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

In determining alimony, we are compelled to take into consideration the 13 factors set forth in our statute. Of utmost importance is the actual need of one spouse and ability of the other spouse to pay, along with the duration of the marriage and the standard of living established during the marriage.

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.

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Internal Revenue Code Section 152 defines a dependent for tax exemption purposes. If parents are divorced or separated with a written Separation Agreement, or live apart during the last six months of the calendar year, and if a child or children are in the custody of one of the parents for more than one-half of the calendar year, that parent may take the dependency exemption for each of those children.

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.

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In New Jersey, both parents are responsible for the support of their children, including contributions toward college education. Many times, parents begin saving for college education while their children are young by investing in 529 College Savings Plans or Custodial Accounts. 
 

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.

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In a recent New Jersey divorce case (Crimi v. Crimi), the parties entered into a Property Settlement Agreement on March 25, 2005, whereby the Wife was to receive the net proceeds from the sale of the marital home. In that Agreement, the Husband guaranteed her a minimum of $7 million less certain agreed upon deductions. If the sales price exceeded $7 million, the Wife would receive a greater amount.

 

In 2004, the house was appraised at $7,250,000. During 2005, the real estate value dropped and the listing price of the house was periodically reduced (from a high of $8 million to $6.5 million). The Wife agreed to modify the parties’ Property Settlement Agreement stating she would receive $6.5 million (less certain agreed upon deductions) instead of $7 million.  

 

The real estate value continued to plummet, and, in October 2009, the Husband filed a Motion with the Court to be released from his obligation to guarantee the Wife $6.5 million (less deductions). He had also requested relief from other agreed upon obligations.  

 

In his Certification to the Court, the Husband stated that no one could have predicted the national economic crisis that occurred beginning in 2008. He also stated that the consequences to him were drastically different than what the parties intended when they reached their Agreement in 2005. The Wife filed a Cross-Motion to enforce the parties’ Agreement. 

 

The Trial Court as well as the Appellate Division noted that it is well-settled law that “property division or equitable distribution provisions may not be adjusted after divorce to reflect unanticipated changes in the parties’ circumstances.” Therefore, even if subsequent events could not have been contemplated when the parties entered the Agreement, modification will not be granted. 

 

In this case, the Appellate Court noted that the Husband claimed the recession and decline of the housing market was an exceptional unanticipated circumstance sufficient to warrant modification. The Court disagreed, stating that both parties were aware that the value of the real estate could have gone up or down since they agreed to a sum certain irrespective of the actual sales price.  

 

If you would like to discuss this matter in more detail, please feel free to contact me here in my firm's Lawrenceville, New Jersey office. 

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Generally, husbands and wives file joint tax returns while married. As joint filers, both parties are jointly and severally liable for any taxes, penalties and interest due as a result of those filings. 

 

When parties are divorcing, one of the spouses may raise an issue with regard to the truthfulness of previous tax returns filed. For example, the wife may say that her husband owns a business, was in charge of all the finances, and she does not know whether he had reported the correct income on previous tax returns. If the IRS audits a return that was filed jointly and finds that there was an underreporting or an incorrect deduction taken of income, thereby causing an assessment of taxes, interest and penalties, the wife may be eligible for Innocent Spouse Relief. 

 

In order to obtain Innocent Spouse Relief, the wife (or husband as the case may be) must file IRS Form 8857 to request the relief, which could be requested for more than one tax year. 

 

The Innocent Spouse can be relieved from the responsibility of said obligations if:

1. She filed a joint return which has an understatement of tax,
2. The understatement of tax is due to erroneous items on the return reported by her spouse (or ex-spouse),
3. At the time the Wife signed the return, she did not know there was an understatement of tax, and
4. It would be unfair to hold the Wife liable for the understatement of tax.

 

As you might imagine, the IRS does not grant these requests easily. They reject approximately 40% of the applications made because it is determined by the IRS that the party requesting relief is ineligible. 

 

If you believe you are entitled to Innocent Spouse Relief, you may wish to review IRS Publication 971, or feel free to contact me with any questions you may have. I’d be happy to meet with you here in my firm’s Lawrenceville, New Jersey office to discuss this matter in more detail.  

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Palimony is a claim for support between unmarried persons. In 2010, legislation was passed which mandated that palimony agreements had to be in writing and signed by the parties in order to be enforceable. Prior to that date, there was no legislation regarding palimony, and we only had case law to guide us.
 

New Jersey case law recognized a claim for support between unmarried persons if those persons had formed a marital-type relationship, and one person promised to support the other person, whether express or implied. In the recent case of Botis v. Estate of Kudrick v. Wells Fargo, an issue arose as to whether the legislation regarding palimony, effective January 18, 2010, was retroactive and therefore governed this case which had been filed prior to the effective date of the statute.
 

The facts are as follows:  The Plaintiff began living with the decedent in 1976. She asserted that in 1984 she invested $17,000 from the proceeds of the sale of her house into furnishing the decedent’s home, where she lived. In 1995, they jointly purchased a residence, although her name was removed from the Deed at a later date, presumably for tax purposes.
 

The Plaintiff claimed that they lived in a marriage-like relationship, that she became dependent upon the decedent for support and that he promised he would always take care of her. In the event of his death, she would be cared for as she was during his life. When he became stricken  with cancer, the Plaintiff cared for him. Shortly before his death, she learned that his Will left his entire estate to his daughter and grandchildren. As a result, in or about November 2008, the Plaintiff filed a Complaint for palimony and for the transfer of title to two residences. The decedent’s estate claimed that the Plaintiff was not in a marital type relationship with the decedent, and, therefore, she was not entitled to relief.
 

In March, 2010, after the law was enacted regarding palimony, the estate of the decedent moved to dismiss Plaintiff’s Complaint based on that law since no promise of support was made in writing.
 

The Appellate Court looked to the plain language of the statute which says that it shall take effect immediately. There was no indication that the legislation favored retroactive application. Further, there was no indication as to whether the law applied to claims that were pending on the date of its enactment. As a result, the Appellate Court reiterated the general rule that statutory construction favors prospective application of statutes.
 

In a case such as this, the parties could not have known or anticipated the pre-requisites to enforcement of a palimony promise when the decedent died almost 1-½ years prior to the effective date of the statute. While the decedent was alive, case law supported the expectation that a palimony agreement could be enforceable without being executing in writing.
 
 

This case seems to indicate that a writing is not necessary for any palimony claim filed before January 2010. However, another question presents itself from these facts. Does the new law apply if the parties’ relationship is irretrievably broken before January 2010 but the claim for palimony is filed after January 2010?
 

As in any case, the facts must be ascertained and analyzed before determining whether a party has a claim for palimony.

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Under current New Jersey law, when a person is adopted, a new birth certificate is issued showing the name of the adopting parent(s) and the original birth certificate, as well as the adoption pleadings, are placed under seal.  As a result, an adopted person may not obtain the name(s) of their birth parents.

Pending legislation amends the current law and provides that an adopted person who is over 18, or the adoptive parent of a minor adopted person, may obtain the adopted person’s original birth certificate upon written, notarized request.

If the Governor signs this bill into law, I will provide more details concerning this legislation.

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In the recent case of Segal v. Lynch, 413 N.J. Super. 171 App. Div. 2010, it was held that a party is not entitled to money damages for intentional infliction of emotional distress when a parent intentionally alienates a child from the natural bond and affection that should exist with the other parent.  The Court’s reasoning was that this type of lawsuit would harm the child forcing them into the litigation through depositions, psychological examinations and having extended family brought in as witnesses.  The only exception is in cases where the conduct is so extreme and so outrageous as to go beyond all possible bounds of decency.  Examples of this are when one parent falsely accuses the other of sexually abusing the child or where one parent unlawfully abducts the child.      

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A party’s involuntary loss of a job and subsequent employment at a lower wage, are not necessarily determinative for a reduction in alimony. There are criteria that a Court must consider in determining whether the spouse seeking modification has established a case for modification. It is well-settled law that temporary unemployment or a temporary change in employment is not adequate to reduce alimony. Other factors a Court must consider are the party’s assets and income that he or she could have earned from personal attention to business as well as the efforts made to find comparable employment. In addition, the Court may analyze the post-marital lifestyle (expenses) of the paying spouse in view of the marital standard of living.

In the recent case of Ianneillo vs Ianneillo, the ex-Husband was laid off from his job and quickly found re-employment at a lower salary at which time he filed a Motion to Reduce Alimony. The Court focused on the fact that the Husband remarried and purchased a new marital residence which had a substantial monthly mortgage payment. This latter obligation was voluntarily incurred without regard to his pre-existing alimony obligation. It was also noted that there was nothing in the record to establish that his current job was more than temporary. Further, although he made statements to the Court in his Certification that his efforts to find new employment at a higher salary were diligent, he did not prove same to the Court. As a result, the Court denied his application for a reduction in alimony.

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A child is not automatically emancipated at age 18 or upon graduation from high school. A child is emancipated when he or she has moved “beyond the sphere of influence and responsibility exercised by a parent and obtains an independent status of his or her own.” Generally, emancipation occurs when a child completes his college education.

 

In most Marital Settlement Agreements, it is specifically acknowledged that a child attending college on a full time basis is not emancipated. As a result, child support continues, at a modified amount, and college education expenses are apportioned between the parents in accordance with their income and assets until the child graduates.

 

What if a child takes seven years to obtain a bachelor’s degree? What if a child has a full time job while attending college? What if a child has assets that could be used to help pay for college education? These questions have been answered in recent cases decided in New Jersey; however, keep in mind that all cases are fact sensitive and a different result may occur with a twist of just one fact.

 

In a  recent case,  the parties’ son was almost 24 years old, attended DeVry University (after a series of other colleges), had a job earning $22,600, lived in an apartment costing $1,260 a month and had taken out student loans to help pay for his college education costs, as well as his living expenses.

 

Upon his mother’s application to the Court to compel the father to continue paying child support as well as to contribute to the college education costs, the Trial Court determined that the son was emancipated and required the son to pay for his college tuition with loans. The Court also stated that if the son finished DeVry University in three years, the son could request that his father reimburse him for the father’s proportionate share of his college loans. The Court’s reasoning in emancipating the son and compelling him to take out loans for his education was to motivate him to finish college.

 

It is important to note here, that the parties’ Marital Settlement Agreement (MSA) stated that child support would continue until emancipation. Therefore, child support was terminated when the Court determined the son was emancipated. There was a separate provision in the MSA which governed the parties’ obligation to pay toward their child’s college education. On appeal, the Appellate Division agreed that the son was emancipated because he earned enough to support himself and moved beyond the sphere of influence. Therefore, child support was not required by either parent. However, the son’s emancipation did not eliminate the parents’ obligation to pay for his college education expenses pursuant to their Agreement.

 

In another recent case, the Court dealt with whether a child’s inheritance could be considered when fixing a parent’s support obligations which include college education. It was determined that a child’s assets may not be used to fulfill a support obligation of the parent. Therefore, in calculating child support, accounts in the child’s name, whether in trust or in custodianship, shall not be considered in setting a parent’s child support obligation. New Jersey Courts have included college education expenses as part of a child’s necessary support; therefore, it follows that a child’s assets should not be considered in apportioning college education expenses between the parents.

 

This is in direct contravention to the seminal case of Newburgh v. Arrigo in which the Supreme Court of New Jersey held that a court can consider a child’s assets (among many other considerations) when determining the parents’ proportionate share of college education expenses.

 

Many of these issues can be dealt with ahead of time through a carefully drafted Marital Settlement Agreement specifically dealing with emancipation and how it relates to college education expenses, as well as the effect a child’s income and assets has on the parents’ ultimate contribution to college.

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