Articles Posted in Alimony

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“All you need is a dollar and a dream”. Mega Millions. Powerball. Pick-6. State lotteries all over the Lottery-300x232country encourage people to pluck down their dollars for the dream of possibly winning a fortune and being financially set for the rest of your life.

However, for one Michigan man that “dream” may have been considered more of a nightmare when he was directed in his divorce case to turn over to his ex-wife $15 million, nearly one-half of the Mega Millions jackpot he won in 2013. That decision was recently affirmed by the Michigan Court of Appeals in Zelasko-v-Zelasko (Docket No: 342854 decided June 13, 2019). Why the husband may have considered a lottery jackpot to be a “nightmare” included the fact that the parties married in 2004, separated in 2008, filed a divorce complaint in 2011 – almost two years before the winning lottery ticket was purchased – and where the wife had been the primary breadwinner, earning roughly three times what the husband earned. Why such a result? Most critically, under Michigan law “marital property” subject to equitable distribution in a divorce includes all property acquired from the date of marriage until the date of entry of the divorce decree. Hence even property acquired after a separation or after a divorce complaint is filed is considered marital property in Michigan. Since these parties’ actual divorce did not become final until 2018, the lottery winnings of 2013 were still considered marital property.

Among the other reasons this significant award to the wife was affirmed on appeal included: (1) that the determination was made by an arbitrator during a binding arbitration process which had been agreed upon by the parties, with the ability to challenge such rulings being statutorily limited; (2) the arbitrator’s ruling that such a division was fair and equitable, opining that the winning lottery ticket was probably not the first lottery ticket the husband purchased during the marriage and that as losses throughout the marriage were incurred jointly, winnings should also be shared jointly; and (3) that the dollar spent for the ticket was arguably marital money and as such a joint investment. Beyond this, the husband had not engendered much sympathy since he allegedly failed to contribute any money for the support of the parties’ three children.

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At the end of 2017, the U.S. Congress passed the most sweeping tax changes in over 30 years, referred to as the Tax Cuts and Jobs Act of 2017 (TCJA). While there were many provisions of the file0001546166524-300x225federal tax laws which were impacted, the most publicized changes were the reductions in the income tax rates along with the reduction and/or elimination of various deductions or exemptions. Most of these changes went into effect for the 2018 tax year. However, when it came to family law matters, the biggest change brought about by this tax law was regarding the deductibility and taxability of alimony. Until this law, alimony payments were deductible by the payor and had to be included as income for the recipient, albeit subject to certain regulations and phase-out provisions. While this tax treatment was “grandfathered” for pre-existing alimony obligations, alimony obligations established after January 1, 2019 were no longer tax deductible to the payor or considered taxable income to the recipient under the TCJA. Indeed, there was a mad dash to finalize divorces prior to December 31, 2018 to take advantage of the prior tax treatment of alimony; so much so that many counties continued to make Family Court judges available during their winter recess to put through divorces.

While the tax treatment of alimony may be considered the most prevalent provision of the TCJA impacting family law, it is becoming evident that there is a more subtle, but no less important, impact which is only now coming to light. Again, one of the major changes in the tax law was the across-the-board reduction in the individual tax rates. As a result, the IRS promulgated revised withholding schedules, which adjusted [downward] the amounts being withheld from one’s paycheck for federal taxes during 2018. Since the vast majority of taxpayers are W-2 wage earners, these revised withholdings applied. What people saw was some sort of increase in their net pay each paycheck. Who wouldn’t enjoy having a little more money in your pocket?

What’s the problem? UNDER WITHHOLDING!

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In the recently published opinion of the Appellate Division in Fattore v. Fattore,A-3727-16 (App. Div. 2019), the Appellate Division the husband appealed a trial court order requiring him to3e728f0b3d0e026b62a8cb4b38918e95-1-300x200 indemnify his former wife for the loss of her share of equitable distribution of his military pension, which was waived as a result of his receipt of disability benefits. The wife filed a cross appeal arguing that the trial court should have granted her request for alimony to replace the value of her lost pension benefit.

In this case, the Fattores divorced in 1997 after a thirty-five year marriage.  In the marital settlement agreement, both parties waived any claim to alimony from the other.  As part of equitable distribution, the husband’s Army National Guard was divided equally between the parties. A Qualified Domestic Relations Order (QDRO) to divide the pension was completed in 1999.  In 2002, the husband became disabled. At that time, the husband collected his pension and disability benefits without any impact on the pension payout. In 2010 the wife inquired why she had not received any pension payments.  She was advised that a portion of her former husband’s pay was based on disability, which cannot be divided under the Uniformed Services Former Spouses Protection Act. The disability amount is used as an authorized deduction. In this case, once the disability was deducted along with the survivor benefit from the husband’s pay, there was nothing left for the distribution to the wife.

The wife wife filed a post-judgment motion in the family court seeking to compel her former husband to compensate her for the loss of her equitable distribution share of the military pension. The trial court decided to compensate the wife for her lost pension benefit based on the decision in Whitfield v. Whitfield, 373 N.J. Super. 573 (App. Div. 2004).  At the time of the trial court’s decision, the U.S. Supreme Court had not yet decided the case of Howell v. Howell, 137 S.Ct. 1400 (2017).  The trial judge appointed a pension appraiser to determine the value of the wife’s coverture interest in the husband’s pension and, in the interim, ordered the husband to pay the wife $1,800 per month, not as alimony, but as an equitable distribution payment. The trial court denied the wife’s request for alimony because alimony is not a compensation for equitable distribution and the parties waived alimony.

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The Appellate Division in the recently published case of Bermeo v. Bermeo, A-1312-17, addressed a post-judgment application by a supported spouse seeking to modify alimony based  on her inability to maintain the marital lifestylefile000142175851-300x230 after entering into a marital Property Settlement Agreement and the lack of findings by the court of what the marital lifestyle was pursuant to Crews v. Crews, 164 N.J. 11 (2000).

In this matter, the parties divorced in 2015 after entering into a Property Settlement Agreement that was incorporated into their Final Judgment of Divorce.  The issue raised post-judgment by the Plaintiff, the supported spouse, was the extent of alimony that she was receiving and her inability to maintain a lifestyle comparable to the marital lifestyle.   During the marriage, the parties had a middle class lifestyle.  The Plaintiff was a homemaker while the Defendant earned an average income of $471,000 in the last several years of the marriage.  By the time of the divorce, however, the Defendant had changed jobs.  The parties negotiated a property settlement agreement through counsel that provided that the Husband would pay $4,000 per month in alimony.  The Plaintiff was earning $6,000 at the time of the divorce but the Agreement was based on an imputed income to her of $25,000 per year.  The Agreement also was based on an imputed income of $160,000 to the Defendant.  In addition, the Agreement required the Defendant to pay a percentage of supplemental income earned by the Defendant in the form of commissions, deferred compensation, stock options and bonuses.   The Agreement expressly stated that neither party would be able to maintain a lifestyle that was reasonable comparable to their marital lifestyle and that the parties “freely and voluntarily waive determination of the joint marital lifestyle at this time.”

Plaintiff in 2017 filed a post-judgment application seeking an increase in alimony to $6,000 per month, arguing that the Defendant was voluntarily underemployed and that alimony should be based on imputed annual income of $220,000 to Defendant.  After the divorce, Plaintiff had not received supplemental alimony because the Defendant earned $120,000 which was less than the $160,000 of imputed income upon which alimony was based.  The family court judge denied the Plaintiff’s application without ordering a plenary hearing or additional discovery and without making a finding as to marital lifestyle pursuant to Crews v. Crews.  The Plaintiff appealed.

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Earlier this year, I wrote a blog post entitled Support Security: Real Life Considerations. In it I discussed the developed case law and statutes dealing with affording dependent ex-spouses (and children) some level of economic security and protection in the event of the death of a payor – spouse, including in the form of life insurance, trusts or other means. While the legal authority of a Court to require same is now well established, it is an issue which has complexities, both practical and equitable, in regards to the determination of the nature, level and extent of same, depending upon the facts and circumstances in a given case. However, often forgotten is another, if perhaps even more valuable, form of “security” which may be available to ex-spouses (and children) in the event of the death of a former spouse – Social Security Survivor Benefits.

social-security-card-300x202Last year my partner wrote a blog post in which he discussed the fact that a divorced spouse may be entitled to elect to receive retirement benefits under Social Security based upon the former spouse’s work history, rather than their own as long as certain conditions were met, namely (1) the marriage lasted ten (10) years or longer (measured from the date of a valid marriage to the date the divorce is final); (2) you are unmarried; (3) you are age 62 or older; (4) your ex-spouse is entitled to Social Security or disability benefits, and the benefit you are entitled to receive based upon your own work is less than the benefit you would receive based upon the ex-spouse’s work. Further, if the ex-spouse had not applied for retirement benefits, but could qualify for them, one would only be eligible to receive such retirement benefits if the parties were divorced for at least two (2) years. These Social Security retirement benefits are not subject to equitable distribution. Since alimony and spousal support are often subject to modification, if not termination, upon the payor – spouse’s retirement, such benefits are an important and valuable consideration which are often overlooked. Curiously, the right to receive these benefits is not predicated upon the existence of such support obligations, or even actual dependency, as long as the requirements noted above are met.

While most people focus on retirement benefits when we talk about Social Security, there is another form of benefits available to divorced spouses that is often ignored and which may be even more valuable – survivor benefits. Under Social Security, if a worker spouse dies, whether before or after reaching retirement, that person’s spouse and/or minor children may be eligible to receive survivor benefits as long as certain criteria were met, i.e. work credits, age, etc. Those eligible to receive monthly survivor benefits include (1) a widow or widower age 60 or older (age 50 or older if disabled); (2) a widow or widower at any age who is caring for the deceased’s child who is under the age of 16 or disabled and receiving benefits on their record; (3) an unmarried child of the deceased who is younger than age 18 (or up to age 19 if he or she is a full-time student in an elementary or secondary school) or age 18 or older with a disability that began before age 22. Additionally, a divorced spouse of a worker who dies may be eligible to receive the same benefits as a widow or a widower provided that the marriage lasted ten (10) years or more. If the divorced spouse is caring for the deceased’s ex-spouse’s child younger than age 16, the ten (10) year rule does not apply and he or she would be able to receive survivor benefits until the child reaches 16 or is no longer disabled. Surprisingly, the divorced non-worker’s spouse’s remarriage after reaching age 60 (50 if disabled) will not affect eligibility for survivor benefits. However, if the remarriage occurred before age 50, the former divorced spouse would not qualify for survivor benefits. Compare this to the fact that by statute remarriage at any age would terminate a right to receive alimony. Further, the fact that the worker spouse may have been remarried at the time of his death would not affect the ability of a divorced spouse who claimed survivor benefits under Social Security. Indeed, multiple spouses, current or former, may be eligible for such benefits as long as they meet the requisite criteria.

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In an unpublished decision in the matter of  T.M. v. R.M., A-4724-16T3 (App. Div. April 5, 2018), the Appellate Division considered a plaintiff’s appeal of the trial court’s denial of his motion to modify his alimony and child support obligations based on changed circumstances. At the time of the parties’ divorce, the plaintiff was earning a salary of $100,000 per year as a limited partner with OTR. In 2011, plaintiff lost his job and was unemployed for eighteen months. The plaintiff became employed again in 2012, earning $38,400 per year. Continue reading ›

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The legal fees incurred with regard to a divorce can be substantial. I have written several blog posts in the past cautioning litigants of how their decisions and actions during a divorce matter can dramatically impact the level of legal fees that can be generated, and the ways litigants can reduce or limit those fees. 1040-300x193The more legal fees incurred, the less money there is in the marital pot to be divided between the parties, to have available for future needs and expenses (college educations, retirement, etc.), and/or income to pay support or one’s own living expenses. Continue reading ›

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If you have listened to local radio in recent years, (certainly those stations geared to a more mature audience), you were hard pressed to miss commercials from a “large” insurance broker toutinginsurance-300x184 his ability to obtain “affordable” life insurance coverage for persons, notwithstanding whether you had various chronic health conditions, took medications, or were otherwise not in the best of shape. Recently, that same insurance broker has been running a new series of commercials clearly geared to divorced or divorcing spouses, who may be in the position of having to secure life insurance coverage for the benefit of their ex, maybe even more than one. Continue reading ›

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Most people would be shocked to find out that an individual who obtains a final restraining order against their spouse could be ordered to pay alimony to support his/her abuser. The Prevention offile000388004075-3-200x300 Domestic Violence Act (“Act”) specifically states that victims of domestic violence are entitled to financial support from their abusers. However, the Act is silent on whether a victim of domestic violence who is also the income producing spouse has to support the abuser. Continue reading ›

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file00032137357-300x225The 2017 Tax Reform Act has been signed into law by President Trump. This law significantly changes the tax liability of individuals. For individuals, it preserves the marriage penalty forcing dual income households to file jointly to increase their tax bracket or face the faster escalated tax rates imposed on those married filing separately. The intermediate tax haven for married persons filing separately or head of household is preserved, allowing for some planning in divorce proceedings with regard to filing status. Continue reading ›