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

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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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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