Law Corner

 

 

Divorce Requirements in New York

New York now allows a divorce without alleging and proving “marital misconduct”. There no longer is a need to allege “guilt” and you may obtain a divorce by stating under oath that your relationship has broken down irretrievably for a period of at least six months – “irretrievable breakdown of the marriage.”

The only prerequisite is that you meet certain residential requirements and that you have a properly executed Settlement Agreement that resolves essential issues, including:

  1. Parenting: how you will parent any minor children when separated;
  1. Equitable Distribution: how you will distribute your assets and liabilities;
  1. Maintenance (spousal support): how you will support yourselves; and
  1. Child Support: how you will support your children.

Once an agreement is reached determining these, among other issues, either your mediator or your consulting attorneys can draft a Settlement Agreement that will be filed with your uncontested Divorce Papers.

You may file for a no-fault divorce at any time, or live under your Settlement Agreement indefinitely. Timing for the divorce is personal. Some couples choose to wait to file for various reasons: maybe they feel there is still a chance that the marriage can be saved, or there may be financial factors such as tax filing considerations or the cost and availability of health insurance. Others want to file the divorce papers immediately.  We can help you evaluate your options.

 

 

 

Parenting

If you have children of the marriage, you will want to make parenting decisions in their “best interests.” Legally, you will need to agree on two separate “custody” arrangements: legal custody and residential custody.

Legal & Residential Custody

Legal custody determines which parent has control over major decisions affecting your children. Joint legal custody, for example, means that both parents have an equal say over major decisions such as education, healthcare and religion. Sole custody, on the other hand, gives the final decision-making ability to one parent.

If you and your spouse are able to communicate reasonable about your children, joint custody may be appropriate. You may also choose to carve out spheres of decision-making authority. Whether you agree to joint or sole legal custody, you may agree to consult with each other before major decisions are made.

Residential Custody refers to where the children will reside on a day-to-day basis. “Joint” or “Shared” parenting (custody) is when the children will spend close to equal time at each residence. “Primary residential custody” is where the children reside primarily with one of the parents.

The Parenting Plan that the two of you reach will include a provision identifying whether you will have joint legal custody or if one of you will be the sole legal custodian; which of you, if either, will provide the primary residence for the children; and how you will decide when each of you will spend time with the children in the future.

Transitions, Holidays, & Vacations

Depending on the ages and temperaments of the children, you will need to decide the frequency and structure of the transition from one home to the other, and may want to detail how holidays, birthdays, vacations, and other special occasions are shared.

Information Sharing & Relocation

As far as sharing information, parents usually agree that each will receive copies of school reports, medical records, notices and other information concerning the children. You also may want to agree that the children will remain within a certain radius of their current residence or within a specific school district.

Creating a detailed and workable parenting plan may be one of the most important things you can do in mediation or collaboration.

 

 

 

Equitable Distribution (Assets and Debts)

In New York, property division between divorcing spouses is governed by the “Equitable Distribution Law.”   The underlying concept of equitable distribution is that marriage is, among other things, an economic partnership, and assets and debt acquired during the marriage should be shared equitably. Equitable does not necessarily mean “equal,” but rather, “fair” under the circumstances.   The longer the marriage, and the more intertwined the finances, the stronger the argument will be to share equally.

Property subject to equitable division includes anything of value such as:

  • personal property such as bank accounts, cars, household furnishings, pensions, retirement accounts, and stock options;
  • real property such as houses or land; and
  • intangible property such as an interest in a business.

In mediation or collaboration, we will work to (1) identify your property; (2) classify your property into marital vs. separate property; (3) value the property as of a certain date; and (4) determine a fair distribution of the property – i.e., an equitable distribution.

Marital property is all property that was acquired between the date of your marriage and the date of the filing of a divorce action or the execution of a Separation or Settlement Agreement (or any other “stop the clock” date that you agree to).  It can also include an increase in the value of separate property if the increase occurred during the marriage and was due, in some part, to the efforts of the non-owning spouse. Title is not determinative.

Separate property includes all property acquired before your marriage or after the commencement of a divorce action or the execution of a Separation or Settlement Agreement (or any other “stop the clock” date that you agree to), as well as gifts that you received from someone other than your spouse, property that you received through an inheritance, or money you received as a result of a personal injury settlement.

Marital debts include credit cards, bank and private loans, and other obligations incurred during the marriage. Marital debts are divided in the same manner as assets, and title is not determinative.

The statutory factors found in Domestic Relations Law section 236B(5) that are used to determine the equitable distribution of marital property include:

  1. the income and property of each party at the time of the marriage, and at the time of the commencement of the action;
  2. the duration of the marriage and the age and health of both parties;
  3. the need of a custodial parent to occupy or own the marital residence and to use or own its household effects;
  4. the loss of inheritance and pension rights upon dissolution of the marriage as of the date of dissolution;
  5. the loss of health insurance benefits upon dissolution of the marriage;
  6. any award of maintenance under subdivision 6 of this part;
  7. any equitable claim to, interest in, or direct or indirect contribution made to the acquisition of such marital property by the party not having title, including joint efforts or expenditures and contributions and services as a spouse, parent, wage earner and homemaker, and to the career or career potential of the other party;
  8. the liquid or non-liquid character of all marital property;
  9. the probable future financial circumstances of each party;
  10. the impossibility or difficulty of evaluating any component asset or any interest in a business, Corporation or profession, and the economic desirability of retaining such asset or interest intact and free from any claim or interference by the other party;
  11. the tax consequences to each party;
  12. the wasteful dissipation of assets by either spouse;
  13. any transfer or encumbrance made in contemplation of a matrimonial action without fair consideration;
  14. whether either party has committed an act or acts of domestic violence, as described in subdiv. one of section 459-a of the social services law, against the other party and the nature, extent, duration and impact of such act or acts; and
  15. any other factor which the court shall expressly find to be just and proper.

In mediation and collaboration, we will work together to ensure that property and debt are shared equitably and that you both feel that the agreed upon division is fair and workable.

 

 

 

 

Child Support

Every child is entitled to be supported by both parents. The parent the child lives with primarily is called the “custodial parent,” and the other parent is the “non-custodial parent.”  Legally, the non-custodial parent must pay child support to the custodial parent.

New York has established child support guidelines, and you are expected to understand and present in your agreement the guideline calculations — the Child Support Standards Act (CSSA). You may choose not to follow the guidelines, but you need to explain why in your agreement.

CSSA basic support calculations: The CSSA basic child support amount is designed to meet the basic needs of your children — food, clothing and shelter. The CSSA mandates that a percentage of the parents’ combined adjusted gross income (defined below) up to a current ceiling of $154,000 (as of 3/1/20) be deemed basic child support – Parentscombined basic child support obligation.

  • One child: 17%
  • Two children: 25%
  • Three children: 29%
  • Four children: 31%
  • Five children: no less than 35%

See NY child support calculator

If your combined parental income is above the cap, the court has the discretion to apply the formula above the cap, or to base the additional amount on the needs of the children and the financial ability of the parents. In agreements negotiated outside the court system, we too will look at needs, interests and resources.  The guidelines do not make sense in all situations, and we have the luxury out of court to be more creative.

Parent’s Share of Basic Child Support: After calculating the “combined basic child support” amount, the law presumes a “non-custodial” and “custodial” parent (discussed below) and requires the “non-custodial parent” to pay to the “custodial parent” his/her pro rata share (percentage of their income to the combined income).

Custodial/Non-Custodial Parent: The parent who provides the primary residence for the children for more than 50% of the time is considered to be the custodial parent for purposes of child support. If the children will spend equal time with each parent, the “non-custodial” parent for purposes of child support is the parent who earns the greater income. Of course, consideration should be made in mediation or collaboration to work outside the strict formula when parents share equal parenting responsibilities, as the formula contemplates a primary caregiver.

Add-Ons: In addition to the basic child support obligation, the CSSA requires that the parents pay for the following mandatory add-ons pro rata according to their income: unreimbursed healthcare expenses and child care to enable a parent to work or seek work. The cost of discretionary add-ons, such as extra-curricular activities (music lessons, sports, summer camps, etc.) and educational expenses are also shared by the parents, but must be mutually agreed to.

CSSA Income: For purposes of the CSSA, the adjusted gross income (CSSA income) is calculated as follows: Gross income minus Social Security, Medicare, and NYC or Yonkers taxes, if any. Note that there is no deduction for Federal or State income tax. Maintenance paid to one spouse should be deducted from the payor’s income and added to the payee’s when figuring out CSSA income and pro rata share.

Cost of Living Adjustments: The CSSA contains a cost of living adjustment so that every two years the base amount will change by the same percentage as the consumer price index. You may choose to incorporate this into your agreement.

Deviation from the CSSA: In mediation, couples often agree to financial arrangements that differ from the CSSA (based on real budgets, for example), but the law requires that your agreement show the CSSA calculations and then explicitly state the reasons for such deviation.   The most common reasons include: a parenting agreement where each of you will be spending a significant amount of time with your children; an agreement that each of you will be directly paying some of the children’s expenses; a waiver of a right to receive spousal support or the full value of a marital asset; or any other factor that demonstrates to the court that the needs of the children will be adequately met.

Future Modifications: Finally, while the law provides for a mechanism to modify the amount of child support as the income of each parent and the needs of the children change (“substantial change in circumstances”), many couples create their own modification provisions and include them in their agreement so they don’t have to risk an application to a court in the future. For example, you may want to include a modification if (a) more than three years have passed since the agreement, or (b) there is more than a 15% change in either parent’s income. You can provide that you will return to mediation to discuss modifications, or you can agree to a formula based on income. Either way, it is wise to file modifications with the court so that they will be included with your original judgment.

 

 

 

Spousal Support (Maintenance)

Maintenance (referred to as alimony in the tax code and spousal support in family court) is money paid by one spouse to the other to aid in the transition of divorce, and help the receiving spouse become self-supportive. New York law requires one spouse to provide financial support to the other if they are unable to meet their needs on their own income. In fact, the law prohibits spouses from entering into an agreement that would result in either going on welfare.

In September 2015, New York passed a new law that will bring more clarity and consistency to determining temporary and post-divorce maintenance. Historically, temporary maintenance, awarded during the pendency of a court action, was determined by a formula. Post-divorce maintenance, however, was left to the discretion of the court. This made it very hard to predict the amount and the duration of support, and gave little to no guidance for those pursuing out-of-court settlements.

Most significant, the new maintenance law provides a formula to calculate both temporary and post-divorce maintenance. Also notable, the law reduces the amount of payor’s income to which the computations apply, bringing it down from $ 543,000 (the old income cap) to $ 192,000 (as of 3/1/20). This cap is subject to increase, every two years, according to the CPI.

Relevant to parties in mediation or collaboration, you can agree to deviate up or down from the maintenance guidelines to achieve a support amount that is workable and fair. (temporary maintenance is not addressed here).  The low income cap may not produce fair results for higher earners.  In those cases, we may chose to look at the deviation factors listed below.

Maintenance Formulas:  The formulas for calculating maintenance distinguish depending upon whether the maintenance payor is also paying child support:

Formula #1 – If Child Support Paid by Maintenance Payor (payor is non-custodial parent):

  • Multiply the sum of the maintenance payor’s income and the maintenance payee’s income by 40% and subtract the maintenance payee’s income from the result;
  • Subtract 25% of the maintenance payee’s income from 20% of the maintenance payor’s income;
  • The lower of the two amounts will be the guideline amount of maintenance.

 Formula #2 – If No Child Support Paid by Maintenance Payor:

  • Subtract 20% of the maintenance payee’s income from 30% of the maintenance payor’s income;
  • Multiply the sum of the maintenance payor’s income and the maintenance payee’s income by 40% and subtract the maintenance payee’s income from the result;
  • The lower of the two amounts will be the guideline amount of maintenance.

Where the guideline amount is zero or less than zero no award of temporary maintenance or post-divorce maintenance is made.

Deviation From Presumptive Amount of Maintenance:  Consideration of payor income above the income cap is discretionary, and can be considered when using the cap would be “unjust or inappropriate”.  In court, the judge is required first to calculate the maintenance in accordance with the applicable formula. Maintenance to be paid with respect to income above the cap, if any, shall then be determined by consideration of a list of the following statutory factors:

(a) the age and health of the parties;

(b) the present or future earning capacity of the parties, including a history of limited participation in the workforce;

(c) the need of one party to incur education or training expenses;

(d) the termination of a child support award during the pendency of the temporary maintenance award when the calculation of temporary maintenance was based upon child support being awarded and which resulted in a maintenance award lower than it would have been had child support not been awarded;

(e) the wasteful dissipation of marital property, including transfers or encumbrances made in contemplation of a matrimonial action without fair consideration;

(f) the existence and duration of a pre-marital joint household or a pre-divorce separate household;

(g) acts by one party against another that have inhibited or continue to inhibit a party’s earning capacity or ability to obtain meaningful employment. Such acts include but are not limited to acts of domestic violence as provided in section four hundred fifty-nine-a of the social services law;

(h) the availability and cost of medical insurance for the parties;

(i) the care of children or stepchildren, disabled adult children or stepchildren, elderly parents or in-laws provided during the marriage that inhibits a party’s earning capacity;

(j) the tax consequences to each party;

(k) the standard of living of the parties established during the marriage;

(l) the reduced or lost earning capacity of the payee as a result of having forgone or delayed education, training, employment or career opportunities during the marriage;

(m) the equitable distribution of marital property and the income or imputed income on the assets so distributed;

(n) the contributions and services of the payee as a spouse, parent, wage earner and homemaker and to the career or career potential of the other party; and

(o) any other factor which the court shall expressly find to be just and proper.

In mediation or collaboration, we would look to the entirety of your situation, and you would strive to agree on support that was workable and fair.

Definition of Income:  The definition of income for purposes of calculating maintenance is the same as that which is used in the CSSA for calculating child support, and includes income from all sources with deductions for Social Security, Medicare, and local (city) taxes, among others. Income also includes income that will be produced from the equitable distribution of income-producing property. The law requires that you add/subtract maintenance to each of your incomes before calculating child support. Therefore, it is prudent to make calculations in the following order: equitable distribution, maintenance, and then child support.   (Whether child support will be paid should be determined before calculating maintenance as the formulas differ depending on whether child support is being paid, and by who).

DURATION – ADVISORY SCHEDULE

Length of Marriage Duration of Maintenance
0 – 15 years 15% – 30% of length of marriage
15 – 20 years 30% – 40% of length of marriage
More than 20 years 35% – 50% of length of marriage

Modification of Maintenance:  The ability to modify an award of spousal maintenance either upward or downward will depend on whether it was the result of a court judgment/order or Settlement Agreement. If it is the result of a court judgment or order, the standard is a substantial change of circumstances. If the maintenance payments are the result of a Settlement Agreement, then there is a higher standard to be met for modification — extreme hardship.  The new maintenance law introduced another modification factor — the actual, full, or partial retirement of the payor if the retirement results in a substantial change in financial circumstances.  In mediation or collaboration, you can customize your modification triggers.

Taxes:  Maintenance has long been tax deductible to the payor and taxable income to the payee. Pursuant to the 2017 Tax Cuts and Jobs Act, for separation agreements signed after 2018, maintenance, like child support will not be a taxable event — i.e., not deductible or reportable as income.   Since maintenance terminates upon the death of the payor, it may be advised to secure a life insurance policy to secure this obligation.

 

 

 

 

 

Basic Tax Considerations

As a general rule, there are no tax implications involved in the transfer of a marital asset. However, there are many other tax issues to consider when reaching an agreement.

Tax Status/Head of Household: When deciding when to file for a divorce, be aware that your tax filing status is determined by your marital status on December 31 of each year. If you are divorced as of that date, you must file Single for the entire year. If you are married, you can file Joint or Married Filing Separate.

Even if you are married, you may be able to file as Head of Household if your spouse did not live in the home for the last six months of the tax year, the residence is the principal living space of a child (more than 50% overnights), and you furnished more than half the cost of maintaining the home. This status is not-negotiable.

Usually Married Filing Jointly produces the lowest tax rate; Head of Household is next, followed by Single, with Married Filing Separately producing the highest tax rate.

Child Dependency Exemption/Credit: The parent with whom the child resides for the greater number of nights during the year is considered the custodial parent and is therefore entitled to claim that child on his or her separate tax return. The dependency exemption/child credit cannot be split although each of you can claim different children and you can agree to alternate this exemption each year. If the non-custodial parent wishes to claim a child, the other parent will need to sign IRS Form 8332, which must then be filed with the non-custodial parent’s tax return.  You will make these decisions together, and the details will be included in your Settlement Agreement.  (The 2017 Tax Cuts and Jobs Acts eliminated the dependent exemption but increased the child tax credit from $1,000/child to $2,000/child under 17).

If the parent with the greater income can save more in taxes than the lesser-earning parent, the dependency exemption/credit may best be given to that parent even if it means he or she pays the “tax cost” to the other parent. Doing so allows you to save on your taxes and use that savings to benefit your children. At high incomes, there may be a phase out of exemptions/credit.  You are advised to consult with a tax professional to determine how best to proceed.

Child Care Credit: The custodial parent can continue to claim a childcare credit for work related expenses incurred for a child under age 13. A tax credit is worth much more than an exemption since it reduces the tax you pay, not just your income.

Summary: Since it is perfectly legal to plan your agreement to reduce your taxes, I recommend that you consult with your accountant about your tax situation so you can create an agreement that maximizes the tax benefits for both of you.

2017 Tax Cuts and Jobs Act.  There are many changes in this new act affecting divorcing couples, including eliminating the alimony deduction and changes in dependency exemptions and head of household benefits, among others.   In mediation, we would discuss how best to navigate the various changes in tax law to maximize the benefits to the family.