NY LAW SUMMARY by Dan Burns

No Fault Divorce

On October 12, 2010 New York joined the other forty-nine States and adopted a ‘No Fault’ divorce statute. Now, instead of having to claim and prove that your spouse is “guilty” of some form of “marital misconduct,” either spouse can obtain a divorce by stating under oath that your relationship has broken down irretrievably for a period of at least six months.

The only requirement the statute imposes is that you have a marital Separation and Settlement Agreement, (commonly referred to as the “Agreement”) in place before you can obtain a no fault divorce. This Agreement defines how you will distribute your assets and liabilities, how you will each support yourselves and your children, and how you will parent any minor children while living apart.

Equitable Distribution – the basic premise of the Equitable Distribution law is that marriage is an economic partnership. Upon the dissolution of that partnership the assets and liabilities that were accumulated during the marriage, called “marital property” should be equitable divided between the partners regardless of title.

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

Liabilitiescredit cards, bank loans and any other debt incurred during the marriage regardless of which partner incurred the debt or whose name it is in.

Marital property – includes 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 marital Settlement Agreement. Marital property also includes 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 spouse who did not own the property.

Separate propertyall property acquired before your marriage or after the execution of a Separation Agreement or the commencement of a divorce action, 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.

The law contains fourteen (14) factors that are to be used by the Courts in determining how to divide marital assets. These factors 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 matrimonial action without fair consideration;
  14. And
any other factor which the Court shall expressly find to be just and proper.

Pensions and Retirement Accounts

Pensions and retirement accounts are forms of deferred compensation. That means that if you worked at a job that provided these benefits while you were married, they are considered marital property and are subject to Equitable Distribution, even if the payouts are not available until long after the separation or divorce.

Retirement accounts are considered defined contribution plans. They include IRA’s, 401(k)’s, 403(b)’s, profit sharing plans and other similar accounts. The value of your account is the balance as of a specific date and includes contributions by the employee, the employer and any gains or losses due to market conditions. With very limited exceptions you are unable to take any money from these accounts without incurring a penalty until you reach the age of 59 1/2.

A pension is a defined benefit plan that pays the employee a future benefit determined by a combination of the length of service and salary. The employee is usually allowed to designate a beneficiary who will continue to receive a portion of the benefit after the death of the employee. While fewer companies still offer a pension to their employees, they are still found in larger companies, trade unions, and federal and state employers, including municipal (town and county) employers, police and fire departments and public schools systems.

Because a pension pays a lifetime benefit in the future based upon your time of service and salary, its value cannot be compared to the value of a retirement account unless you obtain an “actuarial evaluation” to determine its “present-day” value. This “actuarial evaluation” will be a dollar value that represents what the pension would be worth if it was an IRA, 401(k) or other retirement account. The amount that you or your employer has contributed to a pension is not the present-day value.

Instead of obtaining a “present-day value”, you can elect to divide a pension by paying the non-employee spouse a portion of the retirement benefit the employee spouse receives when he or she retires. This is done using a formula that pays the non-employee a fraction of the benefit the employee receives based upon the length of time you were married while a member of the pension.

You should also know that both types of accounts are in “pre-tax” dollars. That is, you will be taxed when you receive the money. However, you can transfer an interest in either type of account to your spouse without penalty or taxes (until distribution) by using a Court order called a Qualified Domestic Relations Order (QDRO).

Spousal Maintenance (formerly known as Alimony)

On January 23, 2016, a new law took effect that created “guidelines” that determine the correct amount and duration of spousal maintenance, which used to be called “alimony”.

The law provides for a formula (guideline) that is to be used in determining the amount of maintenance and the length of time (duration) it is to be paid, which is based on the length of the marriage.

In the past spousal maintenance was typically awarded to a spouse that had left a career in order to stay home and care for children or moved with his or her spouse in order to advance the career of that spouse. However, the amount and duration were often very difficult to predict and varied widely depending on the judge that was deciding your case.

One of the first things the new law did was to define the spouse with the lower income as the “Payee” and the spouse with the higher income as “Payor.” It also defined “income” to be the same as found in the Child Support Standards Act (CSSA), which means that FICA and certain other taxes are deducted from “income” before the formula is applied. “Income” also includes the income from “income-producing property distributed or to be distributed” in the divorce.

The new law also created an income cap that will increase every other January 31st starting in 2018 based on changes in the Consumer Price Index for all urban consumers (the CPI-U). The “cap” until January 31, 2018 is $178,000.00.

The law requires a Court to order the guideline amount of maintenance up to the income cap unless it finds that the guideline obligation is unjust or inappropriate after considering one or more of the following factors:

  1. The age and health of the parties;
  2. The present or future earning capacity of the parties, including a history of limited 
participation in the workforce;
  3. The need of one party to incur education or training expenses;
  4. The termination of a child support award before the termination of the maintenance 
award when the calculation of maintenance was based upon child support being awarded which resulted in a maintenance award lower than it would have been had child support not been awarded;
  5. The wasteful dissipation of marital property, including transfers or encumbrances made in contemplation of a matrimonial action without fair consideration;
  6. The existence and duration of a pre-marital joint household or a pre-divorce separate household;
  7. 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;
  8. The availability and cost of medical insurance for the parties;
  9. 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;
  10. The tax consequences to each party;
  11. The standard of living of the parties established during the marriage;
  12. 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;
  13. The equitable distribution of marital property and the income or imputed income on 
the assets so distributed;
  14. 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
  15. Any other factor, which the Court shall expressly find to be just, and proper.

 

These factors are also used in determining how much spousal support should be paid if the income of the Payor exceeds the cap. 
There are two formulas that are used in determining the amount of maintenance. One is used if the Payor spouse is the non-custodial parent and the other is used when there is no child support or when the Payor spouse is the custodial parent.

The statute also has a formula for determining the length (duration) of maintenance based on the length of the marriage. For marriages that have lasted 15 years or less, the duration will be 15% to 30% of the length of the marriage. For those couples married for more than 15 years but less than 20, the duration is 30% to 40% of the marriage and for those couples who have been married for 20 years or more, the duration is 35% to 50% of the length of the marriage.

The law also requires the termination of maintenance upon the death of either party or upon the payee’s marriage, including circumstance whereby the payee is living in a “married – like” relationship (if that can be proven). It also allows for a modification of maintenance upon the retirement of the Payor.

If you do decide that spousal maintenance is required based on your circumstances, you should determine if and when it should end or be modified. This could be based a change in your circumstances such as the payee obtaining meaningful employment or becoming eligible for a retirement benefit or social security, as well as his/her remarriage. You should also keep a life insurance policy in place on the life of the Payor in case he/she dies before the obligation has been completed.

As before, maintenance is a tax deduction to the Payor and is income to the payee. And since it terminates upon the death of the Payor, it may also be wise to maintain a life insurance policy to cover such a possibility.

Custody & Parenting Plans

While the term “custody” is not defined in any statute in New York, it is generally used to define which parent has control over major decisions affecting your children. Joint legal custody generally means that both parents have control over decision-making while sole custody gives the decision-making ability to one parent.

The primary residence of your children is the place where they reside on a day-to-day basis if one of you will be their primary caretaker while shared parenting is the term we use when the children will spend a significant amount of time at each residence.

Joint legal custody and shared parenting generally means that your children will spend a significant amount of time with each of you and neither of you provides their primary residence. While most courts do not require a detailed parenting plan, if you feel that you should have a clear understanding as to the days and times you will each spend with your children, we can develop one during the mediation sessions. It is also our experience that the best plans are those focused on your goals and parenting values rather than on a specific schedule.

Some of the topics you might wish to have in your Parenting Plan include:

Parenting Time: Would you like a specific schedule of the days and times the children will be with each of you? Or would you prefer a flexible arrangement that allows the two of you to decide on a regular basis when the children will be with each of you.

Holiday Schedule: Are there specific holidays that are important to each of you that you wish to make a provision for in your agreement?

Vacations: Would you like your agreement to include an understanding of how you will spend time with your children during vacations, either from work or from school?

Other Important Dates: You might like to include in your agreement an understanding that the children will spend time with each of you on significant days in your lives such as your birthdays, the children’s birthdays, Fathers/Mothers days and other important days such as family reunions, recitals, graduations, etc.

Significant Other: Some parents want to establish an understanding regarding the circumstances that must exist before the children are introduced to a new “significant other” before that happens.

Geographic Limitation: Do you wish to limit the residence of the children to a certain school district or radius from their current residence? If so, we can discuss this with you during your mediation sessions.

Other Issues: Do you feel your agreement should address any specific values (religious or other) you want to maintain with respect to your children?

Child Support

New York has adopted a Child Support Standards Act (CSSA) that provides for the “presumptively correct” amount of child support when parents are not living together. Although you are not required to follow the law, if you are not doing so you must explain why your amount, if any, meets the reasonable needs of your children.

Under the CSSA, the child support percentages apply to the combined parental income up to $143,000 annually (see section at the end of the Law Summary). If your combined parental income is above that amount, the court has the discretion to apply the formula or to base the additional amount on the needs of the children and the financial ability of the parents.

Although the statute does not define “custody”, the courts have ruled that the parent that provides the “primary residence” for the children for more than 50 percent of the time is to be considered the “custodial” parent for the purposes of child support. And if you have an equal parenting arrangement, the courts have ruled that the parent who has the greater income must pay child support to the other, although not necessarily the full CSSA amount.

While the statute does not require that you adhere to the CSSA, if you are not going to be doing so you must state the reasons for such a deviation in your agreement.

The most commonly accepted reasons for a deviation from the CSSA include a shared parenting plan where each of you will be spending a significant amount of time with your children or an agreement that each of you will be directly paying some of the children’s expenses. Other factors include a spouse waiving the right to receive spousal support or the full value of a marital asset, as long as your Agreement demonstrates to the Court that the needs of the children will be adequately met.

In addition to the child support amount, your Agreement should contain the following:

Modification of Child Support: While the law allows a parent to modify child support if there is a substantial change in circumstances, such as an involuntary loss of employment, you might want to include a provision in your Agreement that modifies your amount every so often based on an change in the cost of living or in the wages of a parent. By creating an understanding now, you may avoid a conflict in the future.

Medical Insurance: Under the CSSA, parents are required to share the cost of providing health insurance coverage for their children on a pro-rata (proportion to income) basis. Your Agreement should determine which of you will maintain this coverage and how will you share that cost. You might also want to determine if you will provide anything beyond basic medical coverage, such as dental or vision.

Non-covered Medical Expenses: Like the cost of medical insurance, the CSSA requires parents to share non-covered medical expenses such as deductibles and copays on a pro-rata basis. And like the basic child support amount you can deviate from this law if you like as long as you demonstrate that the needs of your children will be met.

Child Care: Under the CSSA, like medical copays and deductibles, parents also share these expenses on a pro-rata basis if they are related to a parent working or attending school. You may also want to decide how you will allocate any tax credits or deductions related to these expenses.

Other Expenses: You might like to create an understanding in your Agreement as to how you would pay for any other expenses that you incur for your children? These other expenses typically include extracurricular activities such as sports and lessons, as well as gifts, cells phones, car expenses and the other “extras” that are not covered by the basic child support amount.

Educational Expenses: These include the cost of private schooling, as well as the cost that you might incur when your children go to college. Typically this is based more on your values than on specifics; that is, what would you have done with regard to these expenses if the two of you remained together?

Life Insurance: If something happened to either of you before the children were emancipated, the survivor would be left to support the children alone. Therefore, it is recommended that you include a provision in your Agreement that requires each of you to maintain some life insurance coverage with the other parent, or a trust, as beneficiary to provide for the needs of your children if you should die before they are emancipated.

Tax Exemptions: Under the IRS regulations, the “custodial” parent would be entitled to claim the children but parents can change that to the other parent. Keep in mind that the parent with the higher income will usually obtain a greater tax benefit by claiming the children, although that is not always the case, especially if there are tax credits, or if you would be eligible for more college aid or a reduced cost for health insurance. It might be wise to speak with your tax preparer before making this decision.

Taxes

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

When deciding when to file for a divorce, be aware that your tax filing status is determined by your marital status on December 31st 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, and you furnished more than half the cost of maintaining the home.

If your Agreement does not specify, 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.

This exemption 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, other parent will need to sign IRS Form 8332, which must then be filed with the non- custodial parent’s tax return.

Since the parent with the greater income will usually save more in taxes than the other parent, the dependency exemption is usually best 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.

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.

In summary, since it is perfectly legal to have a plan in your Agreement to reduce your taxes, it is recommended that you speak to your accountant about your tax situation before making these decisions so you can create an Agreement that maximizes the tax benefits for both of you.

Definition of Income for Child and Spousal Support

Domestic Relations Law (DRL) 240 (1-b) (5) defines income to include:

  1. Gross (total) income as should have been or should be reported in the most recent 
Federal Income Tax return;
  2. To the extent not already included in clause (l)… investment income reduced by 
sums expended in connection with such investment;
  • To the extent not already included in (l) and (ll)…the amount of income or 
compensation voluntarily deferred and income received, if any, from the following sources/benefits:
    1. Workers’ Compensation;
    2. Disability;
    3. Unemployment Insurance;
    4. Social Security;
    5. Veterans;
    6. Pensions and Retirement;
    7. Fellowships and Stipends;
    8. Annuity payments, and
    9. Alimony or Maintenance actually paid or to be paid to a spouse who is a 
party…[if] …pursuant to a validly executed written agreement, in which event the…Agreement shall provide for a specific adjustment…in the amount of child support payable upon the termination of alimony or maintenance to such spouse;
  1. At
the discretion of the Court other income sources as may be available to the parent, including:
    1. Non-Income producing assets,
    2. Meals, lodging, memberships, automobiles or other perquisites that are provided 
as part of the compensation for employment to the extent that such perquisites constitute expenditures for personal use, or which expenditures directly or indirectly confer personal economic benefits,
    3. Fringe benefits provided as part of compensation for employment, and
    4. Money, goods or services provided goods by relatives and friends;
  2. 
An amount imputed as income based upon the parent’s former resources or income, if the Court determines that a parent has reduced resources or income in order to reduce or avoid the parent’s obligation for child support;
    1. Any depreciation deduction greater than the depreciation calculated on a straight-line basis for the purpose of determining business income or investment credits; and
    2. Entertainment or travel allowances deducted from business income to the extent said allowances reduce personal expenditures;
  3. The following shall be deducted from income:
    1. Unreimbursed employee business expenses except to the extent said expenses reduce personal expenditures;
    2. Alimony or maintenance actually paid or to be paid to a spouse who is a party to the instant action pursuant to an existing court order … or pursuant to a validly executed written Agreement, in which event the …agreement shall provide for a specific adjustment … in the amount of child support payable upon the termination of alimony or maintenance to such spouse;
    3. Child support actually paid pursuant to Court Order or written Agreement on behalf of any child for whom the parent has a legal duty of support and who is not subject to the instant action;
    4. Public Assistance;
    5. Supplemental Security income,
    6. New York City or Yonkers income or earnings taxes actually paid, and
    7. Federal Insurance contributions act (FICA) taxes actually paid.