 2012 — Post-Divorce Cohabitation and Alimony

August 29, 2012 — The Calculation of Child Support and Alimony with Fluctuating Income

August 24, 2012 — Name Change Requirement Held Unenforceable

August 8, 2012 — Determining Business Goodwill in Divorce Cases

August 1, 2012 — Is a Disabled Spouse Entitled to Permanent Alimony?

July 18, 2012 — IRAs May Be Executed Against for Attorneys' Fees

June 13, 2012 — Securing Alimony and Child Support Obligations

June 11, 2012 — In-Kind Income: In or Out For Child Support?

June 7, 2012 — Federal Defense of Marriage Act Declared Unconstitutional

May 31, 2012 — Considering a Divorce in New Jersey?

May 30, 2012 — Sporadic Income: How Does This Affect Child Support?

May 24, 2012 — New Jersey Child Support Guidelines Can Only Be Disregarded For Good Cause

April 26, 2012 — An Overview of How a Divorce Could Affect Your Taxes Part 3: Property Divisions, Dependency Exemptions and Child Care Credits

April 19, 2012 — An Overview of How a Divorce Could Affect Your Taxes Part 2: Alimony & Child Support

April 18, 2012 — The Use of Experts and Other Professionals in a Collaborative Divorce

April 6, 2012 — An Overview of How a Divorce Could Affect Your Taxes

March 30, 2012 — Are You A Good Candidate For A Collaborative Divorce?

March 14, 2012 — New Jersey Supreme Court Holds That When Parents Don't Agree on Their Child's Last Name, The Court's Decision Reigns

March 12, 2012 — Custodial Parent Rights to Legally Change the Name of a Child

March 9, 2012 — What is a Collaborative Divorce?

March 2, 2012 — March is the New January for Divorce Filings

March 1, 2012 — Maryland Passes Civil Marriage Protection Act

February 27, 2012 — The Changing Face of Domestic Violence

February 22, 2012 — New Jersey Governor Vetoes Marriage Equality Bill Passed by State Legislature

February 13, 2012 — What Standard is Applied in Granting a Grandparent's or Sibling's Request for Visitation?

February 6, 2012 — A Decrease in Salary, Standing Alone, Does Not Warrant a Reduction in Alimony

January 30, 2012 — Should a Post-Complaint Rise in Income be Considered in Determining Alimony?

January 26, 2012 — The Future of Alimony in New Jersey Divorce Cases

January 23, 2012 — Must Complete IRS Form 8332 for Dependency Exemption in a Divorce Case

January 4, 2012 — Broken Engagements May Give Rise to Money Damages

December 27, 2011 — How College Education Savings are Affected by Divorce

November 28, 2011 — New Jersey Woman to be Prosecuted Over Fake Facebook Profile