Divorce

Things to Consider when Discussing Lump Sum Alimony

March 11, 2021 | James P. Yudes, Esq.

I am frequently asked if It makes sense to buy out of an alimony obligation with a lump sum payment. The answer to the question is a bit complex but I will try to tackle it in the length of this post. Usually, when there is a discussion of the buy-out of alimony, the question that is most common to follow is what motivates the desire for a buyout? The recipient of alimony may want a lump of money to use to invest, buy a house, or start a business. The payor can be looking for a clean break and may find the process of paying alimony on a regular basis annoying or emotionally destabilizing or they can be in the process of seeking a final end to the interaction with the payee and has a concern for what can feel like the never-ending revolving door of the courtroom. What motivates a recipient to want a lump sum is personal and that motivation should be discussed with your attorney. This post is to focus on the payor’s rational decision-making process, the emotional need to walk away with a clean break once again should be discussed with your attorney.

When a lump sum is discussed at the very least the payment of alimony overtime must be established. In a marriage of under 20 years the likely length of alimony and amount that needs to be established and then discounted to present value using the present value formula. In marriages, over 20 years alimony is usually assumed to end at the social security retirement age of the payor. Once the term and the amount of alimony is agreed upon there then needs to be an agreement as to the discount rate. The discount rate is the assumed interest rate that will prevail in the marketplace during the term of alimony. The assumption is that if a payee banked the money paid to them or annuitized it they would end up with their full alimony over a period of time.

To put it simply, if you compute the present value of the future payment of alimony and pay it out while assuming you have the economic ability to do so the payment makes very little economic sense for a multitude of reasons. One obvious consideration that is to be made is that you in theory could bank or set up your own annuity to pay the alimony which would hedge your obligation against the possibility that alimony might not be paid for the full term. For example, if your ex-spouse should die, alimony ends. If your spouse received a lump sum the beneficiaries of the remaining lump fund could be your children or could be a new spouse. The payor; could die and alimony would then also come to an end. In most circumstances, alimony is protected with some sort of insurance, however, the money you did not payout in lump sum would be part of your estate and would go to people you love. Your ex-spouse could remarry, alimony ends upon remarriage.

Divorce at a Discount

March 8, 2021 | James P. Yudes, Esq.

After my last blog post, I am getting a lot of emails… let me say this as clearly as I can, divorce’s are cheaper now due to the fact that most court appearances are virtual. Sitting around the courthouse waiting to be reached usually doubles the time in court on a motion. Trials are notoriously interrupted by a host of administrative and emergencies which routinely eat through the day.

People get caught in traffic, they forget their file… human error causes delay, and as I’ve mentioned before and will again, yes it takes time to get everyone to look at the same exhibit.

Another point to consider is lawyers have more time to do substantive work. Pre- Covid it sometimes became difficult to set up a conference due to the time constraints put on the workday joined with the physical location of everyone in the matter that was in need of attendance. Now with virtual platforms available at the ready, most of us have found more time available for substantive discussion now that we are not focused on more mundane tasks and driving to court. All these innovations are really efficient and enure to the benefit of the litigants. I would encourage you to not be afraid of the courts under these new rules. If your matter is complex and the lawyers agree there are still trials in person with appropriate approval but most of the time a virtual courtroom works just fine.

OPEN DURATION CHILD SUPPORT

March 5, 2021 | Kevin M. Mazza, Esq.

In 2014, the New Jersey divorce statute, NJSA 2A: 34-23 as it pertains to the issue of spousal support or alimony was substantially modified. One such modification dealt with the vexing question of what the duration or term of the obligation to pay alimony should be. While a prior amendment to the statute had afforded courts the ability to award “limited duration” alimony, the lack of specific standards of under what circumstances this would apply, or for how long, versus an awarding of “permanent” alimony, led to divergent interpretations and applications by the courts. The Legislature sought to bring clarification to this issue when it included the following language to NJSA 2A: 34-23(c):

“For any marriage or civil union less than 20 years in duration, the total duration of alimony shall not, except in exceptional circumstances, exceed the length of the marriage or civil union.”

Hence, for a marriage of over 20 years, the duration of a possible alimony award was left “open”, and subject to the discretion of the trial court, applying the statutory factors and other legal principles to the facts and circumstances of a given case. Hence the development of what has been come to be known as “open duration alimony” for marriages in excess of 20 years.

The Courts Have Conquered Covid 19

March 3, 2021 | James P. Yudes, Esq.

I have received many questions as of late regarding Covid-19 and the effect it has had on the divorce process. Those I have spoken to expect to hear that the courts are in shambles unable to handle all of the paperwork and processing that has become necessary in this new socially distant world. In point of fact, my experience with the courts since the shutdown has been quite positive. I have argued several matters in the Appellant Courts since the shutdown most by Zoom or through the phone. The Judges have been attentive and as well prepared as an Appellant Judges always is. Most importantly though, the quality of the discussion has been in no way compromised, in fact in many ways I find this virtual experience better than in-person argument. Let’s start by our means of travel or getting there, my office in my home is in the family room. I joke to my wife when descending the stairs that I am ‘driving to work.’ The point being, I do not have to drive to the argument this saves time and furthermore the headache brought on by the annoyance of finding a parking space. My clients save money as well because as a lawyer, I bill for travel time. I also do not have to wait as the Zoom meeting starts promptly when the court is ready to hear our case; a second savings to our clients who are otherwise billed for waiting time. Lastly, I find argument easier as I am able to have all of my documents spread out on my desk (and floor.) When arguing in person the need to drag my files with me and have them all stored at the speaker’s podium which leaves me minimal space to spread out, the ease of finding documents and case law has greatly improved when my appearances have been virtual.

When looking at the trial level, a virtual conference has the same travel and waiting time advantages. When participating in a Zoom trial, the ability to load all of one’s exhibits onto the server and instantly deliver the documents being presented to the judge, the witness, and opposing counsel is very efficient. No more fumbling around for a piece of evidence or waiting for everyone to find the relevant page or section being referred to. Further, when trials were held in person, there were constant interruptions by lawyers seeking emergency relief or other parleys with the Judge. There is more of a flow with uninterrupted trial time on zoom. When first having to cross-examine a witness virtually, I was concerned that it would be harder for the court to capture the demeanor of the witness, this concern I learned is unfounded. Delays in responding and hedging are actually more obvious on zoom. You can literally see the liar sweat.

Motion practice has also been an absolute joy to do via zoom. Usually, on motion days a busy lawyer could be racing from county to county sometimes making three court appearances in three geographically distant locations on any given day. Clients paid for the travel and racing across the state takes a toll on the lawyer. Now I am able to schedule matters in; Bergen, Atlantic, and Sussex County and get them all done in the morning.

MODIFYING SUPPORT: FIRST A PRIMA FACIE CASE

February 12, 2021 | Kevin M. Mazza, Esq.

In many divorce cases, obligations for the payment of alimony and/or child support are established. Whether the result of an agreement between the parties or an order of the Court, such support obligations are generally determined based upon the relative financial circumstances of the parties at the time the agreement was made or the order was entered. However, as has clearly been reinforced by the pandemic, the financial circumstances of either party can substantially or dramatically change. Incomes can increase or decrease. People can lose their jobs or obtain new ones. Someone can suffer from a disabling illness or injury. Needs and expenses may increase or decrease. A recipient of support may enter into a new relationship. Generically referred to as “changed circumstances” they can be many and varied. The issue is whether they are significant enough that it would render continued enforcement of an existing support obligation to no longer be fair and equitable, and in some instances, perhaps even unconscionable. As a divorce lawyer, a significant percentage of our practice are litigants looking to either modify existing support obligations or defending against requests for same. When someone meets with me and believes they have a basis upon which to modify support, whether they are seeking an increase in the amount they are receiving or a decrease in the amount that they are paying, the first hurdle to determine is whether the circumstances which they allege have changed are sufficient, either factually or legally, to support a possible modification. While in some instances the changes proffered may be convincing and irrefutable, the real test is whether the changes claimed, and the proofs substantiating same, would at least rise to the level of making out a threshold showing of changed circumstances. Often when parties come in to discuss these issues they focus less on what their circumstances are and focus more on what they believe the other party’s financial circumstances may be, and feel a right and entitlement to obtain information from them regarding same. When that occurs, I need to explain to the party that before you may have the ability to obtain financial information from the other side they must first establish to a Court’s satisfaction that they have met their own threshold, what the law refers to as a “prima facie” showing of changed circumstances. What does “prima facie” mean?

Black’s Law Dictionary defines a prima facie case as either (1) the establishment of a legally required rebuttable presumption or (2) a party’s production of enough evidence to allow the fact-trier to infer the fact at issue and rule in the party’s favor. The New Jersey Supreme Court has defined prima facie evidence as that which, “if unrebutted, would sustain a judgment in the proponent’s favor” Baures v. Lewis, 167 NJ 91, 96 (2001). Similarly, the United States Supreme Court has previously defined prima facie evidence as “such as, in judgment of law, is sufficient to establish the fact; and, if not rebutted, remains sufficient for the purpose.” Bailey v. Alabama, 219 US 219, 234 (1911) (quoting Kelly v. Jackson, 6 Peters, 632)

In establishing a prima facie case, the “evidentiary burden is modest” and the Court should evaluate the prima facie case “solely on the basis of the evidence presented by the plaintiff, regardless of the defendant’s efforts to dispute that evidence”. Zive v. Stanley Roberts, Inc., 182 NJ 436, 441 (2005) “As in a summary judgment motion, courts should view the facts in the light most favorable to a defendant to determine whether a defendant has established a prima facie claim”. State v. Preciose, 129 NJ 451, 462 (1992) A movant seeking to establish a prima facie case should further be given the benefit of all reasonable inferences that can be drawn from the evidence presented. See Kant v. Seton Hall Univ., 210 NJ Super. Unpub. LEXIS 2469, *7(App. Div. 2010); Teilhaber v. Greene, 320 NJ Super. 453, 464 (App. Div. 1999)

It’s How You Play The Game

February 8, 2021 | James P. Yudes, Esq.

Pretty much everyone has watched at least a portion of the Super Bowl and it is likely that more people know Tom Brady than the Chairperson of the Fed. The Super Bowl was lackluster this year a fitting companion to 2020-2021, which has for most of us been a dud. Some will argue that the game proved that experience wills out over youth; or that the players and not their coaches are the ultimate determining factor in the game and perhaps life in general. These two teams clashed, they both wanted what only one of them could have and both fought to the end. even when it was clear that The Chief’s had no plausible shot.

The point I am making is that both teams came to the field determined to win. Everybody wanted the coveted Super Bowl Ring and Title. The players, were at times contentious and at these times you could see words being exchanged on the field, however, you also saw the players towards the end congratulate each other and Mahomes embrace Brady in a congratulatory huddle. These are big men with high expectations for themselves savoring the combat and the conclusion.

Why would I use up ink even if it is only metaphorical on something that can be seen as quite trivial on a Divorce Lawyers blog? Because what we saw on the field was, for the most part, civility, though there were momentary laps that can be easily attributed to human imperfection. The point I am trying to make is that in litigation lawyers often become enmeshed in the angst and hostility that their clients hold. Often both lawyer and client act out their frustration from bad

Fair not Equal

February 5, 2021 | Melissa Barrella Esq.

One of the most common questions I get asked by both friends and clients who are considering filing for divorce or who have already started the process is, “What is this going to cost me?” It makes sense of course. People want to know what they are going to get and what they are going to lose. What will they get to keep and what will they have to share, or conversely, what will their spouse get to keep and what will their spouse have to share with them? Unfortunately, as simple as this question may sound, the answer is never that simple. There are many variables that can affect the answer.

The law and attorneys use a term many people have probably heard – Equitable Distribution. What I have come to learn over the years is that there are some common misperceptions where equitable distribution is concerned. Most common is the belief that equitable distribution means equal distribution – the idea that every asset, every debt, everything, is split in half. But equitable distribution does not mean equal, it means equitable or fair. Another common misperception related to the first one is the belief that if an asset predates the marriage, it absolutely is not eligible for equitable distribution. As simple and clean as this may seem, the reality of equitable distribution is almost never that simple.

What is fair is dependent on many factors including the financial position of each party and the types of assets and debts that are involved. There are many considerations that go into determining which assets will be subject to equitable distribution and how those assets will be valued and divided. For example, are there investment and retirement accounts (e.g., brokerage accounts, pensions, IRAs, etc)? If so, were those accounts opened prior to or during the marriage? And if they were acquired prior to the marriage, did the holder of the account continue to invest money into the account even after they were married, thereby contributing marital funds into a previously premarital account? Although such accounts are generally passive assets in that they change the value without any action on the part of the holder, they can also have an active element if a holder continues to put money into the account. And if the holder does continue to put money into an investment account after marrying, then part, but not all, of that asset has become marital.

Mid-Marriage Agreements Examined by Appellant Court

January 29, 2021 | James P. Yudes, Esq.

I recently argued a case via Zoom in the appellate division that could have far-reaching implications in this new pandemic world. The issue dealt with an agreement that resolved marital rights in divorce entered into while the parties were happily married. We know that prior to getting married, engaged couples can enter into a prenuptial agreement resolving certain marital issues. The ability for couples to enter into such an agreement has existed since 1988 when it was codified into a Uniform Statutory Law.

Divorcing couples must face and resolve a myriad of issues involving support, property distributions, and, where applicable, the care and custody of children. What ability then do parties have after they are married to contract for and away marital rights and obligations? Before yesterday the law was pretty clear. Mid-Marriage agreements were suspect. Two separate courts have found these types of Mid-Marriage agreements are inherently coercive and as such held that they needed to be seriously scrutinized. Since happily married people are not adverse to each other as they are when they are divorcing and, unlike people contemplating marriage, have already committed to the marriage, it was generally held that the courts needed to examine such mid-marriage agreements to determine if they are fair and fairly entered into. The burden to overcome the presumption of compulsion by circumstance was, these cases opined, monumental. The maxim that to obtain equity one must do equity, rings loudly when questioning such agreements.

In my recent appeal, my adversary argued that the Mid-Marriage agreement should be governed by simple contract law. A deal is a deal he would argue. The protections of those two cases where divorce is threatened should not apply to happily married people. These people, he argued, should be free to contract without restriction. In fact, he argued the dominant financial spouse had no duty of fair dealing or full disclosure. If the subservient spouse did not ask the right questions or seek more information, that person is an adult and should suffer the consequences of the bad deal they chose to make. Spouses should be free Mid-Marriage to give away their rights so long as they have a lawyer, even if that lawyer was hand-selected by the dominant spouse.

A HOUSE DIVIDED

January 25, 2021 | Kevin M. Mazza, Esq.

We all know about the political civil war which has been taking place in Washington D.C. However, that is a mere skirmish when considering the thermonuclear battle which is about to engulf the Earth – the impending divorce between Kanye West and Kim Kardashian! There is nothing better than a good old fashioned celebrity divorce to take people’s minds off of their mundane troubles of the day. We can see it now. Banners blasting across the internet. Headlines across the covers of People Magazine or the National Enquirer (does it still exist?) Page Six in the New York Post. Whole episodes of TMZ or Access Hollywood. Who should get custody of the children? Is Kim unfit? Is Kanye crackers? Was there a prenup, and if not, how will they divide the millions each are worth? However, there was one recent story about this once loving couple posted on the internet which actually piqued my interest. Apparently, Kim and Kanye live in a mega-mansion located in Calabasas, California. While many divorcing couples share a home which may need to be disposed of in some fashion during the divorce, it was the headline of this article that I found most fascinating – “Kim owns the land and Kanye owns the house?”.

The discussion that followed focused on how this could be, and what the impact may be in the disposition of this property upon their divorce. Assuming this is true, how might this be possible? Could it be a land lease situation – think a trailer park on steroids – where someone owns the physical residence structure who then pays rent or dues to the owner of the land itself for the privilege of placing your residence on it? Does Kanye own the track of land upon which the residence is situated but Kim owns all of the adjoining properties? Did Kim pay for the land and Kanye pay for the construction of the house itself? Perhaps as is common in most celebrity situations, some type of trusts were created to hold certain property or assets, and which afford different rights or entitlements to the holders or beneficiaries thereof. Regardless of how Kim and Kanye’s Calabasas home is held, the real question is whether it truly makes a difference when it comes to the disposition of the property in a divorce.

When it comes to California, anything is possible. California is what is known as a “community property” state. As such, it has its own set of standards as to what would constitute property divisible upon divorce, and who would be entitled to what. Who may “own” or have title to a given property, or to the form in which it may be held, might make a difference in how that property is disposed of in the event of divorce under California law. However, things may be considerably different if Kim and Kanye were getting a divorce in New Jersey. When it comes to the division of assets in a divorce, New Jersey operates by what is referred to as “equitable distribution”. If an asset or property is acquired during the course of a marriage, usually defined as being between the date of marriage and the date a complaint for divorce is filed, that property is generally considered to be a marital asset and thereby subject to equitable distribution in the event of divorce. Exceptions would include gifts or inheritances a party may receive from a third party, or assets acquired in the name of one party using “premarital” funds of that party. Assuming these exceptions don’t apply, the name under which the property is held, nor in what form, generally does not matter. Nor does it matter who paid for it. The inquiry is rather simple. Was it acquired during the marriage? Were marital assets or funds used to acquire it? If in Kim and Kanye’s case, the answer was yes, then under New Jersey law their Calabasas mega-mansion would be deemed a marital asset. It would be subject to equitable distribution. Please note that I use the term “equitable”, and not “equal”. This is not mere semantics. Once it has been established what property and assets constitute the marital estate, there are a myriad of factors under NJSA 2A:34-23.1 which a court must consider in order to effectuate “equitable” distribution of marital property. Who paid for what. Custodial obligations. Relative contributions. Prior agreements. These and many other factors may impact what distribution of marital assets would be “equitable”.

Active versus Passive: How you answer the question matters.

January 15, 2021 | James P. Yudes, Esq.

When does it make sense to hire your own expert and when does it make sense to use a joint expert with your spouse? Using a joint expert saves money, obviously, but is the saving worth the lack of control and flexibility? It depends. The more sophisticated the issue related to the asset the more important it is to have your own expert. For example, under our law, a premarital asset is exempt from equitable distribution unless it appreciated by an active effort of a spouse during the course of the marriage. So if you started a business before the marriage the question is what part of any appreciation of the asset is related to market forces and what percentage is related to your efforts. This is a complex issue with many nuances if you have a joint expert they may not feel that all such nuances should be investigated without an agreement. You will not have the same freedom to speak to the expert and your lawyer will certainly be limited in his/her ability to instruct the expert and to discuss concepts. Market forces and the time value of money may play a role in the increased value of your business and the savings if you do not have to share a portion of your businesses’ appreciated value can far exceed the cost of an independent expert.

Inherited assets are also exempt from distribution however once again active appreciation in that asset is distributable. You may have inherited an office building during your marriage. The value of that building when inherited is exempt however if it has appreciated in value during your marriage you will need to prove that the appreciation is not due to your effort but due to market forces. Having your own expert to navigate the appreciation and to explain how the property appreciated could have a critical impact on how much you will need to pay your spouse. In February I will be giving a seminar for the New Jersey Institute of Continuing Legal Education dealing with valuation issues including identifying how to distinguish active from passive appreciation. Joining me will be a Real Estate Appraiser, a Forensic Accountant, and an Appellant Division Judge. This is a complex issue in matrimonial litigation and the outcome can have a tremendous impact on the outcome of your case. Money is a commodity and we use it to value other commodities such as Real Estate and Business Ventures. Money can change in value because of inflation or depression or simply over time. World opinion may also have an impact on the relative value of a dollar. If you use the dollar to value assets without further insight into the factors that affect the value of the dollar you could be economically harmed. If you are looking for a real appreciation you need to stabilize the dollar in the year of valuation relating it to the value of the dollar in the year of acquisition.

Not all appreciation is active distributable appreciation. World or local economic changes may affect value wholly unrelated to owner effort. For example, real estate may appreciate because of zoning changes unrelated to any owner effort or because of market factors that might inflate value; a perfect example is the appreciation in the value of residential real estate in New Jersey caused by the exodus of high-income people from New York City as a reaction to Covid and taxes. This spike in value is clearly due to market reaction to the demand for none urban housing.