Are You an Innocent Spouse?

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One of the benefits of marriage is being able to file joint tax returns with a spouse. However, marriage brings a double-edged sword. On the one hand, spouses reap the benefit of being able to collectively have more money to live on if they’re drawing from the same pool during their marriage and maximizing their tax benefits. The downside, though, is when the spouse with no knowledge of marital finances signs off on tax returns and it later comes to bite them. Often the spouse in control of the finances just tells the other person to sign, because they’ve waited until the 11th hour to file, and have no time for explanations or mincing meat.

Every now and again, a spouse will even sign the other spouse’s signature, which often comes out during the divorce. I’ve had a few clients over the years that said their spouse signed for them, but when I’ve dug deeper, that client has told their spouse to sign for them if they ever needed to.  

In one classic situation, the wife asked for child support and claimed that her husband made $600,000, but the joint tax return showed that collectively they made $180,000. In this case, the husband said that she signed to that amount and should be held to it for child support calculations, thereby imposing a significantly lower child support obligation on him. The wife claimed that she didn’t know what she was signing. She simply believed and acceded to him. Of course, assuming the wife knows basic math, she would know she was living on $600,000, rather than $180,000.

I recently worked on a divorce case, where the wife signed an addendum to the couple’s prenuptial agreement, executed many years ago, that gave the husband carte blanche discretion and authorization with regards to filing their joint tax returns; akin to a power of attorney relating to their taxes. This is an extremely bright and savvy woman — starry eyed in love, in her youth, with who she thought was an incredibly charming millionaire; her romantic notions and desire to be taken care of created thick naïve glasses through which the reality was obscured, and she trusted him wholeheartedly. Years later, his macho charade started to unravel, and IRS letters claiming tax evasion and liabilities exceeding 15 million dollars started to pour in. After her initial shock and numbness, she ran for cover under the safety haven of “innocent spouse relief.” See IRS Publication 971 and IRS Form 8857 (Publication 971;  Form 8857.pdf).

In these case, I’ve looped in accountants, tax lawyers and forensic experts, if needed, to provide the necessary perspective, releases, and maximize the relief to the client. It becomes very interdisciplinary, and a team of professionals who work well together and communicate fluidly, efficiently, and effectively, while also communally keeping an eye on the client’s pocketbook and spending is key.

Cheryl Stein, Esq.
The Law and Mediation Offices of Cheryl Stein
745 Fifth Avenue, Suite 500
New York, NY 10151
Phone: (646) 884-2324
E-mail: cheryl@cherylsteinesq.com

Divorcing High Net Worth Couples

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How apropos is the expression, “Increased possessions, increased worries” or the lyrics to the song, “Mo’ Money Mo’ Problems” to high net worth divorces?

In short, these are first world problems, but problems, nonetheless.

The bigger and more intricate or complex the pie, the more moving parts there are to account for. The asset portfolio and sources of income streams and investments are multilayered and the “mandatory” “nondiscretionary” expenses and the definition of necessities have a significantly broader scope.

The difference between income and assets must also be differentiated, although, high net worth couples are typically well-endowed in both areas and may have income producing assets as well as their business and professional incomes.   

When a high net worth couple divorces, the letter of the law, foremost the statutory caps for maintenance and child support, most often goes out the window, with there being significant latitude for judicial discretion. It’s a different ball game. The statutes are mere guidelines, meant for the average couple, and are inappropriate for ones that fall significantly above the median wealth. Many times, when working on monthly budgets with this caliber of client, their monthly expenditures are higher than what the average American makes per year or what the statutory cap may be.

The present statutory caps are set at $184,000 of the payor’s income for maintenance and $148,000 of the combined parental income for basic child support payments. It is the burden of the payee who is requesting support above the cap to prove the need. This burden is, obviously, swiftly and effortlessly met in high net worth cases.

The caps are periodically adjusted to account for inflation according to the Consumer Price Index (CPI). The $148,000 child support cap was increased to this figure on March 1, 2018. Immediately prior to this, the cap was $136,000. At that time, a client whose monthly budget was in that approximate amount wanted to know what his total support payments would be after an 18-year marriage within the first 2 hours of meeting him; this was unrealistic with the level of complexity of his portfolio and standard of living analysis that would need to be conducted.

The guiding light in these cases is the standard of living analysis, which is an in-depth, thorough analysis of the money and resources needed to maintain the payee’s standard of living, balance out the parties, and ensure that the childrens’ needs will be appropriately met in both households.

These clients still pose off-the-cuff queries at inception regarding how much they’ll have to pay in support, as they often have significant anxiety about it. It is important to be very judicious and careful with this answer, since when clients hear support figures, especially at the beginning of a case, they often become psychologically married to these figures and it gets harder for them to mentally adjust it later.

High net worth spouses whose wealth is tied up in non-liquid assets often have to figure out how to most readily convert the assets to cash in the most tax savvy way. Sometimes they intentionally try to stretch out and prolong the divorce towards this end. These types of case can also be extremely expensive, because of all the required valuations of the assets; moreover, if the parties cannot readily agree on the values and need to hire separate valuators.

There are also different levels of high net worth.

Chances are if you’re living in select neighborhoods in New York City or Manhattan, you’re likely considered as having a high net worth. A family with 3 children enrolled in private school could be running on at least a million dollars a year, but they’re not necessarily feeling so well-off when divorce happens, and they have to liquidate assets and clear out savings.

These different levels of wealth can also be treated differently.

A client wrote in the subject line of one of his e-mails, “I earn 500k, have assets totaling 1.5 million, and am middle- class.” While others might view him as delusional or an ingrate, he wore the middle-class sentiment like a halo and as part of his self-identity. He was very concerned how he would be able to live post-divorce.

Moderately wealthy people often get hit hard. Someone can make $750,000 a year, have assets of $5 million and three children in premier private schools and camps, and divorce can wipe them out.

As of late, in New York County, where there is a high constituency of high net worth divorces, we are commonly seeing judges capping the very high net worth spouses at an income level of approximately $400,000 and setting the child support and maintenance amounts accordingly. As an attorney, it’s important to be aware of this, in terms of setting up the case, counseling your clients, and effectively negotiating towards favorable results.

Cheryl Stein, Esq.
The Law and Mediation Offices of Cheryl Stein
745 Fifth Avenue, Suite 500
New York, NY 10151
Phone: (646) 884-2324
E-mail: cheryl@cherylsteinesq.com

Beware the Trojan Horse

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During negotiations, people oftentimes have a hierarchy of what’s important to them. As a divorce attorney, you have to coach your clients to be wary of what they want versus what the other spouse wants to give them, because almost every scenario has its benefits and pitfalls. Consider these various potential Trojan Horses:

Houses:

Getting the house in a settlement is typically a big issue. Often, the spouse that wants the home perceives it as a security blanket because someone else had been paying for it. If this spouse has never managed the house and doesn’t know how to run a budget, and you, as their attorney, see how tight their budget is, you might be concerned about giving them the house. What if the boiler breaks down within the next two years and there’s no cushion in the budget to fix it? This would drain the client, no matter how emotionally attached they are to the house.

Vehicles:

I’ve had clients that own two Mercedes that they pay parking for in New York City. For the spouse trying to get the cars, they may not realize the onerous responsibilities included in owning a vehicle. These are the types of Trojan Horses that can blow a person’s budget if they don’t carefully account for expenses.

Custody:

Another example of a Trojan Horse can be hidden in custody arrangements. Sometimes, when one party fights to give the other party a specific visitation schedule, they later regret it. I have had women who were fighting tooth and nail for certain visitation schedules, and then suddenly realized that having their ex-husband take extra days is tremendously helpful to them.

Maintenance Payments:

Maintenance is almost always a Trojan Horse to the recipient because it is presently taxable to the payee. When the recipient can receive a lump sum payment, those are tax free equitable distribution exchanges between the parties, making it a much cleaner way of budgeting for the future. January 2019 will bring changes to the way maintenance payments are taxed streamlining pay-outs from payors to payees.

When Something Seems Too Good to Be True:

I had a situation where, after a long negotiation, the husband agreed to pay an enormous amount to his wife. In the end, however, this “gift” ended up being a ruse. He was afraid that his wife would find out about an additional half a million dollars he had hidden from her. His supposed generosity was partially because of guilt and partially to try and end the negotiation, so we wouldn’t dig deeper.

As a divorce attorney, I coach my clients to look for all the various types of honey pot traps. I have them analyze whether or not the things they want may actually end up being more devastating to them if they receive them. Often my clients, once they start getting deals they’re happy with, do change their minds about wanting to go in front of a judge. This is when we quietly negotiate a higher amount with the other side, draft an agreement, and then have the court sign off on it.

Cheryl Stein, Esq.
The Law and Mediation Offices of Cheryl Stein
745 Fifth Avenue, Suite 500
New York, NY 10151
Phone: (646) 884-2324
E-mail: cheryl@cherylsteinesq.com

Guilty Until Proven Innocent

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The traditional “innocent until proven guilty” is often reversed in matrimonial cases. One side is intent on presenting the other side as some sort of shady character in order to gain an advantage. A lot of times, it’s used as a strategy, but the party making these accusations typically believes what they’re saying. For example:

Foreigners:

Where parties are foreigners, there’s the notion that what happens in their country of origin is not discoverable or discoverable with great cost and difficulty. A couple, originally from France or Italy, could have been living here for 20-30 years. The husband may have varied and complex businesses or investments, so the wife, intent on getting more money, will make accusations that her spouse has all sorts of accounts in other countries, and that money has disappeared over the years.

People maintain attachments to their country of origin, often flying back at least twice a year and staying for a month at a time. At one point, those parties often did have bank accounts in their home country — what happened to those accounts? These parties are constantly in a state of trying to prove their innocence and cooperation with the full disclosure and discovery process.

When a party asks what happened to those foreign accounts and their spouse explains it, the suspicious and accusing party believes what they want to believe, and it’s oftentimes very hard for the spouse who’s being demonized to dispel that accusation, especially for high net worth couples, where, often, at the time of divorce, there magically isn’t enough money to be divided.  

I have a client right now in that situation. There were millions of dollars made over the course of 12 years, and now they are both asking where it went. I know where it went — I see the way these people live. This is a case where both parties are scratching their heads. Both spouses think the other one’s lying and putting up a pretense. They both think the money is hidden in their country of origin, but the truth is, the money was probably spent right here in America, evaporated into thin air by their sumptuous and indulgent lifestyle.

Domineering Personalities:

Often, one spouse controls the finances and has a more domineering personality. When the person controlling the finances is domineering, there is often the view that they’re hiding things. It’s easy to accuse a controlling spouse of being underhanded and surreptitious.

Business Write Offs:

When the husband or wife owns a business, there are write-offs while they’re part of a family unit. Some business owners find ways to “write off” their family’s groceries, their wife’s manicures, and other household expenses. At the time of divorce, all those things that were once very helpful to the non-titled spouse, and allowed them more money to live on as a married couple, now gets used against the titled spouse to attack their credibility and get more money out of them.

There are those that would argue that she knew all about it — her signature was on the tax return. But then, the reverse could be said — she can only sign as to what she knows. He was the one that knew everything, and she signed for the expenses she knew.

Personal Work Ledgers:

Business owners, or anyone that has any sort of cash business, often have several ledgers to track how much money is really coming in. Lining up and going through all these ledgers can make the spouse’s head spin, and most of the time, the spouse doesn’t know what’s going on and how to accurately interpret and reconcile it all.

We always ask to see work ledgers as part of discovery, but in cases like this, we give special emphasis to it. We home in on personal work ledgers because a party will tell us that they know their spouse was extremely diligent about keeping those ledgers, recording every single penny that came in. I want to see those ledgers, because they’re usually the most accurate account of how much money was really made.

Debt-to-Income Ratio:

When people travel a lot or live lavishly, they can often be in huge debt. Their reported debt-to-income ratio is off-kilter, yet they’re driving extremely expensive cars. Sometimes, their spouse suspects that they are doing it on purpose to make themselves appear poor, on paper. Typically, judges are not fond of these types of people when they try to slither their way out of support payments. The assumption is that these people’s values are misplaced — they’d rather spend money on a luxury car than their families or that there is more money than they are purporting.

Attorneys should always encourage their clients to be ethical and forthcoming. We don’t expect people to be anywhere near perfect, but we do expect them to be trying to do the right thing. If a client did not reveal something in the beginning and then does so along the way, it is our job to correct the record. If we can see from the beginning that the judge does not believe a client and the case continues on this note, we must do a cost/benefit analysis with the client: should they settle or continue to litigate. We don’t want a client to spend large sums on litigation when, ultimately, they may not prevail, because their credibility is questioned. It may be better to settle on a comfortable enough middle ground with the other side than risk an unfavorable ruling or divorce judgment.

Feel free to contact The Law & Mediation Office of Cheryl Stein to schedule a consultation.

Cheryl Stein, Esq.
The Law and Mediation Offices of Cheryl Stein
745 Fifth Avenue, Suite 500
New York, NY 10151
Phone: (646) 884-2324
E-mail: cheryl@cherylsteinesq.com

When Love and Marriage Don’t Go Together like a Horse and Carriage….What’s Left?

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Marriage is inherently deemed an economic partnership, according to the law, and upon its dissolution, the accumulated assets and interests are to be distributed on the basis of the economic needs and circumstances of the parties.

Equitable distribution in New York is fact specific, and not a 50/50 split, like it is in the community property states, such as California, Arizona, Nevada, and Alaska. (There are 9 community property states in total.) Much is left to judicial discretion in this neck of the woods. Both parties contributions as spouse, parent, wage earner or homemaker are accounted for. The court possesses flexibility and elasticity to mold an appropriate decree, because what is fair and just in one circumstance may not be so in another.

With regards to equitable distribution, we look closely at that economic partnership, splitting interests when there are both direct and indirect contributions made to the titled spouse by the non-titled spouse. These details will oftentimes determine how much is allocated between the parties. If there were many direct or indirect contributions made by the non-titled spouse, that could give a lot of weight to how much is paid to the non-titled spouse in the equitable distribution payout.

Marriage is like being on the clock. It is “marriage time,” like punching in and out of work, with the punch-in time being the date of marriage and the punch-out time being the date of commencement of a divorce action for active assets, and date of trial for passive assets. When you sign up for marriage, your financial actions are accounted for, and there is to be a reckoning with your spouse. A large part of the marriage (contract) is a financial contract with your spouse, and whether or not you understand the provisions and their ramifications when you take those marriage vows, you are bound by them. All time you spend during the marriage may be accounted for and “billed,” so to speak, in the final pay-out equitable distribution awards.

Arguably, this result may be inherently unfair from the get-go if you consider that most people don’t read the Domestic Relations Law, Family Court Act, General Obligations Laws, enter into a prenuptial agreement, or consult with a matrimonial attorney prior to marriage, so they are clueless as to the full breadth of the financial picture and often make erroneous presumptions. For example, many people presume that money they put in their separate titled accounts during marriage is separate property, which is incorrect. All income earned during marriage is marital income, so if spouses put their incomes into separate titled accounts, rather than keeping that money separate, they are commingling their separate account and presumptively turning everything in that account into marital property – the exact opposite result they intended.

Another counterintuitive consequence and irony is that many people’s performance tanks during a bad marriage. A non-titled spouse may be requesting and entitled to equitable distribution for their contributions when the titled spouse may feel that all their spouse did during the phases of a distant or rocky marriage is hamper their performance and growth, and that their growth would have been exponentially greater without their spouse and his/her claimed contributions.

The hoi polloi are entering into marriage contracts without understanding the basic principles of the contract, and later claiming that they did not understand the contract is not a valid defense. If you are old enough to get married, you are supposedly mature and responsible enough to avail yourself of this information and plan your finances accordingly.

It would be a leap to evoke the phrase “The Follies of the Masses,” but as matrimonial attorneys and mediators, we urge people to educate themselves about managing their finances prior to marriage, and if that time has passed, much may still be salvaged. I have married people asking for consultations all the time to realign their finances and understand the financial blueprint, for example, prior to one spouse opening a business, assuming a large debt, receiving an inheritance or personal injury award or liquidating untainted premarital property towards purchasing a jointly titled home, all of which are opportune times.

Feel free to contact The Law & Mediation Offices of Cheryl Stein with any questions.

Cheryl Stein, Esq.
The Law and Mediation Offices of Cheryl Stein
745 Fifth Avenue, Suite 500
New York, NY 10151
Phone: (646) 884-2324
E-mail: cheryl@cherylsteinesq.com

Equality Schmality

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Men often voice that they feel they get the raw end of the stick during divorce, without a larger understanding of their situation.

Generally, women are perceived as victims and sympathetic characters in divorce, both in the monetary and parenting realms.

People often ask me if I am a female-or male-oriented attorney and which sex I predominantly represent. I represent both equally, and each case is fact specific. At any given moment, I represent mirror image situations-for example, a female client who would like to impose that her ex keep to a very time specific visitation schedule, and a male client lamenting that his wife is overly rigid in demanding that his visitation must take place within very precise time frames.  

Arguably, men are often still considered second fiddle when it comes to parenting, even though there is a whole movement underway in the direction of 50/50 parenting, often titled “50/50 is the new default,” as in a 50/50 joint physical and residential custody arrangement.

When actions are commenced, typically it is the husband who moves out and the wife who remains in the marital residence with the children. Men often have a hard time with the idea of leaving the house and no longer sleeping under the same roof as their children every night. Something they took for granted is suddenly gone.  

There is still the general presumption that women are the natural caretakers. Men often have to fight hard to obtain a more liberal access schedule. They often verbalize finding it offensive that they suddenly have to “visit” with their children during prescribed hours. (Euphemisms have been contrived, such as “parenting time” and “access schedule,” but it doesn’t change the underlying concept.) The emotional trauma that many men experience when this happens is not spoken about. Men are expected to “man up” about things, while women are more touchy-feely, often attending support groups or leaning on their immediate social circle.  

In a more traditional situation, such as with a stay-at-home mom, or if the woman is a teacher, of course maintenance is going to be paid, of course the woman is going to be the primary caretaker. But when it’s the reverse and the man is the one that stays home caring for the children or is a teacher, there’s a presumption that something must be wrong with him. Why isn’t he in a more manly profession?  

When the woman is the higher income earner, the man often feels pressured to give up maintenance or to reduce the amount that he takes. It’s almost expected that the man should come up with faster ways to make money or simply not leech off his wife. In the reverse situation, the pressure would be less, because it’s expected that women leave the workforce when they have children to care for. This dynamic is often most evident in mediation when both parties are in the room together, openly expressing their viewpoints.

An additional noteworthy point is domestic violence and abuse towards men.

Domestic violence towards women is a well-known phenomenon, but we hear little about domestic violence towards men, and not because it isn’t pervasive. It is, in fact, quite commonplace, as many divorce attorneys can tell you.

I have seen situations where men, who are 6’2” and over 200 pounds, are the victims of physical and emotional abuse by their 5’4″ wives. These men may be in high-power positions, dominating during business meetings, but tell me they’re terrified to go home to their wives. This issue is not spoken about and very little sympathy goes towards men. They’re expected to suppress their feelings and don’t really have any forums to talk about or deal with it. A lot of these men feel they can’t reveal what’s going on in their lives because of their high-powered professional positions; for all intents and purposes, they have everything together.

It is not a pity party competition between the sexes-rather an observation. Many of my male clients have expressed that they wish there were more resources available to them, while they are going through separation and divorce, to help them through the process. I have a long list of support groups to dispense to my female clients and often think I need to get all my male clients together to create their own support group, because they are so hard to come by.   

Contact The Law & Mediation Offices of Cheryl Stein with any questions if you are preparing for or going through a separation or divorce.

Cheryl Stein, Esq.
The Law and Mediation Offices of Cheryl Stein
745 Fifth Avenue, Suite 500
New York, NY 10151
Phone: (646) 884-2324
E-mail: cheryl@cherylsteinesq.com

The Nurse with a Purse and Sugar Daddy Dynamic

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The idea of a “sugar daddy” is very common and well-known: A “sugar daddy” is an older man who marries a younger woman and takes care of her. There is a similar, but lesser-known dynamic when the older marrying spouse is a woman. This dynamic has been referred to as the “nurse with a purse.” In both cases, it’s equally important for the older spouse to obtain a Prenuptial Agreement.

Often, the woman in the “nurse with a purse” situation is in her 50s or older, highly capable, financially comfortable, healthy and has been married before; she is typically either widowed or divorced. Many — although by no means all — women who are in these circumstances come from traditional or religious backgrounds that particularly value marriage. They may feel like outcasts in their communities and immediate social circles when they are single. When they finally meet a suitor for marriage, their overwhelming relief often makes them walk on tippy toes, feeling they have little leverage to impose the contingency of signing a prenuptial agreement on the marriage. They are afraid of offending and warding off their prospective husband. They may also be more idealistic and resistant to believe that divorce can happen.

In this situation, when the woman remarries, she pays the bills and household expenses. After say — an eight-to-ten-year marriage — that ends in divorce, she often ends up completely depleted financially because the man is not well or is, for some other reason, monetarily dependent on her. The woman often has to assume more of a caretaking role. In such marriages, the woman may get very little from the relationship in terms of actual emotional support, friendship, and household help; literally, the only thing she may get is a man by her side and the status of being married. Several of my clients have fallen into this category and described these exact sentiments to me.

When the woman and her husband end up in divorce, it can have devastating financial consequences. The woman may have her own children she is trying to put through college and is carefully allocating her resources. There is an adage: “As long as you are young and healthy you can generate more money.” However, these women — who are often in their 50s and 60s — cannot generate more money that quickly. They are at the end of their working years. It is very debilitating to them to see that much money wiped out at the time of the divorce in equitable distribution and maintenance payments, as well as litigation expenses.

It is more common for sugar daddies to assert themselves pre-marriage and demand that a prenuptial agreement be signed, while women have a harder time finding their voice on this point and asserting themselves.

If you are remarrying and want to protect your assets both during your marriage and in case of divorce, please don’t hesitate to contact me.

Cheryl Stein, Esq.
The Law and Mediation Offices of Cheryl Stein
Offices in Manhattan and Brooklyn
Phone: (646) 884-2324
E-mail: cheryl@cherylsteinesq.com

Adult Children of Gray Divorce

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There is a large demographic getting a lot of air time right now – those over 50 who are choosing to get divorced. Oftentimes, these couples have been married for many years, and now their youngest is about to go to college or move out of the house. Many of the couples in these “gray divorces” have successful and flourishing adult children, who escaped being in the midst of a contentious divorce or custody battle while they were growing up, only to find themselves in the middle of their parent’s divorce now.

Often the adult children are very involved in the divorce and will help their parents find counsel. Sometimes, the children will pay the attorney’s fees. On the surface, the children may have a camaraderie with both of their parents, but underneath they are often more aligned with one parent over the other and feel justice should be brought because of their observations over the years.

If English is a second language, children often serve as interpreters and assist their parents with the more technical tasks and documents, such as filling out the statement of net worth. They often ask to correspond with the attorney, and it is essential that appropriate authorizations and waivers are in place to enable such communications.

In some situations, adult children have one parent move in with them until the divorce settles. This can create tension and complications if the adult child is married, and his/her spouse is not on board and feels the adult child’s support of his/her divorcing parent is usurping too much time from their marriage and family.

Some adult children go as far as to play Scooby Doo – investigating if they feel one parent is hiding something. In other situations, highly educated and employed adult children may still live with their divorcing parents and are helping pay the household expenses. These children’s own finances are somewhat intertwined with their parent’s, and they have a vested interest in the outcome.

Much like elder care planning, in which children are heavily involved, these children feel that helping their parents, especially the more vulnerable, dependent parent, is imperative to their parent’s future planning and sustainability. The adult child also recognizes that he/she will have to take care of a parent and plug in the gaps where that parent’s needs are not met in a divorce.   

These adult children walk a tightrope and try to be careful not to do anything to imperil their relationship with either parent outright. Despite their maturity, success, and adulthood, they are often emotionally affected. They have to deal with the fact that the family unit they grew up with is disintegrating. These adult children often act as a friend and emotional support system to their parents, which is why we advise them to protect themselves and to avoid jeopardizing their own accomplishments and/or marriage in the process of supporting their parents.

If you’re contemplating divorce or are the adult child of a gray divorce, please don’t hesitate to contact me.

Cheryl Stein, Esq.
The Law and Mediation Offices of Cheryl Stein
Offices in Manhattan and Brooklyn
Phone: (646) 884-2324
E-mail: cheryl@cherylsteinesq.com

Should You Take Your Spouse to the Cleaners?

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There is often a misconception that many divorcing parties want to milk their spouse dry, leaving them to be a homeless bum in a cardboard box on the street. The overwhelming majority of divorcing parties that I’ve encountered do not fall into this category; many are scared and just want to know that, at the end of the day, they’ll get what they need. For those who DO want to milk their spouse dry, the law may not be in their favor.

The maintenance legislation was revamped at the end of 2015 and became effective in January 2016. Under the new law, people who have been out of the workforce for a long time are typically at more of a detriment than they were under the old law. The law sets the maintenance cap at $178,000 of the payor’s income and imposes more stringent and often less generous caps on the duration of the pay-out.

A professional woman who left her high income, fast paced, quickly evolving career 8 years ago to get married and be a full time home-maker, upon the couple’s mutual agreement, may only be entitled to 2.4 years of maintenance under the law, which mandates the pay-out to be 15% – 30% the length of the marriage for marriages up to 15 years. Further, as has always been, the maintenance would be taxable to her as income and tax-deductible to him, netting her less than the designated amount after Uncle Sam’s helpings. This couple may have built themselves up to a comfortable lifestyle based on his income but did not acquire a lot of assets to allocate in equitable distribution. She may feel resentful that her husband now has a glorious career, which he was able to nurture and focus on due to her home-making efforts, and that she will never be able to catch up. Her killer instincts may kick in. She may feel that milking her spouse and hanging him out to dry is the only way she can level the field and get her needs met, especially when trying to spread the resources from one household into two. She may end up knocking her head against a lot of brick walls in such pursuit.

Under the new law, enhanced earning capacity, which was always a hot and controversial topic surrounding the valuation of licenses and degrees, is no longer considered marital property to be distributed in equitable distribution. We still account for the efforts and contributions the non-titled spouse made to the enhanced earnings of the titled spouse, but the non-titled spouse has the burden of proving what the value is and that their contributions were substantial and direct; if they fail to prove either, no can do! Overall, the distributive awards on enhanced earning claims are uniquely low.  

As for equitable distribution of businesses, 5% – 33% is the general range awarded to the non-titled spouse. The non-titled spouse has the burden of proving the value, as well as the direct contributions of the titled spouse and his/her own direct and indirect contributions as the non-titled spouse. Business valuations are often expensive and can significantly balloon the already hefty divorce expenses.

There is also the concept of double and triple dipping, where you’ve captured income too many times. Once an income stream is monetized and distributed towards one pay-out, it cannot be used for another pay-out.

Classic double dipping cases involve intangible assets, such as professional licenses, good will, and the value of a service business, and not tangible income producing assets, such as real-estate. Once the intangible asset has been monetized as an asset (via capitalization of the income to a future period) and distributed as such, it can no longer be counted towards maintenance.

Therefore, non-titled spouses try to argue that what’s on the table is a tangible asset, and the non-titled spouse tries to argue that it’s a service business and play up the goodwill factor involved. Classification of the asset is key. 

Surprise! There is also a common desire to want to share in the assets but not the debts. However, courts typically allocate the debt as well; you obviously can’t just take the assets and none of the debts. Once the debts are distributed, what is left of the assets may be nothing to write home about.

Before expending a lot of time, money, energy and resources in a quest to take your spouse to the cleaners, learn what’s involved. You may want to choose your battles carefully.

Feel free to contact The Law & Mediation Offices of Cheryl Stein with any questions.

Cheryl Stein, Esq.
The Law and Mediation Offices of Cheryl Stein
Offices in Manhattan and Brooklyn
Phone: (646) 884-2324
E-mail: cheryl@cherylsteinesq.com

‘Til Death Do Us Part…

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“’Til death do us part” may more aptly be phrased “I will follow you into the grave!” 

I’ve had a number of clients come to me that live in loveless, self-absorbed, and contentious marriages but manage to exist, having developed a certain understanding in their relationship, such as living in separate bedrooms. Many of these people feel contempt, anger, or apathy towards their spouse. For example, their spouse may be extremely stingy; wastefully dissipate money on addictions; abusive, or duplicitous and cheating on or stealing from them. Nevertheless, for a plethora of reasons, they are often resistant to divorce and want to stay in the marriage.

Many times these people think that there will be justice and a sense of dignity and self-protection if they predecease their spouse, as they believe their spouse will not be able to get anything more from them then. They believe that they can exercise some control while they’re alive to ensure that what is theirs will be carefully allocated when they pass away.

They then become disheartened and their bubble is burst upon learning that their will may not be actualized according to their wishes, and that their spouse may be able to collect under the Right of Election. The Right of Election ensures that you cannot disinherit your spouse; they are entitled to the larger of $50,000 or a third of their spouse’s net estate. Learning this motivates people to find out their options, which include: 

•Signing mutual waivers, which is a critical dimension of both Prenuptial Agreements and Postnuptial Agreements, especially amongst older couples where one or both of them have established a significant amount of wealth and have grown children who they plan on bequeathing their estate to. The fact that their spouse would be able to collect a certain minimum amount throws off the dynamics of what their children could potentially get. Under regular law, you cannot write your spouse out of your will. However, this waiver can dictate that what is written in the will dominates. 

Prenuptial and Postnuptial Agreements are increasingly popular across the board, and especially among older, more established spouses, or people with significant family wealth.

The Prenuptial Agreement is obviously an exercise of foresight, caution, and investment in insurance prior to the marriage. Sometimes, people are wary about bringing it up with their fiance because they are afraid of their fiance’s reaction. However, there are simplified prenuptial agreements that can be entered into that set forth reasonable, modified rights, and waiving the right of election is almost always included in these more narrow, limited-in-scope agreements. It is not overly offensive nor does it shock anyone’s conscience, so to speak, prior to marriage, and fiances are generally amenable to signing and don’t feel isolated in the relationship by such.   

As mentioned, often people are already married when they first learn of the right of election, feel indignant about it, and torn by their basic desire to have their wishes as expressly set forth in their will trump. Once people are married and wanting to carve out certain understandings, they can include a waiver for the right of election in a Postnuptial Agreement. Sometimes when an unhappily married client comes to me in this type of situation, they feel their spouse will be so resistant to a Postnuptial Agreement, they would rather just go through with a divorce at that point.

It is important for people to understand how wills, trusts, and estates are intertwined with divorce, including the fact that on the heels of a divorce, new wills need to be drafted, as new beneficiaries and trustees will likely need to be designated. Also, people should understand the implications of the rights that come with the marriage, such as the right to take against your spouse’s estate.

If you’re going into a marriage or contemplating a divorce and you don’t want your spouse collecting against your worth or your estate, consult with a qualified divorce attorney to put the appropriate measures in place to ensure your estate is bequeathed appropriately, within your control, and according to your wishes.

Feel free to contact The Law and Mediation Offices of Cheryl Stein with any questions.

Cheryl Stein, Esq.
The Law and Mediation Offices of Cheryl Stein
Offices in Manhattan and Brooklyn
Phone: (646) 884-2324
E-mail: cheryl@cherylsteinesq.com

It’s None of Your Beeswax!

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I once read in a psychology journal that you can learn more about a person by looking through their drawers for a few minutes than you can by living with them for many years. Drawers are where people hide things, and oftentimes, even insightful, intuitive people find out they are living with someone that they do not know so well. It doesn’t matter the duration of the marriage. The irony is that marriage is commitment, yet it’s often in the unraveling that people come to know each other in a much deeper way than they ever did. 

A couple of reasons for this include:

1.  Hindsight is 20/20. When you look backwards at things, they start to make sense.

2.  Through the discovery/disclosure process, each person learns a lot about the other that they may not have been privy to learning before. 

In mediation, the discovery process is not enforced, but each party has to sign in the agreement that there has been full disclosure; that they are satisfied with the disclosure; and that the agreements they come to are fair and equitable. Sometimes, parties choose to waive full disclosure for various reasons, including that they just want to get the process over with; that they want to have an amicable relationship with their ex-spouse and feel the disclosure process will create too much hostility; and that the disclosure process is too expensive and cumbersome. In these cases, we need to warn the parties that they may be blindly signing away some of their rights and include in the agreement that the parties waived their rights to full disclosure.  

In litigation, parties have to fill out a Statement of Net Worth, where they must include their separate and joint assets. Oftentimes when I’m working with a client on the Statement of Net Worth, they will give me a first draft that does not include their separate property. They ask me about a dozen times, “Do I really have to include that separate property?” They may further state in exasperation, “It’s nobody’s B.I. Business!” They hid that separate property from their spouse during the marriage and it’s like standing naked having to reveal it. I’ve seen cases where all of a sudden the party got so scared and started to agree to settle when the judge ordered them to reveal their separate property in totality. 

Most people don’t like their spouse better after discovery. Parties have “A-ha!” moments; things start to make sense to them. First of all, people see how their spouses spent money because personal and business credit card statements are subpoenaed. If one spouse billed a lot of $500 meals at restaurants and hotel charges during a specific time frame, it often confirms people’s suspicions that their spouse was having an affair during that period. 

Even through the discovery process, divorcing parties may not be satisfied. They still may feel there’s something underneath the surface that they’re not scraping up; that the other party was clever enough to hide something over the course of 25 years.   

The presumption is that anything accumulated during the marriage is marital property. The person who claims separate property must prove that. Tracing exactly what is separate and what is marital property hinges on the discovery process. A lot of times separate and marital property can become commingled, which we’ll talk about in another blog. 

This is obviously less important for people who get married when they’re very young, as they often don’t have a lot that’s separate. But once people get up there in years before getting married, and there’s a lot that’s separate, the tracing process becomes important.  

When clients decide if they want to settle or proceed, they have to be fully equipped. They need to have seen the numbers themselves. They need to have experienced some of the process that we were going through in litigation. They have to understand that what we were trying to do during discovery wasn’t just ordering people around. We were trying to find out what the best possible deal is, based on the numbers and the situation at hand. 

What’s interesting is that people try to lie so obviously. For example, one spouse may claim on their Statement of Net Worth that their car payment is $300 a month, but when you look at their credit card statements, it clearly shows that they’re paying $750 a month, or vice versa. 

I have my clients take an active role in the discovery process. I have them tell me everything they know and anything they want subpoenaed. Records are subpoenaed when litigation attorneys are not forthcoming. In addition to the attorneys, the parties themselves should look through their spouse’s records and account statements to look for inconsistencies, based on their experience being in a relationship with the person. 

Feel free to contact The Law and Mediation Offices of Cheryl Stein with any questions.

Cheryl Stein, Esq.
The Law and Mediation Offices of Cheryl Stein
Offices in Manhattan and Brooklyn
Phone: (646) 884-2324
E-mail: cheryl@cherylsteinesq.com

How Enforceable Is Your Divorce Agreement?

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The agreement is finally signed. The ink is drying. The divorcing parties want to let out a big sigh that it’s finally over. But is it?

Last month, I wrote that there is no such thing as a gentleman’s agreement, but what about when you have a signed and duly acknowledged agreement?

Good lawyering is, among other things, the art of utilizing words in the most poignant and effective manner. Words, sentences, and terms are carefully calibrated; their misuse can have a deleterious effect. Every word present can count. Every word missing can count. Details matter!

Even a written and signed contract is not always as enforceable as people often think. When terms are included that are against public policy, those terms hold no weight.

An example of this relates to custody. Everything pertaining to custody is subject to court review and approval. Some divorcing parties are resistant to court. They want everything completely private—between themselves and their mediator and/or select arbitrator only—with no court interference. Regarding custody issues, however, the court is the parens patriae (a doctrine that grants the inherent power and authority of the state to protect persons who are legally unable to act on their own behalf), and they cannot be divested of that authority. The court cannot be written out of the agreement. Similarly, naming a guardian for a child in an agreement is likely to be unenforceable.

On a further note, parents cannot assign their decision-making authority to third parties. It is common for parties to erroneously write in their agreement something like the following: “If the parties disagree regarding health-related issues, the child’s treating physician shall make the decision; if the parties disagree regarding the child’s educational needs, the child’s principal shall make the decision.” Clauses such as these would not be upheld. The respective physician, principal, etc. can assist the parties in coming to decisions but cannot be the ultimate decision makers.

With regards to support, maintenance cannot be waived if the result is that one of the parties will become a “public charge,” meaning eligible for public assistance. This is, obviously, upsetting where one of the parties makes a significant amount of cash off the books and indicates on their tax returns that they are making nearly nothing, rendering them eligible for many government assisted programs, and the other spouse is paying taxes on their total income. This can create an unfair imbalance in that the tax paying spouse may be obligated to pay maintenance to the spouse skirting tax laws, and this cannot be waived.

Child support is a biggie! A divorce agreement waiver of child support will not be enforced if the needs of the children are not being met; and if parties indicate that they opt out of modifying child support if there is a substantial change in circumstances, the court is likely to hold the “opt-out” unenforceable when a “substantial change in circumstances” rolls around.

Agreements that resolve divorce often reflect a delicate balance among issues of custody, support, and equitable distribution. Apples are often exchanged for apples, and they are also exchanged for oranges. For example maintenance, child support, and equitable distribution all boil down to money and monetary values and exchanges. A little less in one category being exchanged for a little more in another category would be like apples being exchanged for apples. Sometimes, however, the parties barter things like mitigated support obligations being exchanged for the ability of one party to relocate with the children a greater distance away from the other parent; that would be more akin to apples being exchanged for oranges.

If part(s) of the agreement are later determined unenforceable, that can grossly affect the equilibrium of the agreement the parties initially agreed to voluntarily, believing they knew the values and rights they were exchanging in a concrete way. It can lead to a windfall for one party, and the other party being forced to give up significantly more than they anticipated and bargained for.

Independent covenant and severance clauses are staples in all the agreements to ensure that, if parts of the agreement are held to be unenforceable, the remainder of the agreement stays intact. However, in the worst-case scenario, a faux pas can invalidate the entire agreement.

For example, as it relates to the bigger all-encompassing picture, an agreement that mandates the divorce or mandates that the divorce not transpire violates public policy and can invalidate the whole agreement. In this scenario, even a severance clause cannot yield a messianic salvation for the agreement.

A large majority of people have no patience to read through dense and tedious agreements. However, it is critical that the divorcing parties perform the painstaking task of reading their agreement and understanding its provisions, consequences, and enforceability in totality.

First and foremost, my goal is to inform clients of the law so that they understand what they are agreeing to along with any accompanying positive and negative repercussions. I present the options and advise clients what I think the most appropriate options are for their particular situation. Feel free to contact me with any questions.

Cheryl Stein, Esq.
The Law and Mediation Offices of Cheryl Stein
Offices in Manhattan and Brooklyn
Phone: (646) 884-2324
E-mail: cheryl@cherylsteinesq.com

There’s No Such Thing as a Gentlemen’s Agreement…and Then Some!

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Often when couples first begin talking about divorce, they come up with their own agreement: “I’ll take this, and you’ll take that…I’ll be responsible for this, and you’ll be responsible for that.” Sometimes, they recruit a mutual friend to play makeshift mediator, and then somewhat live under the terms of the agreement they contrive. However, this agreement is unenforceable, as it is usually either a gentleman’s agreement or one written, but not signed, notarized, and acknowledged in the manner required by the courts to deem an agreement enforceable. Ironically, divorcing parties are often “stuck on” this initial “home-baked” agreement. Fast forward a bit to one of the parties becoming disgruntled enough to commence a litigation action. Within the litigation context, they often keep referring to that initial agreement, which bears no weight.

An analogous situation can occur in mediation. Mediators typically have each party sign a waiver stating that anything said in mediation is private, confidential, and cannot be used in litigation. The parties often strike agreements on various issues and start planning their future and making arrangements based on their agreements. If mediation falls apart and litigation begins, what the parties agreed to during mediation is meaningless. Nevertheless, the parties are often so stuck on what happened in mediation, where they were an active participant, able to get many concessions they were satisfied with, that four years later they are still reminiscing about it with nostalgia. It wasn’t successful—why be fixated on something that didn’t work.

In one extreme example of a mediation case gone sour and turning into a bitter litigation battle, the husband broke into the mediator’s office at night to steal the records from his case, which he thought would highlight the concessions his wife agreed to make during mediation. Besides being a criminal act and downright meshuga, to what end? What was to be gained? The deals struck in mediation stayed there and are bootless.

When divorcing parties start to live under the terms of the agreement before it’s actually drafted, it can be like a house of cards that falls apart. It is important that adequate protections are in place and that things happen in a sequential order.

A good practice is to have “interim agreements” or “stipulations.” In litigation, parties typically enter into stipulations along the way as they settle and resolve select issues and can then move forward to tackle the outstanding issues. For example, there may be a custody trial or settlement with a parenting agreement executed, on the heels of which follow the financial aspects of the case. It is wise to engage in a similar practice in mediation. The parties should each have consulting attorneys, and valid interim agreements can be entered into as the mediation progresses.

In almost every case, there are the pressing, time-sensitive or “elephant in the room” issues that need to be tackled first, which often include but are not limited to:

•Custody, visitation, and parenting issues.

•Interim support plan.

•One spouse moving out of the marital residence.

•Closing joint accounts and devising a plan to pay off marital debt.

•Deciding whether to file tax returns jointly or separately and who claims the children as dependents.

•Removing one spouse’s name from investments they know nothing about and feel they may need immediate protection from.

With the guidance of consulting attorneys, valid agreements can be entered into, settling each of the situations the parties are most concerned about along the way.

Often, when parties resolve the matters they are most anxious about, the rest falls into place more easily.

Whether parties choose to litigate or mediate, it is important to consult with an experienced attorney at the very beginning, when they start thinking about divorce or discussing it with a spouse, to ensure they are adequately protected.

Feel free to contact me with any questions.

Cheryl Stein, Esq.
The Law and Mediation Offices of Cheryl Stein
Offices in Manhattan and Brooklyn
Phone: (646) 884-2324
E-mail: cheryl@cherylsteinesq.com

Will the Court Allow You to Relocate with the Children?

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I wrote an article for the New York Women’s Bar Association. Clients and colleagues may find parts of it, which I have parsed out, useful, as it highlights trends relating to relocation issues in divorce.

The judge who gave the discourse classified the recent trends and broke them down into primary factors and driving forces in the decisions rendered. It appears that Manhattan and the Bronx (both within the First Department of NYS Court jurisdiction) give heavy weight to the following factors:

1. The residential/custodial parent’s willingness to allow liberal visitation, access, and to foster a meaningful relationship between the children and the non-residential parent;

2. The non-custodial parent’s failure to disclose and engaging in subterfuge regarding financial information and/or delayed, erratic or delinquent child support payments; and

3. A strong familial network of contacts and support systems in the area the custodial parent wishes to relocate to.

In contrast, the relocation decisions of the Second Department (Brooklyn, Queens, Staten Island, Nassau, Suffolk, Westchester, Rockland, Dutchess, Orange, and Putnam counties) give emphasis to the residential/custodial parent being able to provide the children with better living accommodations, such as a more spacious house and a backyard, upon relocating—as well as a close connection and positive relationship between the children and the custodial parent’s network of support in the new location, such as a new spouse and/or stepchildren.

A judge’s determination in allowing one parent to relocate with the children, thereby affecting the parenting schedule, used to be predictable and quantifiable—but not anymore. Judges will often look to the recent Appellate Court decisions to determine the court’s direction.

I can guide my clients from experience, precedent, and the above factors. We can get all our ducks in a row from the beginning, putting forth the strongest argument for relocation based on the department we are in and the factors we know that department gives great credence to.

An example of a relocation case I had recently was a wife living in New York, making $100,000 per year, and her spouse, making $60,000 per year. They have 2 children that they’re sending to private school. The wife discovered that if she moved to South Carolina, she could make $40,000 more per year.

This couple had discussed moving while they were married since living in New York is so costly. Now that she wants to get divorced, she realizes she’ll be further stretched for money, as her husband is not committing to paying for private school. The couple has several options: Both could move, or she could move and pay for visitations, or she could stay (foregoing the additional $40,000/year in income). Since she wants to move, I can help her negotiate towards that.

In another example, a husband agreed to pay the wife $10,000 towards her relocation costs; she accepted and moved nearby. It was beneficial for her to move. They were able to maintain the visitation schedule as is. He actually saved money in the long run since he didn’t have to pay for years of fostering visitation, including travel and lodging expenses.

An overarching theme in all departments is when the non-custodial parent has a history of being delinquent in child support payments, it often works against them. In a relocation case, if the custodial parent has the opportunity to offer a better lifestyle and the ability to be closer to other family members, and the non-custodial parent has been remiss in paying child support, the non-custodial parent is likely to have a lower standing in court, and the judge very well may decide to rule in favor of the custodial parent wanting to relocate.

We can put forth the strongest relocation case based on the county (court; department) we are in and the client’s specific needs. If you have questions about your relocation issues, please feel free to contact me.

Cheryl Stein, Esq.
The Law and Mediation Offices of Cheryl Stein
Offices in Manhattan and Brooklyn
Phone: (646) 884-2324
E-mail: cheryl@cherylsteinesq.com

How to Get What You Want in a Divorce

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From the outset, I discuss with my clients what their bottom line is and what they are willing to negotiate on. Typically, in the beginning, the client wants everything but the kitchen sink. Over time, however, the way that bottom line ends up morphing is astounding, especially as the urgency to get relief from the situation envelops the client. Of course, the goal in litigation is to get the other side’s bottom line to morph towards you as much as possible. In mediation, it’s to get the clients to meet somewhere in the happy middle.

One of my clients wanted his wife to have a certain amount of life insurance, with him being the trustee. She agreed, with the stipulation that she be the trustee of his life insurance. He didn’t want that and realized it wasn’t important enough to him to delay the process. So, he chose to “pick his battles” and took this out of the negotiation altogether (even though that was originally his ideal end situation).

Another client wanted her husband to pay towards multiple extracurricular activities for their very young child, especially as he could more than well afford it. His position was that he would pay towards only one extracurricular activity that he thought most appropriate to enhance the child’s development at any given time. He was very obstinate on this point and would not budge. They had a joint custody arrangement, where ALL decisions relating to the child were to be made jointly, and both parents were very involved. She ultimately decided that if she allocated and budgeted her money carefully enough and cut down personal spendings in other areas, she could come up with the money to pay for the child to be enrolled in multiple extracurricular activities at a time, as was really important to her. We proposed that she would be responsible for all extracurricular activities above the one he agreed to pay for, but that she would also NOT need his consent. He resisted at first because it meant relinquishing some of his control and decision making. Ultimately, he begrudgingly acquiesced, and the parties signed off on it.

Those can be categorized as more “small ticket items.” Sometimes, divorcing parties start to feel such an overpowering desire for immediate relief and resolution, they start bending on “big ticket items.” For example, they may start offering to accept significantly less in basic child support than they are entitled to pursuant to the statute; or to pay a lot more (if they are the non-custodial parent to pay basic child support). It is critical that the parties are anchored, thinking it through clearly, and not “selling their shirts,” so to speak, for the immediate gratification of a speedy divorce.

As clients go home and crunch their own numbers, they seem to start analyzing their lives more. They think about their lifestyle and what they want in the short and long-term future—different things end up being important than what was initially thought.

In terms of negotiation tools, what people think is going to be important to the other party often isn’t. This is most poignant during mediations when each side fills out a separate intake form where they convey their desired results and bottom lines. I’ve had a wife say in mediation, “I know him; I know what’s important to him.” As the mediator, I knew that, in fact, it was something else that was important to him—something the wife would not have thought of—and vice versa.

Sometimes, during litigation, the other party’s responses to a settlement proposal focus on something that is such minutia to my client, we would laugh about it. That’s an important piece when bartering—each party can receive “his/her minutiae” and everyone can be happy.

Often when clients think through their situation, they calm down on their own. What once was a problem becomes a non-issue. So rather than throw fuel into the fire, let things simmer on their own. Be willing to morph your bottom line, and focus on what’s really important to you in your divorce negotiations.

Cheryl Stein, Esq.
The Law and Mediation Offices of Cheryl Stein
Offices in Manhattan and Brooklyn
Phone: (646) 884-2324
E-mail: cheryl@cherylsteinesq.com