New York Divorce Lawyer & Attorney : Clement Law Firm : Family Law Serving Manhattan, Westchester County, Brooklyn, Queens, Bronx, New York City

As part of a divorce, the marital home is generally sold. But, in view of the slow down in the home sales market, it is possible that the proceeds from the sale of a home may be insufficient to fully pay off the mortgages on the property.

In a prior post, I explored the option of retaining possession of the martial home to avoid selling at a loss. For some, this is simply not an option and the home must be sold. Most couples cannot or simply do not want to continue living together after a divorce. Many cannot afford to maintain the marital home on their own.

The New Jersey Law Blog offers great insight in dealing with the situation  when the sales price martial home is insufficient to satisfy the mortgage.

If the homeowner is unable to obtain a sales price which enables him to pay off all loans and closing costs, and he does not have the funds to make up the difference, then he may want to try to obtain approval from his current lender(s) to accept an amount less than the full amount due on its mortgage. For a lender, this may be acceptable to obtain repayment of a substantial amount of its loan and to avoid the costs and delay of foreclosing on the loan. This will generally mean that the Seller will not receive any funds from the sale of his home.

In order to obtain such approval from a lender - which may or may not be granted - the homeowner needs to contact his lender(s) to determine what information they will need to make their decision. This usually includes a financial statement of the homeowner, copy of a contract of sale, appraisal, and other pertinent documents. Generally, a lender will not consider approving a short sale without a clear economic hardship on the part of the homeowner and an existing default or pending foreclosure.

Until recently, forgiveness of a debt under these circumstances, could trigger a taxable event according to the IRS. This means that if a lender forgave a part of the mortgage debt by accepting a reduced amount in full satisfaction of the loan, then the amount forgiven could be deemed taxable income to the homeowner. This was so even though the homeowner received nothing from the sale. However, in December 2007 Congress passed the Mortgage Forgiveness Debt Relief Act of 2007. This Act amends the Internal Revenue Code to exclude from gross income amounts attributed to a discharge of indebtedness incurred to acquire a homeowner’s principle residence. The amount of the debt forgiveness can be up to $2.0 million. Thus, a homeowner is now able to sell his home for less than what is owed on it without incurring an additional tax liability. This exemption for forgiven debt, however, is only temporary and expires within three years.

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They started to the fight
When the money got tight . . .
                Billy Joel, Scenes from an Italian Restaurant

With all the talk about recession and the fall-out from the sub-prime mortgage crisis, it is no surprise the telephones in most divorce lawyers’ offices are ringing off the hook. I have even noticed that the numbers of readers of this blog has dramatically increased in the last several months.

Jeffrey Lalloway in the California Divorce and Family Law blog notes:

The sharp downturn in the market is taking a similarly painful toll on couples who are breaking up. But now it's not that they can't afford their next home, but that they can't get rid of the old one. . .

"The housing market is having a major impact on divorce cases," said Stephen Ruben, a certified family law specialist in San Francisco. "If a house doesn't sell, it has a major impact on cash flow for child support, on where people live, on future taxes.

In the midst of the housing boom, when a couple divorced, the marital home was sold and the parties could simply cash out. The dispute was oft motivated by greed; each of the parties would argue to maximize his/her interest in the marital home and the size of his/her profit.

In the present economic environment, the marital home may still be sold, but if there is insufficient equity, the parties may be fighting how the loss will be split. As a result, instead of taking a profit at closing, the parties may argue about who will pay to cover the mortgage short-fall.

Mr. Lalloway notes that some couples, rather than taking the loss on the sale of the home, are forced to continue to live together until they can afford to sell the property. In other cases, one party gets the right to remain in the home.

Both scenarios trigger other considerations.   Parties forced to continue to live together, simply are denied the ability to get on with their post divorce lives. How possibly could you move on if your spouse is sleeping in the adjoining room?

Even if only spouse remains in the home, post divorce- the parties have to address:

• What will trigger the sale of the home?
• Who pays the mortgage?
• Does paying the mortgage increase the payer's equity?
• Who gets the mortgage interest deduction?
• Who is responsible for the maintenance and repair of the marital home?

To paraphrase another song, breaking up just got harder to do.

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A recent study discovered that 20% of divorcing couples tried to conceal assets or income from the spouse.

As reported in the Telegraph:

The study - by the accounting firm Grant Thornton, which surveyed 100 family lawyers - found that husbands were much more dishonest when a marriage crumbled.

In cases where assets had been hidden, 88 per cent involved men concealing wealth from their wives. Just two per cent involved women hiding assets. In the remainder of cases, both partners tried to conceal wealth from one another. . . .

"Men are seeing these huge settlements and they are terrified," she said. "If they think a marriage might break down, more and more men are panicking and trying to put their capital into trusts and offshore accounts or buy assets in a third party's name so that they are hidden from their wives.”

As a result of this trend, finding hidden assets as part is a divorce has become an important aspect of many divorce cases. 

And now for the shameless plug - I will be chairing a program aptly titled, Finding Hidden Assets- What Every Divorce Bankruptcy & Commercial Litigator Needs to Know at New York City Bar on April 24, 2008.

The distinguished facility of this program includes:

•  Fred Abrams, an attorney and author of the New York Asset Search Blog,
•  Lori Lapin Jones, a Chapter 7 Panel Trustee and a New York Law Journal columnist, and
•  Peter J. Theobald of Klein Liebman & Gressen, a computer forensic expert specializing in computer forensic examinations.

 It looks to be an eye-opening discussion about uncovering hidden assets.

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The Appellate Division answered a common question- what happens when one spouse uses marital assets to pay a separate obligation.

It is quite common for the parties to enter the marriage with existing  financial obligations, whether it be student loans, credit card debt or even an obligation to pay child support  or maintenance from a prior marriage. It would be the norm to pay these financial obligations from current income. The problem is that the separate debt is being paid with marital assets, the current income.

In the fascinating case of Johnson v. Chapin, the husband used martial assets for his separate obligation to pay support to his former spouse. The Appellate Division pointed out this scenario gave  his second wife’ the right to recoup her share of the marital property used to pay the husband’s separate debt.

There is ample authority for the proposition that contribution to the separate assets and liabilities of a former spouse may be recouped in an award of equitable distribution. For example, in Lewis v Lewis (6 AD3d 837 [2004]) the Third Department upheld an equitable distribution award which allowed a plaintiff to recoup 50% of payments made during the marriage to reduce mortgage indebtedness on a residence deemed to be the defendant's separate property. Citing numerous cases, the Court emphatically reaffirmed the settled principle that:

" marital funds should not be used to pay off separate liabilities' and, whenever that occurs, the inequity may be remedied by permitting the injured spouse to recoup his or her equitable share of the marital funds so used. . .

Similarly, in Dewell v Dewell (288 AD2d 252 [2001]), the Second Department held that the plaintiff was entitled to recoup 50% of marital funds used to reduce a deb incurred to obtain a medical license which, in the circumstances of that case, was found to constitute the defendant's separate property. Applying this authority, the court properly held that plaintiff was entitled to recoup 50% of marital funds used to meet the husband's separate legal obligations to his former wife.

What this means is that husbands need inventory their wives’ separate debt and wives need inventory their husbands’ separate debt. To the extent that either’s separate debt has been reduced or eliminated during the marriage, the other may make a claim to recoup his/her equitable share.

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When thinking of marital assets to be distributed during a divorce, litigants prepare for battle over homes, pensions and investment accounts. Unschooled or poorly advised litigants may overlook valuable assets.

For instance, what happens if one of the parties attends school or attains an educational degree during the marriage.

The Appellate Division re-affirmed the well settled rule of law that

an academic degree may constitute a marital asset subject to equitable distribution, even though the degree may not necessarily confer the legal right to engage in a particular profession. While the MBA degree might not actually be a prerequisite to the defendant's employment, the record demonstrates that the degree substantially increased her future earnings, and therefore the plaintiff is entitled to an equitable share of its value, with the proper valuation date being the commencement of this action.

In the recently decided case of Judge v. Judge, the wife “stopped working outside the home in order to take care of the parties' first child. She primarily stayed home and took care of the parties' children until the fall of 1993, when she enrolled in a program for a Masters of Business Administration degree (hereinafter an MBA degree) at a college where the plaintiff was employed as a professor. In the spring of 1994, the defendant was hired by the Federal Reserve Bank (hereinafter the FRB), through the college placement office, and she received her MBA degree in February 1997. The defendant's first job with the FRB was as a Management Information Analyst, and at the time of trial she was an officer at the FRB and vice-president of the FRB's Cash and Custody Division.”

The fact that the degree is an asset to be equitably distributed should not be in dispute. Generally, only the value of the degree is open for debate and is determined through the use of expert testimony. It is quite common for the court to appoint a single neutral evaluator to determine the value of a degree, license or enhanced earning capacity.

In the Judge case, based upon expert testimony at trial, the Court found that the value of MBA was $565,000 and find that the plaintiff was entitled to 25% thereof, for an award in the sum of $141,250.

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Your credit rating could be hurt by divorce. As part of divorce, you distribute not only your assets, but your debts and obligations as well.

An in-artfully drawn marital agreement may provide that one spouse will assume the liability for a joint debt. However, an agreement apportioning joint liability between you and your spouse is not binding on the creditor. The creditor can attempt to collect the debt from either or both parties. As pointed out in a Fox Business article, “The mistaken assumption that you're off the hook for financial obligations can result in a series of missed payments that may trash your credit score for years.”

A well written agreement would provide that the debt is fully paid or transferred into the name of the spouse who is going to be responsible for paying it.

The Fox article does provide some useful information about protecting your credit rating:.

Begin by converting your credit card accounts. People most often miss payments on this type of debt, rather than the loans that keep a roof over their head and wheels under their feet.

Next, work on refinancing your mortgage and your car loan. Granted, this is going to be more difficult, because the bank will want just one person to accept the loan in his or her name -- which may not be possible if that person's salary isn't enough to qualify for the loan. In cases like these, it might be easier to sell the car or the house, split the money and move on. That way, you're guaranteed not to have credit damages caused by a vengeful ex-spouse.

"Remember that when you're getting divorced from your spouse, you're also divorcing yourself from emotional attachment to assets," Ulzheimer said.
You would also be wise to opt out of receiving pre-screened offers for credit or insurance. A spiteful ex-wife or ex-husband may be tempted to apply for a loan in your name just to ruin your credit. Go to the consumer credit reporting industry's official Web site for details. Visit the Web site.

Finally, start planning for all this at least six months to a year before you file, or as early as possible before the divorce gets ugly. Once any problems begin, you and your embittered other half will have a hard time thinking logically. If this seems like a lot of work at the front end of your separation, remember that it will save you up to 10 years of credit-related headaches in the aftermath

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I just wanted to announce the debut of the new and much improved Clementlaw web-site.

The Practice Areas part of the site provides some useful and practical information about divorce, separation, child custody, equitable distribution, the different types of marital agreements and other areas under the broad umbrella of family law practice.

You are invited to explore. I would love to hear your comments as to its user friendliness and readability.

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In a fascinating case, the Appellate Division, as a punishment, dismissed the appeal of a litigant who deliberately and continuously disobeyed court orders.

In the case Wechsler v. Wechsler, a husband was ordered to pay to his wife $22,770,623 as equitable distribution. The husband filed an appeal and refused to pay any part of the judgment, despite repeated court orders requiring his immediate compliance.

As a result of the husband’s willful disobedience of court orders, the husband was found to be in contempt of court. The court issued an arrest warrant and ordered the husband, who resided in Colorado,  to appear in Court. The husband, claiming ill health, disobeyed this order as well.

The Court applying the doctrine of fugitive disentitlement, dismissed the husband’s appeal of the underlying judgment.

"The fugitive disentitlement doctrine permits a court to dismiss an appeal if the party seeking relief is a fugitive while the matter is pending' (Degen v United States, 517 US 820, 824 [1996]; see Ortega-Rodriguez v United States, 507 US 234, 242 [1993]). The doctrine is based on the inherent power of courts to enforce their judgments (see Degen v United States, supra at 823), and it has long been recognized and applied to those who evade the law while simultaneously seeking its protection (see Bonahan v Nebraska, 125 US 692 [1887]; Smith v United States, 94 US 97 [1876])" (Matter of Skiff-Murray v Murray, 305 AD2d 751, 752 [2003]). The doctrine applies in civil cases provided there is a nexus between the appellant's fugitive status and the appellate proceedings (id. at 753). The nexus requirement is satisfied where the appellant's absence frustrates enforcement of the civil judgment (id.). The principal rationales for the doctrine include: (1) assuring the enforceability of any decision that may be rendered against the fugitive; (2) imposing a penalty for flouting the judicial process; (3) discouraging flights from justice and promoting the efficient operation of the courts; and (4) avoiding prejudice to the non-fugitive party (Empire Blue Cross & Blue Shield v Finkelstein, 111 F3d 278, 280 [2d Cir 1997]). . .

Here, appellant, having been adjudicated in contempt of court and made the subject of an arrest warrant, is a fugitive (see Skiff-Murray, supra; Finkelstein; supra). That appellant is a resident of Colorado is immaterial; he is wanted in New York pursuant to a warrant and refuses to return to this State. Furthermore, there is a nexus between appellant's fugitive status and the appellate proceedings. Appellant's fugitive status resulted from his failure to comply with an order enforcing the judgment of divorce requiring him to transfer to respondent substantial assets, and his refusal to return to New York. Indeed, appellant's counsel acknowledged to Supreme Court at the hearing on appellant's motion to reduce the amount of money he owed respondent that he did not appear in court as directed because he was afraid of being arrested and incarcerated pursuant to the warrant. Appellant's appeal is from the judgment of divorce, the underlying charter of his financial obligations to respondent, and all post-judgment proceedings before Supreme Court and this Court have revolved around that charter. Appellant's absence from the State owing to his fugitive status has, as evidenced by the multiple motions and applications made before both Supreme Court and this Court, frustrated respondent's enforcement of the judgment of divorce. Moreover, under these circumstances, the principal rationales for the doctrine — imposing a penalty for flouting the judicial process, discouraging flights from justice and promoting the efficient operation of the courts, and avoiding prejudice to the non-fugitive party — would be vindicated by dismissing the appeal.

At bottom, appellant has willfully remained outside of New York in order to avoid the jurisdiction and authority of the courts of this State (James, 27 AD2d at 814), and we will not afford him review of the judgment of divorce since he has evaded court mandates

In short, the Appellate Division simply had enough and held that it would not aid a litigant who flagrantly and deliberately disregarded its orders.

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Illegal conduct, like bribing the judge in your divorce case, may be considered as a factor in awarding equitable distribution. Domestic Relations Law §236(B)(5)(d) provides a laundry list of factors to be considered by a court in distributing marital property. The thirteenth factor is the catch-all “any other factor which the court shall expressly find to be just and proper.”

The New York Legal Update provides the background of the case of Levi v. Levi in which a husband’s attempt to bribe the matrimonial judge constituted egregious marital fault and was to be factored into the equitable distribution award.

The divorce action originally appeared before a certain Justice of the Supreme Court, Kings County. The action terminated abruptly after it was learned that the plaintiff-husband attempted to bribe the judge with a $10,000 payment for a favorable outcome.

When the divorce action appeared before a new judge, the new judge equitably distributed the marital residence entirely to the defendant-wife because the plaintiff-husband had attempted to bribe the judge. The Second Department affirmed the distribution finding that the new judge properly exercised its discretion in finding that the plaintiff's attempt to bribe the former judge constituted egregious marital fault to be factored into the equitable distribution award. The Second Department also rejected a claim by the plaintiff-husband that his conduct was not egregious because he was suffering from a mental disease or defect at the time he made the bribe.

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I was quoted in an article on AOL highlighting the Top Five Mistakes to Avoid in a Divorce.

According to the article, the top five mistakes are:

1.Failing to be prepared with copies of all relevant financial and legal documents;
2.Failing to obtain financial advice as part of the divorce. Parties often fail to consider impact of taxes on the assets to be distributed. Other assets need to be appraised;
3.Failing to sell the marital home when you can ill afford to remain in it;
4.Failing to explore settlement or other avenues of dispute resolution and, instead, rushing into court; and
5.Failing to untangle assets and debts acquired during the marriage.

The list is far from exhaustive. In fact, the number one mistake on my list would be using the divorce to punish your spouse. Vindictive conduct or using the divorce to extract revenge only increases the acrimony, unhappiness and the emotional, psychological and economic costs of divorce.

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The Appellate Division in Mildy v. Mildy examined some of the factors considered in equitably distributing martial assets. In this case, the Court was confronted with the issues of equitably distributing the wife’s enhanced earning capacity and jointly held real property which was, in large part, paid for with the wife’s separate property.

The Wife earned a master's degree during the marriage.  Her enhanced earning capacity  was valued at $140,000. After trial the husband was awarded a half interest in the degree. The Appellate Court reduced the husband’s interest in the wife’s enhanced earning capacity to 25%, and provided the following reasoning:

While both parties agreed that they hired a babysitter to care for the child while the wife was in school, the husband testified that, although he continued to work full time while the wife was in school, he cared for the parties' child during the time when he was not working, relieved the wife of her household chores so that she could study, maintained the household, took the child to school and activities, and assisted the wife with her studies, as he had a similar background in special education. There was no evidence that the husband sacrificed any career opportunities during the time the wife was pursuing her degree. Under the circumstances of this case, we find that the husband's contributions did not warrant an award of 50% of the wife's enhanced earning capacity.

The parties purchased a vacation property in Florida in 1997 for the sum of $270,000, subject to a mortgage of $243,000. In 1998, the wife received $500,000 as a gift from her family, which was deposited in a joint account. The husband conceded that the money was her separate property. On February 2, 1998, the sum of $216,238.58 was withdrawn from the joint account to pay off the mortgage on the Florida property.

In equitably distributing the property, because the wife’s separate property contribution was traceable, the court granted the wife a credit equal to the $216,238.58 paid to satisfy the mortgage. The balance of the house proceeds were distributed equally between the parties.

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The Pennsylvania Family Law Blog poses the very practical question- what do to with a gift or inheritance received during a marriage? How can one insure that a gift to an adult child does not end up marital property subject to the other spouse’s claims?

As the blog post points out,

Generally, marital property means all property acquired by either party during the marriage, regardless of whose name it is in. An exception arises for property acquired by gift (except between spouses), such as an inheritance.

In New York, the same rule applies. Provided the gift remains in the sole name of the recipient of the gift, it will remain  that spouse’s separate  property. If the gift is put in joint names, the other spouse could claim that it is marital property and subject to equitable distribution. The burden shifts to the recipient spouse to prove that the property is and was separate property

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Janet Langjahr in her Florida based divorce and family law blog, reports that money does not equate with happiness in marriage. Citing an article, The Rich and Unfaithful, in Forbes, she says that the wealthy are no happier in their marriages than the not as well off.

About half of wealthy people describe themselves as unhappy in their marriages, and just as many admit to cheating on their spouses in the last three years. (Interestingly, more women than men owned up to affairs.)

Somewhat ironically, the excuse cited for unfaithfulness was desire for variety.

Although half of the affluent were unhappy in their marriages, just thirty percent were considering divorce…

It is not terribly surprising that the wealthy may be more divorce adverse. Quite simply, the exit costs may simply be too great. Assets acquired during the marriage have to be equitably distributed. Maintenance to keep a non working spouse in the marital lifestyle may be required to be paid.

A couple, living comfortably, with a million dollars in assets and a nice home with a mortgage could find themselves each with half as much in cash and looking for a new place to live.

There is an economy of scale in remaining in a marriage, even an unhappy one. The same income will not go as far if it must be split between two households. Rather than paying household expenses for a single home, a divorced couple must pay rent or mortgages on two homes, as well as all the other related housing expenses. In the end, there would be less discretionary or play money.

It may be purely economics that keep the wealthy in their unhappy marriages.

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The New York Times featured a front page story on how computers, blackberries, cell phones and other electronic devices are being used to discover adulterous relationships and hidden assets.

The Mississippi Family Law Blog points out these electronic devises all leave a  trail which may be discovered during the course of litigation.

Folks need to understand that if you use a computer or a phone, you are leaving an electronic trail which can easily be followed. Once divorce proceedings begin, the discovery process can allow your spouse to discover e-mails and inspect computer hard drives. Just because you hit the delete button does not mean the data is gone. Many times it is easily recoverable.

But, before resorting to self-help cyber-sleuthing, it is imperative that you consult with an attorney, to ensure that you do not violate federal criminal law.  Stephen Worrall on the Georgia Family Law Blog has written extensively on this subject.

While the electronic crumbs left on a computer may evidence attempts to secrete assets, the Asset Search Blog details how money laundering schemes and other attempts to hide assets have been frustrated.

In short, in most cases, through due diligence and sheer bull doggedness, hidden assets will be discovered.

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The New York Times and New York Magazine each report that the uncertain financial markets could lead to a “bull market” for divorce. The periodicals report that wealthy clients in the financial-services industry are being counseled to consider ending their unhappy marriages now, “as a way to cut losses on future payouts.”

This mercenary theory works best for the spouse expecting to receive maintenance or child support and who expects the other spouse’s income to substantially decrease in the immediate future. It would certainly be advantageous to have support payments (which are income dependent) fixed before there is a loss in income.

It is notable that both articles mis-state a basic premise of divorce law. Assets are distributed equitably in New York. This does not necessarily mean that the assets will be divided 50-50 as stated in the articles.

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When a childless couple divorces there is generally no issue of custody, except when there is a dispute about who will get custody of the four legged family members.

The ABA Journal E Report features a case in which a lawyer was appointed as guardian ad litem for a dog in a contested custody dispute. This report lead a columnist for the Times and Democrat to imagine the negotiation for custody of a dog in a divorce:

There would be many issues to discuss: Who will get primary custody and who will get visitation rights? Is joint custody a possibility? With whom does the dog spend holidays? Then there is the issue of doggie support: Who will be responsible for the dog’s veterinary care and the associated expenses? Who will pay for his grooming? Well, at least the couple wouldn’t have to argue about who pays for his education.

In my experience, when a divorcing couple disputes custody of a dog or cat, courts have treated the matter not as a custody dispute but as a personal property issue.

Tell me about your experiences.

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Divorce, illness and a long term disability are the most common life events that have a catastrophic effect on a person’s financial well being.  All too frequently a person going through divorce watches as his/her credit rating is destroyed by the former spouse.

The  Ask the Advisor Blog has some great tips for protecting your credit after divorce.  Chief among his tips are:

1.Check Your Credit Score — By checking your credit score you can see if your credit has been adversely affected by your divorce. It will also show if there are any debts that you used to share with your spouse that are now being neglected. This will point you in the right direction when it comes time to cancel any joint accounts.

2.Separate/Cancel All Joint Accounts — Any and all accounts, debts and property that you still share should be separated, canceled or sold.

3.Notify Creditors of Your Divorce — Once you have separated/canceled all of your joint accounts/debts, you are no longer legally bound to your former spouse's current debts..

It is important to note that any agreement for the payment of debts between you and your spouse is not binding on your creditors. That means, until and unless the debt is transferred to the spouse that assumed the particular liability, the other spouse remains personally liable for the debt. So, if the debt is not transferred into your spouse’s name, it remains a joint obligation. If it is not paid, your remain liable to pay the debt.

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The Appellate Division in Walker v. Walker provides us with yet another lesson on the importance of carefully drafting martial agreements.

In Walker, the parties, in an oral stipulation of settlement, agreed to divide a 75 acre property. The stipulation specifically provided that defendant "would be entitled to one-half or 37½; acres off the westerly side of that parcel of 75 acres (emphasis added)."  Not surprisingly, the parties then had a dispute about how the property was to be actually divided.

On appeal, the Court found that the stipulation was ambiguous,

because there is no mechanism by which to determine how much of defendant's 37½; acres must be from the "westerly side" of the parcel. Stated otherwise, the stipulation provides no basis from which to discern a dividing line.

As the result of a simple, and, perhaps, misplaced “or” in a settlement agreement, the parties were forced to perfect an appeal and to conduct a hearing to clear up the ambiguity and to ascertain their intent at the time (they thought) they settled the case.

The lesson, select the language of agreements carefully. If necessary, give examples. In this case, an illustration on the land survey showing how the property was to be divided would have saved this couple a lot of legal fees and heartache.

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The Appellate Division in Van Kipnis v. Van Kipnis enforced a pre-nuptial agreement which the parties entered into in France in 1965.  The agreement provided that “Each spouse shall retain ownership and possession of the chattels and real property that he/she may own at this time or may come to own subsequently by any means whatsoever.”

Although there is a presumption under New York law that property acquired during the marriage is marital, the Court found that the presumption was overcome by the unambiguous terms of the parties’ agreement and their conduct in keeping their assets separate. As a consequence, the parties’ separate assets were not subject to equitable distribution.

In rendering this decision, the Court offered a primer on the relevant law  of matrimonial agreements. Among the basic concepts elaborated upon are:

• There is a "strong public policy favoring individuals ordering and deciding their own interests through contractual arrangements" (Bloomfield v Bloomfield, 97 NY2d 188, 193 [2001] Thus, "[d]uly executed prenuptial agreements are accorded the same presumption of legality as any other contract.”
• "Agreements are to be construed in accord with the parties' intent."
  
• The best evidence of what parties to a written agreement intend is what they say in their writing."
• A written agreement that is complete, clear and unambiguous on its face must be enforced according to the plain meaning of its terms.
• Extrinsic evidence of what the parties really intended is generally inadmissible, and will be considered only if the agreement is found to be ambiguous, W.W.W. Assoc., v Giancontieri 77 NY2d 162 [1990]).
• Extrinsic evidence may not be utilized to create an ambiguity that would otherwise not exist

The decision can be read here.

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Governor Spitzer signed into law, this week, a bill amending Domestic Relations Law  §250, tolling the three year statute of limitations for commencing an action or asserting a defense that arises from a pre-nuptial or post nuptial agreement until service of process has been completed in a divorce action or until one of the parties dies. The law does not apply to separation agreements or agreements entered into during the matrimonial action.

What this means in plain English is that a party does not have to take any action to enforce or to declare void a marital agreement until an action for divorce or annulment is commenced.

This amendment makes sense. It would be impractical to require a party, during an intact marriage, to contest or change the terms of prenuptial agreement. Under the amended law, any dispute over the marital agreement would need to be asserted within three years of the commencement of a matrimonial action.

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The Oklahoma Family Law Blog highlights some of the basic tax concerns that need be considered in connection with divorce.  

• Alimony is taxable and deductible. The person who provides alimony can claim the payments as a deduction, while the person who receives it can avoid a large end-of-year tax bill by paying estimated taxes during the year. Unlike alimony, child support is not deductible or taxable.
• Who claims the children? The parent who has custody of a child usually can claim the child as a dependent. However, with the custodial parent’s consent, the parent without custody can claim the child. (The custodial parent may still be able to claim certain tax benefits related to the child, including head of household filing status, the Earned Income Tax Credit, and the child-care credit.)
• Who is a head of household? There are several factors for determining the head of a household. A few include being considered “unmarried” on the last day of the year, having children or other dependents who live with you, and paying more than half the cost of providing a home for dependents. Taxpayers should consult with a tax professional to determine if they qualify for head of household status.
• Divorce, annulment and legal separation are considered the same by the IRS for tax purposes. The way a tax return is affected by the situation depends on how the decree is worded, and in cases where state and federal law differ, the IRS will side with the federal government.

Taxes may even be used to facilitate settlements. For instance, by using the differential in tax rates between spouses, a settlement can be structured so that, in essence, taxes subsidize some maintenance payment.

For this reason I suggest that a settlement proposal be examined by a tax professional or a certified divorce financial planner.

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The Wall Street Journal in an article entitled Divorce: Counting Money Gets Tougher, highlights the common mistakes made by unwary litigants. These mistakes can have dire tax consequences.

Some common blunders: Dividing a stock portfolio down the middle without checking for losses or gains -- which can trigger either a tax break or a big capital-gains tax hit.

There are steps you can take to avoid house-related tax hits. If you keep the house and retitle it in your name, but end up selling it after the split, you may be able to shield only as much as $250,000 of the gains from capital-gains taxes. Consider selling the house while you're still married, or include specific provisions for the sale of the house in the divorce decree, to shield as much as $500,000 from capital-gains taxes.

The QDRO -- short for Qualified Domestic Relations Order -- is a court order that spells out who gets what in an employer-sponsored retirement plan such as a pension or a 401(k). QDROs must be approved by both the employer's retirement-plan administrator and the divorce-court judge.

The document lets you make transfers to an Individual Retirement Account, or make early fund withdrawals from the plan without paying the usual 10% IRS penalty if you're under age 59½. (You'll still have to pay income taxes on withdrawals.)

Try to complete the QDRO before the divorce is finalized. Otherwise, if your ex should die, remarry or leave the company, it may be tough to receive any retirement money.

Adding to the confusion, IRAs don't require QDROs. If you write it in your divorce agreement, you can split an IRA by transferring the funds directly into other IRAs without being subject to penalties or taxes.

If you're paying alimony, you can claim the payments as a deduction. But if you receive alimony payments, they count as taxable income. Child-support payments are neither deductible nor taxable.

Other tips: Take out a term life-insurance policy on the alimony-paying spouse. And update wills, trusts and beneficiary designations on retirement plans and insurance policies, so that your ex doesn't end up inheriting an unintended windfall.

An easy way to avoid making bad financial decisions incident to the divorce is to consult with a certified divorce financial planner. I have found, in some cases, a certified divorce financial planners assistance to be invaluable.

After analyzing the client’s finances, cash flow, work and income history, this professional can run “what-if" and tax impacted scenarios on settlement proposals. In this way, a settlement can be specifically structured to the client’s present and future after tax financial needs.

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A wife was granted $184 million as equitable distribution after trial in a Chicago divorce action. This equitable distribution award is reported to be the largest in history.  

Charles Meyer reports in the Pennsylvania Law Blog that  “this is a rags to riches story, as the parties came to the United States from Eastern Europe with only $500.  Husband became a huge success in the energy business, and later sold his business for several hundred million dollars.

At issue in the case was the wife’s contribution to the wealth. 

David Sarnacki writes in Domestic Diversions that:

They would walk together after dinners, and Michael would share details of his work, looking for empathy, advice or merely an open ear,” Rosenfeld wrote in court filings. “For many years, their marital partnership flourished. Michael provided sustenance and security, and Maya provided love, support, advice and counsel

While the numbers  may seem obscene, the result seems just.   The reported facts reveal that the marriage was a true economic partnership. All of the wealth was created during the long term marriage through the joint efforts of the couple. It seems only fair that the marital property be divided equally.   Quite frankly, even if the division of marital assets should not have been equal, would a 60-40 split  of  the nearly $400 million marital estate really made that much of a difference to these parties?          

It is, disappointing that this couple did not follow the lead of Blixseths, who divided their fortune amicably over a bottle of wine.  

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The martial home is often the most valuable asset to be dealt with in a divorce.

Generally, one of three things can happen to the martial home as part of the divorce: it is sold on the open market, one of the spouses buys out the other spouse’s interest, or one spouse is allowed to occupy the home for a period of time, until, for instance, a teen age child graduates from high school, and then the home is sold.

If the home is sold, the value to be distributed is easy to ascertain- it is the net proceeds remaining after all the costs associated with the sale have been paid.   The costs of sale include transfer taxes, broker’s commissions, the costs to satisfy the outstanding mortgage and, of course, legal fees.

If one spouse is to remain in possession of the home, the property needs to be appraised.  The appraiser, by comparing the particular home to others in similar condition and location, offers an opinion as to the property's value and the parties or the Court will determine the parties' equitable shares.

The New York Observer ran an informative piece detailing the process of selecting a real estate  appraiser and the problems they encounter in  valuing real estate in a contest divorce. 

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In a case where a husband abandoned his wife and children and failed for nine years to pay any child support, a Court ruled it was appropriate to set off the husband’s unpaid child support obligation against his interest in marital property.   Since the husband failed to pay child support for nine years, his interest in the martial home was set off against the amount of unpaid support. As a result, the Wife was entitled to full possession and title to the marital home. 

 In the case Pritchett v. Pritchett ( N.Y.L.J. 4/9/07(subscription required), Justice Darrell L. Garvin ruled that the husband’s abandonment of his family and failure to contribute any child support created a “substantially unequal burden on the [Wife] to the benefit of the [husband]. This benefit of the non-contributing spouse constituted an unjust enrichment which should be rectified.”

Applying the child support guidelines to the Husband’s income at the time he abandoned the family, the Court calculated the amount of unpaid child support arrears and the husband’s share of the child care, educational and medical expenses even though the Wife had not previously obtained an order requiring the payment of support.   

Since the child support arrears exceeded the value of the Husband’s equitable interest in the marital home, the Court transferred title to martial home to the Wife. 

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Michael Sherman in The Alabama Family Law Blog started an excellent series of articles (seven so far) on preparing for divorce. 

Preparation is essential. Since one of the primary purposes of divorce is to divide the marital assets, you should be knowledgeable about your and your spouse’s income, assets and debts.  

If you are in the dark about your family finances, a good place to start is by reviewing your income tax returns, check stubs and credit card statements.   After you have retained competent counsel, you should provide him/her with copies of your relevant documents.

Look about your home- do you own or rent? Do you own art, antiques, jewelry or collectibles? How were they acquired? Did you or your spouse purchase them or were they a gift? When were they acquired - before or during the marriage?

 Are you and your spouse self supporting? Will you or your spouse require maintenance? What will your post divorce lifestyle be like?  You will need to make a budget to determine your financial needs after divorce.

Do not be discouraged if you cannot make this assessment because documents are missing or you do not understand complex financial statements.   Missing documents can all be “discovered” during the divorce. Experts – lawyers, accountants, appraisers and financial planners- can be retained to make sense of the family finances.

 By preparing, you are yourself and your counsel with the tools necessary to protect and assert your legal rights.

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In January, I wrote about the Taubs, who put up a wall and divided their home in two during the divorce.

Well, the jury spoke and denied Mrs. Taub her divorce.  (You can request a jury trial on the issue of grounds in New York). 

As detailed in Daily News:

In a divorce battle that has gotten more and more bizarre, Chana Taub asked a Brooklyn Supreme Court panel to dissolve her 21-year marriage to Simon Taub. Both listened in stunned silence Tuesday as the jury said they could not separate. . .

But in keeping them married, the six-member jury rejected Chana's stated grounds for divorce, that Simon had subjected her to "cruel and inhuman treatment."

The wacky case began two years ago, when Chana said she wanted out of the marriage and Simon refused.

Although most divorce cases are decided by judges, Chana Taub sought a jury trial because she said she thought she would get a fairer hearing. 

The real-life "War of the Roses" got so nasty Simon Taub built a wall dividing the Hasidic Jewish couple's Borough Park brownstone to keep them apart. 

During the 10-day trial, Chana Taub testified that she needed more than a wall to protect her against his abusive streak. She said he has attacked her with everything from a telephone to a treadmill during their hellish 21-year marriage. Their four children testified against him.

Tuesday's astonishing jury decision came after just five hours of deliberations, leaving the warring couple speechless, albeit temporarily. ...
Simon Taub's lawyer Abe Konstam called the case, "a colossal waste of judicial time."

He said the case would have easily been settled if New York allowed married couples to split based on irreconcilable differences, like most states.

Yesterday, Chana Taub made a new allegation that her husband punched her in the eye.   when they  returned to their divided house after the jury's decision Tuesday evening.

"He was yelling, 'I'm going to break down the wall. I'm going to get rid of her. I'm going to get the whole house,'" said Chana Taub, sporting a bloodshot right eye.

She claimed her husband got rough when she tried to serve him with a restraining order.

But Simon Taub denied the fresh allegations of abuse, insisting they were a continuation of a smear campaign his wife began during the trial. . .

He raced to Brooklyn Family Court yesterday to get his own order of protection - while his wife was in the same courthouse trying to get a judge to look at her shiner.

But yesterday, Simon Taub said he was ready to "negotiate" and  that the lawyers should work it out.

If New York did not force divorcing parties to prove grounds, but instead allowed for a no-fault divorce, cases like this, where the parties are in a "dead" marriage, but are compelled to remain married, would not occur.

While this jury probably gave the parties what they really deserved (being stuck to each other), the result is a terrible waste of judicial resources and time. The parties wasted precious Court trial time and now are further burdening the Family Court with their suspect petitions seeking orders of protection.

All this could have been avoided if New York recognized irreconcilable differences as a basis for divorce.

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With a dedicated staff which includes a parenting coordinator and a family services coordinator, the Court is able to refer litigants to alternate dispute resolution programs, counseling, and parent education programs. Under the auspices of the Court, the parties are encouraged, for instance, to develop parenting plans.

According to Justice Robert Ross, the supervising judge of Nassau County’s Matrimonial Center, “The non-adversarial forum for parents to resolve their custody disputes, often expedites the resolution of a contested matrimonial cases.”

The New York Law Journal reports that the pilot program has been quite successful. Since the program was implemented five months ago, 16 of the 20 cases assigned to the program have settled.  The grateful litigants have written thank you letters to the court.

The Nassau County Courts should be commended for looking “out of the box” for a way to efficiently resolve divorces. Other jurisdictions, like New Jersey, have made parent education mandatory at the outset of a divorce. But in those cases where custody is not in issue, mandatory participation is a waste of time. 

What seems to make the Nassau County program effective is that it can be specifically tailored to the needs of the litigants. Still the question remains, will this program, which was limited to twenty cases, be as effective when it is expanded to the almost two thousand contested divorces filed in Nassau County last year?    

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If parties do not wed, the engagement ring must be returned.   A engagement ring is a gift made in contemplation of marriage. The engagement ring is a conditional gift and if the marriage does not take place, the condition has not been satisfied and the ring must be returned. 

Despite this “golden rule,” it is sometimes necessary to litigate to compel the return of the ring. Indeed, I had to file one such action this week.

With only one exception, the reason the parties failed to marry is irrelevant.

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The New York Times spotlights Justice Robert A. Ross, a matrimonial judge on Long Island. Justice Ross has apparently earned a reputation for enforcing court orders and judgments by holding recalcitrant litigants in contempt of court and imprisoning them.

Too often, when a party prevails in a divorce action, winning a judgment against their spouse, the victory is pyrrhic.   The “losing” spouse will not only refuse to honor the judgment, but will deliberately frustrate enforcement.   

Last February, the Matrimonial Commission, a task force convened by the New York State court system, issued a report that called, among other things, for stricter enforcement of divorce-court decrees. The report said that in two years of hearings around the state, dozens of the 100 or so witnesses told of waiting years for orders to be issued, only to find themselves waiting months and years more for them to be obeyed.

“After people have gone through the time and money and exasperation, and they get an order that is not enforced, it’s an injustice,” said Sondra Miller, a recently retired appellate judge who was the commission’s chairwoman. “There were many, many, many complaints about this; that there is a lack of enforcement, a need for sanctions. And jail is certainly a sanction available to the court.”

Sentencing someone to jail for contempt of court was always an option, but one of last resort.    

It is a drastic remedy,” [Justice Ross] said. “But what is to be done when the law is not being complied with? There is an alarming frequency of contempt.” Judge Ross declined to discuss any current case. . . .but said that he would jail only someone who “makes a conscious decision not to comply with a court order.”

Maxine Last, a Long Island divorce lawyer who has struggled for years with cases that drag on for lack of enforcement, said of Judge Ross: “I wish there were many more like him,” adding that besides jail, “unfortunately, there is no incentive for the parties to comply.

Certainly, the “losing” spouse must make a decision, obey court order or lose your freedom. However, as one jailed husband pointed out: “At least while I’m here [in jail], everything’s on hold,” he said, waving a thin arm under the cold, fluorescent light. “She’s not getting richer off me.”

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Awhile back, I posted a humorous  piece about a couple fighting for possession of a house as part of a divorce.  But proving the adage that the truth is stranger than fiction, I found this article in Newsday:

Like two Cold War adversaries, Chana and Simon Taub are separated by a wall built down the middle of their home to keep the bickering spouses apart.

The divorce case, which has been staggering through the courts for nearly two years, has been dubbed Brooklyn‘s "War of the Roses," after the 1989 movie starring Michael Douglas and Kathleen Turner as a battling couple.

It‘s not as if the Taubs have no place else to go. For one thing, they own a place two doors down. But for reasons that include stubbornness, spite and their love of the home, both insist on staying in this particular house in Borough Park, a heavily Orthodox Jewish neighborhood.

Chana, 57, who claims her husband abused her, says she has as much right to stay as he does, if not more. "I need a house to live in and money to live on!" she says. "I worked very hard, like a horse, like a slave for him."

But an actual wall? That‘s a new one, says Barry Berkman, a New York divorce lawyer.

She gets the top floor, where the bedrooms are situated, along with the kitchen on the second floor. He gets the living room on the first floor and the dining room on the second floor. So that they don‘t run into each other on the second floor, the door between the dining room and the kitchen is barricaded on both sides.

Chana says that for two decades she served Simon like a virtual slave, putting up with physical and mental abuse that grew more severe over the years. She says she had to flush the toilet after him, and put on his socks and shoes for him. He became so violent by mid-2005 that she filed for divorce, she says.

Chana says she doesn‘t want much from her husband, mainly just alimony, child support and a fair share of property.

At one point during the transition, someone said Chana had 300 pairs of shoes trapped on Simon‘s side. Chana claims that is a lie Simon cooked up to make her look like the Imelda Marcos of the Orthodox Jewish community.

Simon retorts: "Maybe it was 299. I didn‘t count it."

Chana says that since Simon has returned, he has been monitoring her via video cameras. Simon says the surveillance goes both ways, and points to cameras on her side, though Chana claims she does not control those. Chana says Simon has bugged her phones. Simon says that‘s crazy — he doesn‘t care who she talks to.

Kimberly Flemke, a couples therapist in Philadelphia, says when spouses go so far as to refuse to leave a house while divorcing, it often means neither is ready to move on.

"It‘s clear that if they‘re going to go this length, there‘s still far too much connection," she says. "I would hope they‘d both go to therapy

In the end, the only thing that this couple will succeed in doing is perpetuating the misery.

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Forbes ran an insightful article which surveys the  various means each state uses of distribute property in the event of divorce. 

As the article points out, New York is an equitable distribution state, the means all marital property is equitably distributed at the time of divorce.  Equitable does not mean equal.  The distribution is based on  a litany of factors codified in Domestic Relations Law 236(B).  which include the length of the marriage, the age and health of the parties, and their respective incomes,

Only the property that is acquired during the marriage is distributed.  Property owned before the marriage, acquired by gift from a third person, inherited or received as compensation for personal injury is generally considered separate  property and not subject to equitable distribution. 

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Dissolution of a marriage by divorce or annulment is one of the two events triggering marital assets to be distributed; death is the other event. However, if one spouse caused the death of the other, he/she will be prohibited from taking a distribution from his/her spouse’s estate.

The Nassau County Surrogate’s Court in the case of Estate of Adeline Joseph Alexis, 2006 NY Slip Op 26452, restated the well established rule that “One who takes the life of another should not be able to profit from his wrong and shall be barred from inheriting from the person slain.” 

In this case, the husband was convicted of murdering his spouse and was, therefore, disqualified from inheriting as a distributee from his wife’s estate.

The Court noted that not only does a murderer not inherit from the victim’s estate, but he/she may be prohibited from collecting any insurance or other death benefits. The underlying principle is that no one should profit from their crime.

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