In 1962, the United States Supreme Court decided United States v. Davis, which created difficulties for divorcing parties and attorneys. Although, there was no sale and no money changing hands, the transfer of appreciated property in exchange for marital rights was considered to be a “sale” with the transferor liable for payment of capital gains taxes.  The gain was determined by the fair market value of the asset on the date of the transfer with the transferor deemed to have received the value equal to that portion of the fair market value transferred to the other spouse.  Conversely, the transferee was charged with neither gain nor loss because the marital rights relinquished were not “appreciated property,” even though these rights were considered to be equal in value to the value of the property received.  Thus, the transferee of appreciated property received it on a “stepped up” basis equal to the fair market value of the property received. 
 

Imposing a tax on the transferor of property incident to a divorce was largely viewed as a perverse tax consequence since the transferor, who was parting with an asset like the marital residence (and often reluctantly so), considered the imposition of a tax in addition to the taking of an asset to be punitive. 
 

The Domestic Relations Tax Reform Act of 1984 changed the Davis rule so that divorce related transfers after July 18, 1984 are treated as gifts which result in neither gain nor loss to either party and thus have no tax consequences.  The transferee receives the asset at the original basis rather than the stepped up basis and is taxed on the gain when the property is ultimately sold.  The transfer is not a taxable event since no tax is immediately imposed on the transferred property. 
 

With regard to transfers of appreciated property, such as real estate or stock between spouses incident to a divorce, prior to 1984 these were considered to be taxable events.  The transferor was subject to capital gains taxes on the gain from the original basis of the property to the fair market value on the date of transfer.  The theory justifying the tax was that even if the transferor received no money, the consideration for the transfer was “money’s worth” in exchange for the transfer.  Again, the transferee took the property at the new “stepped up basis”.  The Domestic Relations Tax Reform Act of 1984 likewise changed the law by providing that the property would pass to the transferee at the original basis with no tax imposed.  Of course, the transferee was required to eventually pay the capital gains taxes or qualify for an exemption when the property was ultimately sold. 
 

The shift of the tax burden from the transferor to the transferee was temporarily rendered more onerous with the passage of the Tax Reform Act of 1986 that eliminated preferential capital gains tax treatment and imposed tax on capital gains at ordinary income tax rates.  The Taxpayer Relief Act of 1997 eliminated taxes on capital gains of up to $250,000 realized from the sale or exchange of the taxpayer’s principal residence. 
 

Deferred compensation payments from non-qualified plans and stock options transferred incident to divorce do not trigger an immediate tax consequence to the transferor.  The tax liability is imposed on the transferee upon exercise of the options or receipt of the deferred compensation.  However, cashing out a retirement account and transferring the proceeds results in an imposition of tax to the transferor.  To avoid an immediate tax consequence, the transfer must be made of the transferor’s interest in the account by way of a rollover directly into the transferee’s account or by changing the name on the account. 
 

With regard to dependency exemptions, prior to 1984 a parent could claim a child if he or she paid more than 50% of the child’s support for the year in question.  Application of this test generated disputes between parents and significant administrative problems for the IRS.  In cases where both parties claimed the dependency exemption, they were required at an audit (usually years later) to produce proof of their expenditures for food, clothing, medical care, shelter and so on.
 

These provisions were changed in 1984 to entitle the primary custodial parent to claim the child absent a written waiver to the other parent.  This was an important feature because as  personal exemptions were phased out for high income taxpayers, it cost little or nothing for a payor in a high income tax bracket to grant the exemption to the other party for whom the exemption actually confers a benefit. 
 

Congress created an additional benefit to parents in 1997 in the form of a child tax credit which acts to offset actual tax liability.  The child tax credit is an addition to the dependency exemption and is available only to the parent entitled to claim the exemption. 
 

An additional credit, the Child and Dependent Care Credit, is available to a custodial parent even if he or she waives the dependency exemption in favor of the other parent.
 

From a simple concept one hundred years ago to provide a source of revenue for the Federal Government by taxing income, federal tax law has steadily evolved and expanded.  Despite periodic expressions of intentions to simplify the tax Code, it has grown ever more complex.  Changes in tax law over the past fifty years have generally been modifications that are responsive to the needs of divorcing couples and their children.  When considered as a whole, such changes have, almost without exception, been improvements. 
 

Divorce lawyers have used their experience in applying the tax consequences of transactions incident to divorce into catalysts for change.  The current state of the tax law as it applies to divorce remains a work in progress; however, it improves with each change.          
 

John Eory is the Co-Chair of Stark & Stark’s Divorce Group in the Lawrenceville, New Jersey office. For questions, please contact Mr. Eory.

Alimony comes in many forms, including permanent, rehabilitative, limited duration, reimbursement and temporary (pendente lite) support. It is important to recognize that whether payments qualify as alimony under federal tax law is determined by the characteristics of the payment and not by how they are labeled under state law.

 

In 1954, the Internal Revenue Code added two key provisions, Section 71, which provided that alimony payments were includeable in the taxable income of the recipient and Section 215, which provided that such payments were deductible to the payor.  These provisions remain part of current tax law although they have been subject to revisions over the years.

Initially, to qualify as alimony, the payments have to be “periodic”.  Thus, installment payments of a principle sum did not qualify for periodic payment treatment unless the installments were payable for a period of more than ten years.  This ten year requirement was rigidly enforced.  Payments over a shorter period of time could qualify as periodic provided that the total sum was rendered uncertain by a contingency, such as the death of either party or the remarriage of the recipient.  Additionally, the payments must be in discharge of a support obligation, as opposed to payment for transfer of property or a property settlement.

 

Additionally, the payments must have made pursuant to a decree, court order or written agreement.  In the case of an agreement, the requirement was that it be signed by both parties. 

 

Thus, agreements for payment of support that were confirmed by an exchange of letters between lawyers did not qualify, nor did oral agreements between the parties.  Importantly, the requirement of a writing has remained unchanged despite subsequent amendments to the Internal Revenue Code.

 

The Domestic Relations Tax Reform Act of 1984 and Tax Reform Act of 1986 amended the Internal Revenue Code and dramatically changed tax law with respect to alimony. Most of the changes are beneficial to divorcing parties and have provided lawyers with previously non-existent planning possibilities.

 

For example, since1984, parties have been able to designate alimony payments as non-taxable to the payee and non-deductible to the payor and this designation is accepted without question by the IRS.  The concept of alimony “recapture” was also introduced to prevent “frontloading” or disguising property settlements as alimony to gain tax advantages.  To eliminate such problems, the new law placed limits on accelerated alimony by “recpaturing” excess payments in earlier years and adding that excess back to the payor’s income.  The recapture rules do not apply to temporary support or to fluctuating payments not in the control of the payor, such as an  obligation to pay a percentage of income.  Importantly, the rule is applicable only to qualifying payments in the first three post-separation years. 

 

Unlike alimony, child support payments are neither deductible to the payor nor taxable to the payee; however, payments that are “unallocated” between spousal support and child support are entitled to alimony treatment under the Internal Revenue Code.  Unallocated payments became a popular device which resulted in making additional funds available to the family assuming that the payor is in a higher tax bracket than the payee, he or she could afford to pay a larger amount, a portion of which would be retained by the payee rather than paid out in taxes.  This principle proved to be so popular that many states have adopted the unallocated payment structure. 

 

The next and final article in this series will deal with the tax considerations of property distributions, dependency exemptions and childcare credits.

John Eory is the Co-Chair of Stark & Stark’s Divorce Group in the Lawrenceville, New Jersey office. For questions, please contact Mr. Eory.

In addition to each party’s attorney, other trained professionals may be called upon to help you navigate through the issues in your divorce case.  Not all of these professionals are used in every case, but one or more may be helpful, depending on the issues in your case.

Divorce Coach: This is a licensed mental health professional who guides a party through the emotional issues that many times hinder the settlement process.  A divorce coach can help prioritize issues, aid with communication between the parties, and support that party through the emotional ups and downs of divorce.  Each party should have their own divorce coach to deal with their particular issues.
 

Child Specialists: These are trained professionals who work with children, parents and families in transition.  They advocate for the children in this process by communicating the children’s concerns to the parties.  The child specialist can make recommendations to the parents based on their education and experience as well as the children’s needs and desires.  The goal is to establish a workable parenting plan taking all family members’ needs into consideration.
 

Financial Specialists: This team member can aid the parties by analyzing assets, debts, incomes and budgets with the goal of having everyone understand the financial situation.  In addition, he/she can identify options in dealing with that situation.  Issues of cash flow, tax consequences, and net worth, fall within their purview, as well as determining true income for support purposes in the event there is a closely held business in the mix.
 

Appraisers: If the value of real estate, a business or personal property is at issue, various experts in these fields should be hired as neutral experts to value said property.
 

The above professionals are hired on an as needed basis and can greatly aid the parties in first understanding the issue and them coming to a workable settlement.

Maria Imbalzano is the Co-Chair of Stark & Stark’s Divorce Group in the Lawrenceville, New Jersey office. For questions, please contact Ms. Imbalzano.

If your total score is higher than 40, you are a good candidate for the collaborative process.  If the total is between 30 and 40, you may still be a good candidate, but you should work on the areas producing 1's and 2's. If your total score is between 20 and 30, you may not be quite ready for this process.  If your score is below 20, the collaborative process may not be right for you.

That decision was further affirmed by the New Jersey Supreme Court in 2004 in the case of Ronan v. Adely, 182 N.J. 103 (2004).  The Supreme Court affirmed the presumption in favor of the custodial parent’s choice of last name and clarified that the non-custodial parent has the burden of rebutting the presumption–i.e. showing that the name set forth by the custodial parent is not in the best interests of the child. The Court further emphasized that, in rebutting the presumption, the non-custodial parent should address the following factors in showing that the last name set forth by the custodial parent is not in the best interest of the child:

1. the length of time the child has used one surname;
2. the identification of the child as a member of a family;
3. the potential and anxiety, embarrassment and discomfort the child might experience if the child has a different surname than the custodial parent; and
4. any preference the child might express assuming the child is of sufficient age

It is important to note that both of the children in both Gubernat and Ronan were born out of wedlock, i.e. the parents of the child were never married. In an unpublished (non-precedential) decision rendered in January of this year, the Appellate Division decided the issue of whether the presumption set forth in Gubernat and Ronan applied where the parties were previously married, and the children were born during the marriage. In Emma v. Evans, after the parties’ divorce, the mother sought to change the child’s last name from the father’s last name to her last name. The Appellate Division, in that case, affirmed the best interest of the child test regardless as the child’s birth status, but rejected the presumption in favor of the parent of primary residence when children are born in wedlock. In that case, even though the mother was the custodial parent, the Appellate Division held that she was not entitled to the presumption because the child was born when the parents were still married. 
 

A different Appellate Division Panel issued a published (precedential) decision on March 6, 2012, addressing the same issue addressed in Emma v. Evans, but rejected the conclusion reached in Emma v. Evans that held that the presumption established by Gubernat does not apply to children that were born when the parents were married.

In Holst-Knudfen v. Mikish, the Appellate Division clarified that the Supreme Court’s Decision in Gubernat did not differentiate between children born out of wedlock and those born to married parents.  Accordingly, the Panel held that the presumption set forth in Gubernat in favor of the last name proposed by the custodial parent applies to all cases-- whether or not the child is born out of wedlock or to married parents.  That Panel also clarified that, the current law states that it is the non-custodial parent’s burden to rebut that presumption by addressing the relevant factors and showing that the last name is not in the best interest of the child. 
 

However, the Appellate Decision in Holst-Knudfen v. Mikish found some merit in the issues that the Panel in Emma v. Evans found with the presumptions set forth in Gubernat, and essentially,  invited the Supreme Court of New Jersey to make new law.  The Panel asked the Supreme Court to differentiate between cases where the parents  have entered into a detailed settlement agreement and cases where the parents did not have a settlement agreement– despite their marital status at the time the child was born.  The Panel noted that,  even in cases where the parents were never married, they may enter  into settlement agreements outlining the parenting time, responsibilities, child support obligations, etc. – and perhaps those settlement agreements may even address which parent’s last name the child shall assume. 

The Appellate Division in Holst-Knudfen v. Mikish further suggested that if the parties have expressed a position in their settlement agreement regarding the child’s last name, then the Court should enforce that agreement.  On the other hand, if the agreement is silent with respect to the child’s surname, the Appellate Division in Holst-Knudfen v. Mikish suggested that perhaps the parties should be on neutral ground rather than proceeding with the presumption in favor of the parent of primary residence (who in many cases are women)– so as to not unfairly advantage either parent.  In the event that the Supreme Court adopts this reasoning, then cases where the  parents  have settlement agreements that are silent on the issue of the child’s last name would be determined by a straight best-interests-of the child determination. 
 

In lieu of these conflicting decisions issued only two short months apart, it seems that the issue of the presumption set forth in Gubernat as it applies to persons that have a negotiated settlement agreements--despite their marital status at the time of the child’s birth--may be an issue that comes before the Supreme Court of New Jersey before long. 
 

As always, it is important to consult with an experienced matrimonial attorney if you have any questions regarding any of these cases, or wish to enter into a settlement agreement outlining your rights and responsibilities as a parent.

Corrine Cooke is a member of Stark & Stark's Divorce Group in our Lawrenceville, New Jersey office. For questions, or additional information, please contact Ms. Cooke.

In this case, the parties were married in 2000 and had a daughter in 2005. They divorced in 2008. The Final Judgment of Divorce incorporated a Marital Settlement Agreement negotiated with the assistance of counsel which contained detailed arrangements and financial support obligations for the child between the individual parent and the non-custodial parent. Two years later, Ms. Holst-Knudsen filed a motion to compel Mr. Mikisch to remit child support through the Probation Department by wage garnishment, to modify the parenting schedule and to legally change the surname of the child to “Mikisch Holst Knudsen”. Mr. Mikisch filed opposed the relief sought.
 

The Marital Settlement Agreement provided that the parties would have joint legal custody with Ms. Holst-Knudsen as the primary custodial parent.
 

The Agreement also laid out a complex parenting time schedule base on Mr. Mikisch’s residence in South Carolina. After issuing its rulings on child support and parenting time, the trial court denied Ms. Holst-Knudsen’s request to change the child’s surname.  Ms. Holst-Knudsen appealed.
 

The Appellate Division reversed and remanded the issue back to the court for further proceedings. In so doing, the Appellate Division cited the seminal case of Gubernat v. Deremer, 140 N.J 120, decided by the New Jersey Supreme Court in 1995. In Gubernat, the Supreme Court held that when parents who are  not raising a child together do not agree about the child’s name, the court must resolve the issue under the “best interests of the child” standard but with a “strong presumption” that the name selected by the custodial parent is in the child’s best interests. Thus, the non-custodial parent bears the burden of proving by a preponderance of the evidence that the custodial parent’s choice is not in the child’s best interests. As stated in Gubernat, the trial court should”examine scrupulously all factors relevant to the best interests of the child” including the length of time the child has used one surname, the identification of the child as a member of a family unit, the potential anxiety or embarrassment the child might experience if he or she bears a surname different from that of the custodial parent, and any preference the child may express if sufficiently mature.
 

The Appellate Division went on to address its disagreement with the recent decision of another appellate panel in the similar case of Emma v. Evans which drew a distinction between children born out of wedlock and those born of married parents. The Court held that the Gubernat standard applies equally in both circumstances. If, however, the parties entered into “a detailed settlement agreement that addressed parenting issues, perhaps the parents should be on equal footing” (emphasis supplied by author). Factors to be considered are whether the parties addressed the issue in their agreement, purposely omitted it or inadvertently omitted it. The Appellate Division concluded that the trial court did not rule under current legal standards and remanded the case for further proceedings consistent with Gubernat, as discussed above.
 

The case is important because changing a child’s surname has consequences for the child’s self perception and relationship with his/her parents, peers, teachers and the community at large. This author personally believes that the presumption in Gubernat should be set aside and that such cases be determined on a straightforward “best interests of the child” basis.  Readers are invited to agree or disagree. 
 

John Eory is the Co-Chair of Stark & Stark’s Divorce Group in the Lawrenceville, New Jersey office. For questions, please contact Mr. Eory.

The longer a divorce takes, the more money the parties will spend on attorney’s fees, and the more entrenched in their positions they become; many times finding even more issues to argue over.  This, of course, is not good for the parties’ mental, physical or financial health, nor is it good for the children.
 

In a collaborative divorce, the parties agree from the very beginning of the process to focus their efforts on civilly reaching an agreement on all issues including custody, parenting time, support, and division of assets without litigating the issues.  They do this by each hiring a collaboratively trained lawyer and signing an agreement, up front that commits both parties to reaching a settlement.
 

The attorneys sign the agreement as well which requires them to withdraw as counsel if an agreement cannot be reached. 
 

Since an agreement is reached in approximately 98% of all divorce cases (and only about 2% go to trial), it would benefit most divorcing couples to start out with the goal of reaching an agreement in the least stressful and most productive way possible.
 

In order for any case to be resolved, whether litigating or settling, both parties and their attorneys have to have full information concerning income, assets and debts.  The collaborative process compels both parties to voluntarily disclose all relevant financial information through an informal exchange.
 

The information requested can be streamlined to only information that is relevant, thereby eliminating dozens of hours of responding to formal discovery requests which may be irrelevant.  The information requested is then located (whether by the parties together, individually, or with the help of their attorneys) and then shared.  At four-way conferences, which are held as often as necessary to review documents, discuss issues and attempt to reach agreement on those issues, the parties can have open and productive discussions.
 

My next blog will contain a quiz to help you determine whether you are a good candidate for the collaborative divorce process.

Maria Imbalzano is the Co-Chair of Stark & Stark’s Divorce Group in the Lawrenceville, New Jersey office. For questions, please contact Ms. Imbalzano.

Corrine Cooke is a member of Stark & Stark's Divorce Group in our Lawrenceville, New Jersey office. For questions, or additional information, please contact Ms. Cooke.

The Bill was amended to take effect on January 1, 2013, allowing opponents the time required to bring the Bill to a vote through a referendum in November. In a statement, Maryland Catholic Conference spokeswoman Kathy Dempsey said, “Every time this issue has been brought to a statewide vote, the people have upheld traditional marriage.” Opponents are confident that they will obtain the roughly 55,000 signatures needed to place it on the ballot.

The passage of the Civil Marriage Protection Act came on the heels of Governor Chris Christie’s February 17, 2012 veto of New Jersey’s marriage equality bill. Governor Christie’s veto came despite the recent repeal of California’s Proposition 8. Like the opponents in Maryland, Christie is calling for a referendum to bring the issue of same-sex marriage to the voters. Maryland Democrats have likened the fight for same-sex marriage to the issue of racial integration.

Issues such as these make it difficult for same sex couples, even in states that recognize their status and allow civil unions or gay marriage, to actually enjoy the rights and benefits to which they are entitled.   Gay couples should be sure to take steps to secure their benefits legally, especially when faced with visiting or even traveling through a state that does not recognize their status and rights. You should seek legal counsel if you are not sure if you have the documents necessary to protect yourself and your partner or spouse in such a situation.

Megan Smith is a member of Stark & Stark's Divorce Group in the firm's Lawrenceville, New Jersey office. For questions, or additional information, please contact Ms. Smith.

In recent months, legal observers have witnessed a trend by trial and appellate judges to exercise greater caution in this sensitive area of the law. In part, this recognizes the inherent distinction between domestic discord and domestic violence, the latter of which carries significant legal penalties if proven to exist. The intent of the Domestic Violence Act was to protect bona fide victims of domestic violence, not to create a remedy for all offensive conduct. Thus, even if a predicate act of domestic violence is found to exist, courts are not compelled to enter a Final Restraining Order unless there is a continuing need to protect the health and safety of the victim.

The recent trend of more critically examining the elements and public policy aspects of the Domestic Violence Act should result in more consistent decisions, a level playing field and protection of true domestic violence victims.

John Eory is the Co-Chair of Stark & Stark’s Divorce Group in the Lawrenceville, New Jersey office. For questions, please contact Mr. Eory.

“[The Feb. 16] milestone came in the face of the toughest obstacles in the history of the marriage equality movement. Instead of a Governor twisting arms on our behalf, we have a Governor who twisted arms against us right up until the final votes in each chamber [of the legislature],” Garden State Equality Chair and CEO Steven Goldstein said in a statement before the Governor’s veto. Christie would prefer a state-wide referendum and let the voters of New Jersey decide the case.

The Governor’s veto has implications for universal marriage equality and may set a precedent for other states where similar marriage equality bills are on the ballot. While the legislature has until the end of the current term in Jan. 2014 to over ride the Governor’s veto, New Jersey still honors civil unions for same-sex couples and recognizes those from other jurisdictions.

Civil Unions in New Jersey provide GLBT couples with the same benefits and rights as “married” couples within the state.  However, there continue to be significant differences outside of the State of New Jersey and on a Federal level.  GLBT couples should seek legal advice to ensure they are fully protected and to discuss the rights and benefits that accrue to them as in the State of New Jersey under a Civil Union. 

Megan Smith is a member of Stark & Stark's Divorce Group in the firm's Lawrenceville, New Jersey office. For questions, or additional information, please contact Ms. Smith.

When this issue was brought to the Supreme Court (In the Matter of D.C. v. D.C., Minors), the standard was raised. It was determined that a sibling seeking visitation must prove by a preponderance of the evidence that denial of the visitation he/she seeks would result in harm to the child. This is the same standard now used for a grandparent seeking visitation.
 

The reason the standard had been raised was because it was determined that a parent, or a “psychological parent” (i.e., foster parent or other person who has assumed a parental role) has the fundamental right to autonomy in child rearing decisions. 
 

However, in an even more recent case (Tortorice v. Vanartsdalen - decided September 30, 2011), the Court has made a distinction between a natural parent and a psychological parent.  In a case between a natural parent (which includes a parent who has adopted a child) and a third party who is seeking visitation, the presumption of parental autonomy exists in favor of the natural parent.  But, if there is a dispute between a “psychological parent” and a third party, who wants visitation under the grandparent/sibling statute, then the Court must determine what is in the best interests of the child.

Maria Imbalzano is the Co-Chair of Stark & Stark’s Divorce Group in the Lawrenceville, New Jersey office. For questions, please contact Ms. Imbalzano: mimbalzano@stark-stark.com.

The termination of an obligor’s alimony obligation occasioned upon the payor’s retirement is not automatic.  It is up to the obligor to file an application with the Court for a modification or termination of their alimony obligation.  In determining whether an obligor’s impending retirement constitutes a substantial change in circumstances warranting a modification or termination, the Court must consider: (1) the age and health of the party seeking to retire and (2) the motive and timing of the impending retirement.  The Court will also look to the obligor’s ability to pay alimony after retirement, and the dependent spouse’s ability to provide for themselves, which involves an examination of both parties’ incomes and assets.  In the event the Court determines that the reason for the obligor’s retirement is to avoid his or her alimony obligation, the application will be denied.    

Even if the Court determines that the payor has advanced a good faith reason for retirement, the Court must then decide whether the advantage of the retirement to the retiring spouse outweighs the disadvantage to the other party.  This determination is critical to the analysis.  If this inquiry is answered in the affirmative, only then will the Court address whether and to what extent the payor’s alimony obligation should be modified. 

In the event that the Court determines that the advantage to the payor in retiring does not “substantially outweigh” the disadvantage to the participant, then the payor’s retirement–even if pursued in good faith–will not be a basis to modify their alimony obligation.  This is a fact sensitive inquiry that the Court determines on a case-by-case basis. 

Of course, divorcing parties have the ability to negotiate through counsel an automatic date for the termination of alimony, if both parties agree.  If an agreement is reached that contemplates an automatic termination of alimony upon a triggering event (reaching a certain age, retirement, etc.), courts will enforce that agreement.  In negotiating these provisions, it is important that the payor of alimony understand that this is a benefit they would not normally receive and must be willing to offer something in exchange for an automatic termination.   

If you are contemplating a divorce, or are divorced, have an alimony obligation and are considering retirement, it is important to consult with an experienced family law attorney to determine how to best proceed.  
 

Corrine Cooke is a member of Stark & Stark's Divorce Group in our Lawrenceville, New Jersey office. For questions, or additional information, please contact Ms. Cooke: ccooke@stark-stark.com.

In September 2010, the ex-Husband filed a motion to suspend his alimony obligation until he obtained full time employment. He also requested that the accrual of arrears be stayed (or stopped) during that time. His only source of income was unemployment compensation of $390 a week. He asserted that he applied for 181 different jobs and established a professional profile on a networking site. 
 

The Trial Court denied the ex-Husband’s motion, and he appealed. The Appellate Division affirmed the Trial Court’s decision denying the ex-Husband relief. Both courts stated that the person seeking modification has the burden of showing changed circumstances that would warrant relief. In this case, there was a substantial decrease in the ex-Husband’s salary; however, the Court stated that a decrease, standing alone, will not constitute the requisite showing of changed circumstances. 
 

The Court noted the following:

1. the ex-Husband did not seek training or employment in related fields
2. he failed to establish that he had exhausted all of his assets, including his retirement fund
3. he failed to adequately explain and provide proofs of his severance pay
4. he failed to adequately account for monies and assets that he received upon the divorce, including the recent sale of his home

Maria Imbalzano is the Co-Chair of Stark & Stark’s Divorce Group in the Lawrenceville, New Jersey office. For questions, please contact Ms. Imbalzano: mimbalzano@stark-stark.com.

In a recent case (Dudas v. Dudas, decided on April 11, 2011), the Defendant/Husband earned between $40,000 and $59,000, towards the end of the marriage. A Complaint for Divorce was filed in 2008, and the case was tried in 2011. Over those years, the Husband’s income increased wherein he earned $64,000 in 2009, $76,000 in 2010 and $68,000 in 2011.

The Defendant argued that his post-Complaint income should not be considered in any alimony calculus and that only the income he earned up to the date of the Complaint should be considered, since the parties’ standard of living was based on his pre-Complaint income.

While the standard of living established during the marriage is a predominant consideration, this factor does not stand alone. The Court held that the actual need and ability of a party to pay directs an analysis of the parties’ present needs and ability to pay, not the past. One of the other factors is the earning capacities of the parties which is also a current consideration.
 

The Dudas Court also considered two additional factors under the catch-all factor of “any other factors which a court may deem relevant.”  They are:

1. the marginal cost estimation; and
2. momentum of the marriage

The marginal cost estimation has to do with the fact that a couple living together is less expensive than a couple living separately in two households. Further, once each party establishes their separate residence, each party’s new budget is not 50% of the marital budget, it is generally more, and may not be substantially less than the two person household budget. In many divorce cases, when the parties separate, there is insufficient money available for either party to maintain the standard of living enjoyed during the marriage.
 

In the Dudas case, the Court felt it was fair to bring both parties reasonably closer to the marital standard of living, which could only happen by looking to the husband’s increased available funds after the Complaint date.
 

Momentum of the marriage recognizes the fact that one’s occupational efforts may take years to pay off. A person’s earning level may start out slow, but through experience, education and perseverance, it may increase dramatically the longer a person works in that particular field.
 

Therefore if a party focuses on his career throughout the course of a marriage, while the other party, as in the Dudas case, maintained the home, cared for the children and provided support and encouragement for the husband in his professional endeavors, then a post-Complaint rise in income will be considered in determining alimony.

Maria Imbalzano is the Co-Chair of Stark & Stark’s Divorce Group in the Lawrenceville, New Jersey office. For questions, please contact Ms. Imbalzano: mimbalzano@stark-stark.com.

Mr. Luesek’s organization seeks no less than the elimination of permanent alimony, a position supported by Assemblyman Sean Kean (R-Monmouth) who has introduced a bill to set up a blue ribbon panel to examine such changes and thereby “bring New Jersey into the 21st century”.

Such efforts will provoke discussion, of which this article is an example, but will likely bear little fruit. Alimony in New Jersey is based upon a myriad of statutory factors which the Court can utilize, balance or deem inapplicable in the circumstances of the case. These factors include need and ability to pay, duration of the marriage, marital standard of living, career interruption and other factors which give discretion to the Judge while imposing a set of guidelines for the Court’s instruction and application as  circumstances deem “fit, reasonable and just”  under the governing statute. 

Contrary to popular assumption, Judges are required by law to utilize these factors and cite them in their decisions,  as opposed to employing their personal  sense of what is or isn’t “fair”.  Coupled with the statutory establishment of multiple forms of alimony such as Limited Duration, Rehabilitative and Reimbursement Alimony, it is, in my, wrong to contend that the elimination of “permanent” alimony serves a legitimate legal or societal goal. This is not to say that every alimony case is decided in a manner acceptable to both parties; however, in my over 30 years of practicing matrimonial law throughout New Jersey, the overwhelming number of alimony awards (or denials) have been appropriate to the circumstances of the case. There also exists an enormous body of reported decisions which are legally precedential with respect to alimony and its variations, as a result of which New Jersey judges and lawyers are very well-informed.

I would be the first to add than an award of alimony is not the answer in every case. In fact, it may be deemed totally unwarranted as I, and other matrimonial attorneys, have learned through courtroom experience. Moreover, “permanent” (indefinite duration) alimony is always subject to modification based upon a substantial change in circumstances unless the parties specifically contract otherwise. Thus, the elimination of this type of alimony unfairly tilts the scales in favor of alimony payers and against alimony payees.

There are an increasing number of legal authors who propose a different look at alimony via the establishment of “alimony guidelines” which would determine the amount and duration of alimony awards on a uniform basis throughout all of New Jersey’s counties. Such guidelines would be rebuttable; that is, they could be demonstrated to be inapplicable in a particular case.

This dialogue should continue as uniformity of alimony awards is a legitimate topic.  In contrast, arguments favoring the elimination of one type of alimony are not so framed and, in my opinion, run counter to New Jersey’s distinguished legal history in this important area. 

John Eory is the Co-Chair of Stark & Stark’s Divorce Group in the Lawrenceville, New Jersey office. For questions, please contact Mr. Eory: jeory@stark-stark.com.

In many cases, parties who are divorcing reach an agreement as to who may take the dependency exemption for their children in any given year. Sometimes they split the dependency exemptions between them if there are two or more children. For any divorce or agreement entered into from 2009 onward, if the custodial parent (parent having the children for the greater portion of taxable year) agrees to give the other parent an exemption in any given year, the custodial parent must sign a written declaration that the custodial parent will not claim such child as a dependent for said taxable year and the non-custodial parent must attach that declaration to his/her tax return.  Prior to December 31, 2008, the non-custodial parent only had to attach the pages from his/her divorce decree or Separation Agreement to his/her tax return.

The form required now is IRS Form 8332 entitled “Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent.”  Said form may cover the exemption for more than one year.

Maria Imbalzano is the Co-Chair of Stark & Stark’s Divorce Group in the Lawrenceville, New Jersey office. For questions, please contact Ms. Imbalzano: mimbalzano@stark-stark.com.

It is important to note the differences between these two types of accounts since it may affect the vehicle you chose if you are getting divorced.
 

Custodial accounts are accounts established at a financial institution for the benefit of a minor child. Generally, one of the parents is named as the custodian for the benefit of the child under the Uniform Transfer to Minors Act (previously the Uniform Gifts to Minors Act). These accounts belong to the child, not the parent. By establishing this type of account, the parent(s) made an irrevocable gift to the child. While the parent, as custodian, may make the decision as to how the money will be invested and spent (until the child is 21), the money must nevertheless be spent for the child or turned over to the child at age 21.
 

It must also be noted that when using funds in a custodial account, that payment is in addition to, not in substitution for, any obligation of a person to support that minor. It is well settled law in New Jersey that a child’s assets may not be used to fulfill a parent’s support obligation.
 

A 529 Account is a college savings plan which has tax advantages authorized under IRC 
Section 529.  These plans allow an investor to save money in an account in which the earnings (i.e., interest, dividends) will grow tax free and, when used for qualified higher education expenses, may be withdrawn tax free.
 

Anyone can be named as a beneficiary regardless of their relationship to the owner, and anyone can contribute to the account.  Only one account owner can be named on the account. 
 

Since this type of account is owned generally by a parent (and not the child), this asset must be dealt with in any Property Settlement Agreement during a divorce. Since the account is only in one party’s name, the best way to deal with it is to split it equally between the parents to assure that each party has control or ownership of an equal amount.  Since divorce agreements many times include provisions for the allocation of college education expenses when they arise, each party can then plan for their own contribution in the future by continuing to invest in their own 529 plan or at least continuing to hold the asset.
 

It should be noted that an owner of a 529 account can make unqualified withdrawals (withdrawals for any reason) as long as they pay the tax and penalties associated with the withdrawal. Therefore, it is not preferable to keep the account in one party’s name after divorce with just a promise that he/she will use the account for your child’s college education expenses. 
 

Further, if only one party holds the asset and there were no specific terms in the Agreement relating to this account, the owner/parent may argue that these funds will go only toward his/her share of the obligation for college education, and the other parent will receive no credit.
 

It is best to be very explicit in your Property Settlement Agreement with regard to funds saved and intended for college.