Monday, January 24, 2011

Thought of the Day

"If you're going to play the game properly you'd better know every rule."

- Barbara Jordan

Wednesday, January 19, 2011

Can I reduce my New Jersey alimony?

The Superior Court of New Jersey Appellate Division, in a recent unreported decision, overturned a decision by the lower court that significantly decreased a permanent alimony award.  The decision was overturned because the lower court made a premature decision that was based on minimal credible evidence.  Because the case is unreported, it does not hold precedential value; however, it can be helpful to understand the court’s logic in their decision-making, as well as how a New Jersey court likely will rule in future cases.  The name of the case is Butera v. Toy

In New Jersey, alimony and support order amounts are subject to modification if there is a change of circumstances on the part of either spouse.  According to the court, some common situations that would qualify as a change of circumstances are: an increase in the cost of living, an increase/decrease in the supporting spouse’s income, deterioration in the health of a spouse in the form of illness, disability or infirmity, loss of housing, the dependent spouse’s cohabitation with another party, employment by the dependent spouse and changes in federal income tax laws. 

A change in the circumstances must be “permanent and continuing” in order to justify a change in the support.  This requirement prevents parties from seeking a change to their support order in the event that the situation is only temporary.  The courts want to see a permanent, lasting change before they are willing to make any modifications.  In a modification of alimony case, the New Jersey courts have stated that the supporting spouse’s ability to pay is the central issue.  Although income is a significant factor, when determining ability to pay, the courts also to look at factors such as “real property, capital assets, investment portfolio and capacity to earn by diligent attention to . . . business.”  The party seeking the change in support must show the change in circumstances that would require such modification. 

The parties in Butera v. Toy were divorced in August 1999 after nineteen (19) years of marriage.  The parties’ Property Settlement Agreement included an alimony award to the Wife at a rate of $45,000.00 per year from January 1999 to December 2004 and then at a rate of $75,000.00 from January 2005 onward.  The alimony payment was calculated based on Husband’s annual income of $350,000.00 and Wife’s imputed income of $20,000.00.  Husband, an attorney, worked in a large New York law firm at the time of the divorce proceedings.

In 2005, Husband left the firm and began employment with a Houston, Texas law firm that was establishing a New York office.  Husband, under his new employment, earned approximately $743,000.00 annually during 2006, 2007 and 2008.  Wife, who stayed home during the marriage, at the time of the litigation held a position as an associate college professor, in addition to being a Chair of the Art and Music Departments and the Director of an Art Gallery.  Wife earned approximately $56,000.00 in 2008.

In early 2009, Husband notified Wife that his contract with the Texas law firm was ending and that, due to a lack of employment prospect and income, he would likely be unable to pay her alimony payments.  Husband, in June 2009, opened a solo practice and, around this time, stopped making his required alimony payments to Wife.  Husband, after accumulating several months in arrears for failing to pay alimony, filed a motion with the court to terminate his alimony obligations. 

After an unsuccessful mediation attempt, the trial court determined that a change in alimony was justified because Husband had undergone such a change in circumstances in the seven (7) months since the ending of his employment contract with the firm.  Notably, the court made this decision solely on the basis of Husband’s submission of two (2) case information statements and three (3) certifications.  Case information statements in New Jersey are basically a roadmap to the parties’ income, expenses and assets.  Up-to-date statements are required at the filing of divorce, the finalization of divorce and during any modification requests.  Certifications in New Jersey are documents that state the supporting information and circumstances for the party’s request.  Based on these submissions, the trial court drastically reduced Husband’s monthly alimony obligations from $6,250.00 per month ($75,000.00 annually) to $1,400.00 per month retroactive to September 2009.  Wife naturally appealed the surprising decision. 

On appeal, the court found numerous errors with the lower court’s decision and remanded for further proceedings.  First, the original order for alimony was based on Husband earning an annual income of $350,000.00.  Defendant, according to his case information statement, earned $725,000.00 in 2008 and, according to financial records, earned over $400,000.00 in 2009. Although Husband’s career was now based on a solo practice, there was a lack of evidence to show that his income would decrease to the point that it would fall below the $350,000.00, which was the basis for the original agreement.  Furthermore, there was a lack of documentation to support Husband’s claimed dramatic decrease in income and to support his projections of decreased income for the next year.  Husband’s figures of income and future income were taken on their face without any proof that the amounts were accurate.  In addition, the lower court did not consider any assets acquired post-divorce, including Husband’s significant 401K.  The appellate court found that a review of the case information statements and certifications submitted by Husband “does not constitute an adequate study” of Husband’s financial situation. 

The appellate court also took issue with the lower court’s failure to establish that the change in circumstances requiring the decrease in alimony was permanent and lasting, such to require modification of the order.  New Jersey courts are generally unwilling to allow for a modification where the circumstances are only temporarily altered.  For example, the courts have rejected changing alimony orders, even when there was a significant decrease in income, when that decrease occurred only twenty (20) months after the original order.  Here, a seven (7) month period likely would not be an adequate amount of time to demonstrate that a change in income was permanent.  Also, the income predictions by Husband, even if they were supported by adequate documentation, were not a basis for a modification, because the circumstances were merely predictions rather than being actual changes.  Thus, circumstance that have not yet actually occurred are not sufficient to show that a change in support is necessary. 

Due to the significant lack of financial records, the appellate court stated that the lower court should have first ordered that Husband submit the required documentation, and then should have conducted a plenary (full) hearing to further develop a complete financial status of both of the parties.  The modification, if granted, should have been after a thorough investigation into Husband’s assertions. 

This case is a further example of the reluctance of New Jersey courts to disturb alimony awards, except where there is a significant change in circumstances that is permanent or at least proven to be long-term.  Furthermore, the courts want to see substantial documentary support, including tax returns and pay stubs, for the party’s assertions and claimed changes in circumstances.  The courts are unwilling to entertain requests from parties who are seeking to decrease the amount they are responsible to pay or increase the amount they receive, unless they prove their case with legitimate and comprehensive evidence.

If you would like to read the full opinion, click here

Written by Elizabeth Early, law clerk with the Law Offices of Linda A. Kerns, LLC.

Tuesday, January 18, 2011

Know what your children are doing online!

As we often warn, please know what your children are doing online, and talk with them about their activities.  There are real dangers in social networking, especially for children, as this tragic story proves.

Monday, January 17, 2011

Modification of final orders in New Jersey.

During the divorce process, soon-to-be ex-spouses often interact with varying and sometimes increasingly degrees of animosity.  The dissolution of a relationship and the difficult process of dividing possessions, allocating support and handling custody arrangements of minor children can unfortunately be quite frustrating and create a great deal of hostility.  The courts have seen many soured relationships, and they are accustomed to handling disputes, even those with especially outrageous disagreements.  However, the court, as seen in a recent New Jersey case, may eventually step-in to stop a continuous barrage of disagreements, especially when children are involved.  

In Penza v. Penza, an unpublished December 2010 opinion, the Superior Court of New Jersey Appellate Division affirmed the lower court’s decision to step-in and alter the terms of a custody order when there was a long and extremely hostile history that showed the parties’ complete inability to agree and cooperate in the raising of their child.  

The parties were divorced in July 2003.  From the time of the divorce judgment to November 2009 when the parties appeared before the trial court on the current issue, there had been an appalling 42 post-judgment motions filed.  During the divorce process the parties were apparently unable to agree on almost anything.  As a result, the divorce judge laid out a detailed manner in which all decisions regarding the parties’ child would be handled.  Wife was given primary physical custody; however, the parties were required to consult with each other on a regular basis on all decisions, including the selection of medical care and school-related decisions.  Only after consultation with Husband was Wife permitted to make any decisions regarding the child.  

Despite the clear wording that appeared numerous times in the divorce judgment requiring the parties to consult with each other and make joint decisions regarding their child, Wife made a unilateral decision to remove the child from the school where she had attended kindergarten through fifth grade.  Wife transferred the child to another school.  Wife was allegedly motivated for the sudden change of schools by, what she perceived to be, an inappropriate alliance of the school principal and Husband against her.  Clearly, despite the passage of over six (6) years since the divorce decree was entered, the parties were still consumed with animosity for each other.  Husband filed an order to show cause that sought to stop the transfer of schools and have the child remain in her current school.

The trial court permitted the child to remain at her new school, but modified the divorce decree with respect to the decision-making authority of Wife.  Under the new directions, Wife was required to consult with Husband on school changes.  If the parties could not reach a mutual agreement through their lawyers, then Wife was also required to make an application to the court before any changes could be made.  The appellate court refused to overturn the changes made by the trial court.  The unilateral actions of Wife, as well as the continued inability of the parties to cooperate with each other, was a sufficient change of circumstances from the time of entry of the divorce decree to justify the trial judge’s decision to alter the terms of the original divorce judgment.

Accordingly, the court is able to modify the terms of a divorce judgment, but only if circumstances are changed such that the modification is necessary.  The intervention of the trial court in this matter and the modification of a six (6) year old divorce decree reflect the fact that the court may, at some point, tire of endless bickering between parties and determine that neither party can be given authority to make unilateral decisions in certain matters.  

It is natural for there to be some animosity between parties in a divorce action.  Yet, if parties continue to refuse, despite direction from the court, to cooperate with each other, then the result may be that the court may take away some of the parties’ independent decision-making ability

Written by Elizabeth Early, law clerk at Law Offices of Linda A. Kerns, LLC.  Edited by Elizabeth A. Bokermann, Esquire.

Saturday, January 15, 2011

Affidavit of Non-Military Service

Before entering a default judgment, courts require that plaintiffs certify or otherwise prove that the defendant is not an active duty member of the military (pursuant to the Service Members Civil Relief Act (SCRA) - this law prevents members of the armed forces from being sued and involved in litigation while they are on active duty and unavailable to defend themselves.)  

Both Pennsylvania and New Jersey require an Affidavit of Non-Military Service when processing a default divorce.  You can look up an individual's status and print out a statement of service from the Department of Defense website.

Friday, January 14, 2011

Adultery in the marital residence

The New York Times recently featured an interesting article about the anger and emotions that arise when adultery occurs in the marital residence.  Read the article here.

Wednesday, January 12, 2011

A daily reminder about money

Daily Candy send emails to subscribers with tips, hints and reviews of all sorts of products, restaurants and services.

From another website, you can also receive a daily email about money issues: earning, budgeting, spending, savings, paying down debt and empowering yourself.  Designed for women, but with tips even men can use, go to the Daily Worth website to sign up for the free service.

Tuesday, January 11, 2011

The effect of divorce on irrevocable trusts.

When planning their estate, optimistic couples often do not take into consideration the effects that a future divorce would have on the disposition of their assets after their death.  Obviously, couples do not marry with the expectation of divorce, and it can be a sensitive subject to approach during the creation of an estate plan.  After all, divorce and death are painful subjects. 

The legislature has directly addressed some estate planning issues that arise after a divorce including Section 2507(2) of the Pennsylvania Probate, Estates and Fiduciary Code.  This Section states that upon divorce any provisions in a pre-divorce Will that favor or relate to the testator’s former spouse will be ineffective, unless it is clear from the Will that any such provisions were meant to apply despite divorce.  There are similar provisions for revocable conveyances; however, there is not protection under the Pennsylvania code for irrevocable trusts created prior to a divorce

A trust is an instrument where the grantor (the person creating the trust) transfers their assets into a trust with terms that dictate how and to whom the income the trust generates should be distributed.  An irrevocable trust is a trust where the grantor, once he or she creates the trust and transfers assets into the trust, is unable to revoke the contents or terms of the trust.  Irrevocable trusts are used because, although they remove future control of the assets from the grantor, they can offer some tax benefits and creditor protection that revocable trusts and other estate planning instruments do not provide.  At the time of the trust’s creation, the grantor of an irrevocable trust, like other trusts, is free to direct how the proceeds of the trust are distributed to third parties.  These third parties often include the grantor’s family members. 

After divorce, while Wills and many revocable conveyances are protected under the Pennsylvania statue, irrevocable trusts are not.  Therefore, a failure to plan for what will happen to an irrevocable trust in the event of a divorce could result in the grantor’s estranged spouse receiving significant funding from the trust, despite the dissolution of the relationship between the parties.  Accordingly, it is important, while creating an irrevocable trust, to include language in the terms of the trust that will alter the distribution to the estranged spouse in the case of divorce.  Such language could state that legal separation or divorce is to have the same effect on the trust that the death of the spouse would have.  Thus, the estranged spouse would cease to have any claim or interest in the trust upon divorce.  The provisions could also state that the interests of third parties (such as other members of the grantor’s family or the couple’s children) that would have become ripe upon the death of the spouse are to become effective upon divorce. Thus, if legal separation or divorce occurs, the spouse will not continue to benefit from the trust, and other third parties will continue to receive the proceeds as directed by the trust’s terms. 

Trusts, estates, wills and divorce documents involve complex language and laws.  Consult with an attorney to make sure that you have adequate protection. 

Written by Elizabeth Early, law clerk at the Law Offices of Linda A. Kerns, LLC.  Edited by Linda A. Kerns.

Thursday, January 06, 2011

January 5, 2011

Senator Patrick Toomey, United States Senator, Pennsylvania
Linda A. Kerns, Esquire

Jones Day Law Firm, Washington, DC

January 5, 2010

Reducing your mortgage payment

The New York Times recently featured an interesting article about the possibility of "recasting" your mortgage payment which may help to lower your monthly bill.  Read the article here.

Monday, January 03, 2011

2011 Federal Holidays

Take a look at the 2011 holidays at the beginning of the year.  Need to make slight changes to your custody schedule?  Do it now.

Sunday, January 02, 2011

Get your finances in order

A new year is always a good time to organize and get your finances in order.  In January 2009 I wrote a comprehensive step by step guide to gathering and keeping your financial records.  You can read the post here.

Happy 2011!