New Jersey Lawyer & Attorney : Stark & Stark Law Firm : New Jersey Law Blog

Tax season has arrived and with it questions as to tax treatment of children of divorcing or divorced parents. For purposes of this article let's deal with the most basic, the "dependency exemption". According to the IRS, the parent who has custody of his or her child for more than one-half the year can claim the child provided that he or she  has provided more than half of the child's support for the year in question.

In  some cases, however, the non-custodial parent can claim the child but in order to be able to do so four requirements must be met:

• First, the parents mus t be divorced or legally separated under a written agreement or lived apart continuously for the last six months of the year;
• Second, the child has received more than half his or her support from the non-custodial parent for the year;
• Third,  the child has been in the custody of either or both parents for the greater part of the year; and
• Fourth, the custodial parent releases the claim to the dependency exemption to the non-custodial parent in writing (IRS Form 8332) which must be attached to the non-custodial parent's tax return.

In many divorce cases, a non-custodial parent's right to claim the exemption is established by court order or written Marital Settlement Agreement. In divorce negotiations, this right may be a bargaining chip since the exemption is worth more to the higher income parent. Assuming the non-custodial parent receives the exemption, the next question is whether it should be annually or perennially.  It is not advisable for the custodial parent to waive the exemption for more than one year at a time and agreeing to do so each year should be tied to a provision in the Agreement or Order requiring the non-custodial parent to be current in child support for the year in question.

Since no two cases are alike, a parent going through divorce should always consult with knowledgeable matrimonial counsel to determine what is in their best interests in terms of settlement or trial.

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In a case of first impression in New Jersey, an appeals court affirmed a trial court's ruling that a paid escort qualifies as a "date”, and thus is a victim under the New Jersey Prevention of Domestic Violence Act. In J.S. v. J.F., the trial judge determined that the parties had entered into a "dating relationship" even though most of their "dates" were at the club where J.S. danced. As for the exchange of money involved, J.S. testified that J.F. was simply trying  to help her out financially, as opposed to rendering payment for professional services, an argument unsuccessfully advanced by J.F.'s counsel.
 

By way of background, J.S. sought protection under the Domestic Violence Act when she began "seeing another man" to which J.F. responded by sending her harassing and threatening text messages. The case serves as fair warning that the commonly-held definition of "dating" is being expanded to satisfy the presumed legislative intent of the Act. As we lawyers like to say, "please be guided accordingly". As others might put it, "buyer beware".

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In a decision of fist impression a New Jersey court has awarded shared possession of a six year old pedigree pug named Dexter to a former couple who bought the dog for $1,500 while were engaged and living together.
 

In Houseman v. Dare, the court gave each party five weeks of time with Dexter and alternating holidays, with the party having physical custody responsible for Dexter's veterinary bills including cremation expenses in the event of his death. The court hoped that in such unfortunate circumstances the responsible party would agree to share his ashes.
 

The decision follows up an New Jersey appeals court ruling that pets, unlike furniture, household goods and other types of personal property, have a subjective value that transcends monetary factors. At the same time, it should be noted that the court declined to apply a "best interests of the pet" standard as would apply to child custody cases
 

I have at times  handled so-called "pet custody" as part of a divorce, although the court in Houseman declined to use the word "custody", opting instead for "possession".  Regardless of the language, there is no doubt that pets are often considered  "members of the family" instead of mere objects and that courts are starting to acknowledge their unique and special status.

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The U.S. Census Bureau has released data regarding the incidence of divorce on a state-by state basis. Interestingly, and contrary to some segments of public opinion, New Jersey and Pennsylvania rank second and third, behind only Hawaii, for the lowest percentage of divorces.
This is all the more interesting since New Jersey is the most heavily populated state by square mile and not a politically conservative "red state".  In fact, some  "red states" have very high divorce rates, so go figure.
 

What's the reason?  One theory is that more folks are opting to live together rather than get married, thus reducing the number or divorce filings.  One the other hand, some opine that the availability of " no fault"divorce is a major contributor to the breakdown of marriage and  increase in divorce rates. Others say that the cost of divorce is too expensive yet increasing numbers of persons are electing mediation or arbitration as alternatives to divorce litigation and even the cost of litigation can be properly managed if a divorce attorney has an associate to assume appropriate responsibilities at a lesser billing rate during the process.

Putting the cold data aside, my experience is that unhappy spouses either need to find their way to a happier place through counseling (assuming both participate in good faith)  or acknowledge that their relationship is unworkable  and harmful to their children.  In the latter case, a person's retention of experienced divorce counsel is essential to maximize a fair and cost-effective outcome depending on the complexity of issues and willingness of the other party to be part of the solution.

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The proper treatment of intellectual property (IP) in divorce cases requires an understanding of the different types of IP, valuation of the IP and ultimately equitable distribution of the IP as a marital asset.
 
There are four types of IP:

1. A Trademark is a name, word, phrase, logo, symbol, design, or image used to identify a product or service.  Also known as a “mark”, trademarks are denoted with the symbol “™”, although trademarks registered with the United States Patent Trademark Office are followed by the symbol ®.
2. A Copyright protects the expression of ideas captured in tangible form, such as drawings, sheet music, photographs, videotapes, computer files/software, books or paintings.  .  Copyright laws provide the creator with exclusive rights to publish and distribute his or her works for a certain time period after which the work belongs to the public.  Copyright owners may also authorize others to reproduce their work or derivative works based on the original work
3. A Patent protects a new or useful invention, such as a process or machine, as well as improvements thereto.  An inventor may assign his or her rights to the patent to another party.  Patent law exists for the purpose of excluding others from making, using or selling an invention for the term of the patent which is usually twenty years.
4. A Trade Secret protects  information which provides an economic benefit to the owner because it is not known to the public.  Unlike other types of IP, the protection of confidential information of a trade secret does not expire as long as the secret is never disclosed.

In a divorce, the first question is whether the IP is subject to equitable distribution.  Generally speaking, all assets acquired by the parties or either of them during the marriage (defined as from the marriage date to the date a divorce complaint  is filed) are marital. Thus, premarital assets, inherited assets or assets gifted from a third party ( and not subsequently “co-mingled”) will not be divided; however,  any increase in value of exempt assets which are the direct result of effort by one or both marital partners will be subject to equitable distribution.   

Thus, in cases involving IP, appropriate areas of inquiry are whether marital funds were expended to market the IP or to defend the owners rights to the IP during the marriage.  If marital funds were utilized, the non-owner spouse can assert that the otherwise exempt IP is subject to equitable distribution.

     
The valuation of IP as a marital asset is complicated by the fact that in many instances such value is based upon the IP’s ability to generate future income.  To the extent that such income will also be a factor in an alimony or child support calculus, the conundrum of a “double dip” exists.  In other words, having valued the IP as a marital asset based upon a future income stream and carried out equitable distribution based on that value, a court may nonetheless take a second look a the future IP income for alimony or child support.  New Jersey courts have determined that such an approach does not constitute a “double dip”, a fact which attorneys, forensic accountants and owners of an IP must recognize from the outset. 

   
Although there is no “bright line” ruling in New Jersey with respect to equitable distribution of intellectual property, guidance can be gleaned from decisions in other states such as a Kansas court’s decision that a disproportionate equitable distribution in favor of a patent holder was equitable since he would be required to expend post-marital efforts to ensure the continued income stream from the patents.

   
In summary, attorneys dealing with IP in divorce cases must be aware of the issues and pitfalls involved by exploring out-of-state cases and New Jersey cases dealing with different but analogous types of marital assets such as stock options and pension plans.

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Legal Briefs On Divorce is a video podcast series providing viewers with a discussion on timely news and insight on current trends impacting divorce. This installment of Legal Briefs On Divorce is an interview with John S. Eory, Shareholder in Stark & Stark's Divorce Group, and Sam Sacks, a Financial Advisor and First Vice President of Investments for Wells Fargo Advisors.
 

Mr. Eory and Mr. Sacks discuss the common questions many people face after a divorce in relation to their financial assets, such as where to invest, how do I find an advisor who suits my needs, and how to best invest my assets in today's economy?

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Legal Briefs On Divorce is a video podcast series providing viewers with a discussion on timely news and insight on current trends impacting divorce. This installment of Legal Briefs On Divorce is an interview with John S. Eory, Shareholder in Stark & Stark's Divorce Group, and Rob Kleeger, Managing Director of the Intelligence Group.

 

Mr. Kleeger conducts digital forensic investigations for divorcing parties in order to gather electronically stored information and put it in a format useful to a divorce case. Mr. Eory and Mr. Kleeger discuss the reasons for digital forensic investigations and what type of information can be gathered for a divorce case.

Legal Briefs On Divorce With John Eory & Rob Kleeger from Stark & Stark on Vimeo.

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In a just-decided case (Bello-Englesbe v. Englesbe, decided June 5, 2009), a New Jersey appeals court rejected a father's request to reduce child support based on terms of his Marital Settlement Agreement (MSA). The two judge panel ruled that the MSA failed to establish an income baseline from which an application for relief from a support obligation could be measured.

The significance of this ruling is that courts will not presuppose starting points if the divorcing parties do not establish them in their MSA. Attorneys and clients should ensure that such details are addressed and quantified if necessary, to includes parenting schedules, income and earning capacity assumptions, pension division formulas, life insurance provisions, college contribution formulas and so forth.

As this case demonstrates, it pays to "get it right" the first time to avoid future problems occasioned by insufficient explanation or lack of attention to detail.

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Legal Briefs On Divorce is a video podcast series providing viewers with a discussion on timely news and insight on current trends impacting divorce. This installment of Legal Briefs On Divorce is an interview with John S. Eory, Shareholder in Stark & Stark's Divorce Group, and Tom Hoberman, CPA with the accounting firm of WithumSmith + Brown.

 

Mr. Eory and Mr. Hoberman discuss the need for forensic financial investigations in your divorce, and Mr. Hoberman discusses his experience in conducting investigations in order to uncover fraud, embezzlement schemes, damages and assess internal control weaknesses.

Legal Briefs On Divorce With John Eory & Tom Hoberman from Stark & Stark on Vimeo.

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Legal Briefs On Divorce is a video podcast series providing viewers with a discussion on timely news and insight on current trends impacting divorce. This installment of Legal Briefs On Divorce is an interview with John S. Eory, Shareholder in Stark & Stark's Divorce Group, and Richard Carabelli, Jr., MAI of Martin Appraisal Associates, Inc. Mr. Eory and Mr. Carabelli discuss the importance of a real estate appraisal in the divorces process.

 

Legal Briefs On Divorce With John Eory & Richard Carabelli from Stark & Stark on Vimeo.

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