SURVIVOR'S LAW PROJECT'S FAMILY AND MATRIMONIAL LAW
CLE
PROGRAM - March 18, 2004
EQUITABLE
DISTRIBUTION"
Presented By:
Kathleen Donelli,
President of the Westchester Women's Bar Association (www.wwbany.com)
McCarthy Fingar, L.L.P (www.mccarthyfingar.com)
11 Martine Avenue
White Plains, New York 10606
I. Initial Interview
2
1) Statutory
3
2) Egregious
Fault
7
III. Marital
v. Separate Property
1) Definitions
. 9
2) Burden
of Proof
9
3) Commingling and Transmutation
A. Financial Accounts
.. 10
B. Marital Residence
13
4) Active
v. Passive Appreciation
. 16
5) Debts 19
IV. Date of Valuation
.. 19
V. Retirement
Benefits
1) Defined
Benefit v. Lump Sum
.. 20
2) Qualified
Domestic Relations Orders
. 20
3) Disability
Pensions
20
VI. Licenses and Degrees
21
- The Hougie Issue: "Exceptional Earnings
Capacity" Not Resulting
From A Degree
or License
.
......
22
VII. Bankruptcy
VIII. Expert Valuations
24
1) Real Property
2) Pensions
3) Businesses
IX. Tax Impacting
25
X.
Tort Actions
.. 25
I. Initial Interview:
Obtain Information, Develop Strategy and Establish Realistic
Expectations
1) Client Information Sheet (Ex. A)
2) Statement of Client's Rights and
Responsibilities
3) Client's Immediate Concerns:
a) domestic
violence
b) temporary
custody
c) pendente
lite support
d) exclusive
occupancy
e) minimizing risks: credit cards, lines of credit, safeguarding personal property and
important documents (e.g., financial, passports, diaries, computer e-mails)
f) insurance: health, life, homeowners, car
4) Grounds
Tanvir (Ex.
B). Wife is entitled to summary
judgment awarding her a divorce because the Family Court's findings in issuing
an order of protection based on verbal abuse, "coupled with thinly
disguised written death threats," are entitled to collateral estoppel
effect establishing cruel and inhuman treatment as a matter of law.
5) Preliminary Conference Requirements
a) Documents
- 22 NYCRR 202.16(f) (Ex. C)
b) Statement
of Net Worth
·
estimate monthly expenses by using 12-month average
·
keep documents used to estimate monthly expenses
and to list assets and liabilities (e.g. value as of date of last statement
that you should keep)
·
footnote relevant information and information you
and/or your client "may" forget
ό education
- date of degrees and licenses
ό health
- spouses and children's special needs: juvenile diabetes; past and future
operations; physical handicaps; learning disabilities
ό expense
is for marital residence, temporary residence, vacation residence, anticipated
future residence after divorce
ό anticipated
expenses after divorce (e.g. Wife's health insurance)
ό past
expenses that are currently unaffordable (clothing, tutors, gym, vacations,
recreation, gifts)
·
identify separate property: date of acquisition; source of funds to
acquire; trace separate property in a footnote
·
identify "purpose" for debt (living
expenses, gambling debts, other spouse's unknown purpose)
·
fill in transfers, child support, maintenance,
legal fees and need for expert fees to value assets
6) Settlement Agreement v. Litigated Divorce Judgment
"Best" and "Worst" Case Scenarios
7) Retainer Agreement
II. Factors
In Determining Spouse's "Equitable" Distribution
1) Statutory
RULE: The court in deciding equitable distribution must
set forth the factors it considered
in its decision and such requirement may not be waived by either party or counsel. (DRL §236(B)(5)(g)).
The court must set forth these
factors in a clear and comprehensive manner. Dunne
v. Dunne, 172 A.D.2d 482,
567 N.Y.S.2d 838 (2d Dept 1991).
1. The specific factors found in DRL §236 (B) (5) (d)
are as follows:
(1) The income and property of each party at the time of the
marriage and at the time of the commencement
of the action.
(i) An unequal award of equitable distribution
was justified in view of the parties'
respective financial circumstances,
including the husband's substantial
separate property assets. Glasberg
v. Glasberg, 162 A.D.2d 586, 556 N.Y.S.2d 772 (2d Dept 1990).
(2) Duration of the marriage and the age and health of both parties.
(i) Wife awarded
eighty percent of the proceeds from the sale of
the marital residence where the wife was forty-two years old, lacked any formal education and had an inability to achieve financial independence. Pagan v. Pagan, 138
A.D.2d 685, 526 N.Y.S.2d 498 (2d Dept 1988).
(3) Need of the custodial parent to occupy or own the marital residence and to use or own its household effects.
(i)
Ordinarily there is a preference to award the custodial parent exclusive use and occupancy of the marital residence.
Leabo v. Leabo, 203 A.D.2d 254, 610 N.Y.S.2d 274 (2d Dept 1994).
(ii) The
preference that the custodial parent remain in
the marital residence may be overcome by proof that alternate housing is available in the general area at a more
affordable cost, or the party to remain is incapable of maintaining the home or that either party is in immediate need of the sale proceeds. Kalisch v. Kalisch, 184 A.D.2d 751, 585 N.Y.S.2d 476 (2d Dept 1992); Waldmann v. Waldmann, 231 A.D.2d
710, 647 N.Y.S.2d 827 (2d Dept 1996).
(iii) Even where a
husband has substantial income, if it would be unduly
burdensome to force him to bear the cost of
maintaining the marital residence in the face of financial obligations and his
child support obligations, it should be sold. In essence, the need of
the custodial parent to occupy the marital
residence is outweighed by the financial need of the parties to sell the
house. Lauer v. Lauer, 145 A.D.2d 470, 535 N.Y.S.2d 427 (2d Dept 1988).
(iv) Sale of the marital residence was directed
where immediate and paramount concerns of providing
for the children's college education outweighed the preference for
continuing occupancy. Ricciardi
v. Ricciardi, 173 A.D.2d 807,571
N.Y.S.2d 41 (2d Dept 1991).
(4) The loss of inheritance and pension rights upon dissolution of the marriage as of the date of
dissolution.
(5) Any award of maintenance under DRL §236 (B) (6) (a).
(6) 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 and career potential of the other party.
(i) An equal distribution of assets was proper where the husband was essentially the sole wage
earner in the course of a nineteen year marriage and the wife was a full-time parent, spouse and homemaker. Dawson v. Dawson,152 A.D.2d 717,
544 N.Y.S.2d 172 (2d Dept 1989).
(ii) Wife's comparatively small financial contributions earlier in the marriage were held to be
very significant since they enabled the
husband to pursue his own education and career opportunities. Anderson v. Anderson, 153 A.D.2d 823, 545 N.Y.S.2d 335 (2d Dept 1989).
(7) The liquid or non-liquid character of all marital property.
(i) It was
error to award virtually all liquid assets to
one spouse while leaving the other spouse with only pension interests, the full value of which was not subject to immediate realization. Petrie v. Petrie, 143 A.D.2d 258, 532
N.Y.S.2d 283 (2d Dept 1988).
(ii) It was
also error to award virtually all marital
property to one spouse while leaving
the other spouse with merely a
distributive award, the full value of which would not be immediately received and which might not be received in the future. Filax v. Filax, 176 A.D.2d 1194, 576
N.Y.S.2d 692 (4th Dept 1991).
(8) Probable future financial circumstances of each party.
(i) A distribution
in excess of fifty percent was justified upon
consideration of all the statutory factors, particularly the probable future
financial circumstances of the parties. The likelihood that the husband would
continue prosperous growth in his medical practice was compared to the wife's
modest financial prospects. Megally
v. Megally, 142 A.D.2d 721, 531
N.Y.S.2d 301 (2d Dept 1988).
(9) 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.
(10) The tax consequences to each party.
(i) Where husband failed to present any evidence of tax consequences of distribution, equitable distribution
without consideration of tax consequences was appropriate. Malin v. Malin, 172 A.D.2d 721, 569
N.Y.S.2d 743 (2d Dept 1991).
(ii) However, where no evidence of taxable consequences was presented at trial and was only raised
in post-trial memos, the Appellate Division, as a matter of discretion,
considered the taxable consequences of the equitable distribution since to refuse to do so would have resulted in a fundamental injustice. Teitler v. Teitler, 156 A.D.2d 314, 549 N.Y.S.2d 13 (1st Dept 1989).
(iii) Tax
Impact: Where husband paid taxes in connection with sale of stock, wife was entitled to fifty percent of the net proceeds
after taxes. Hackett v. Hackett, 147 A.D.2d 611, 538 N.Y.S.2d
20 (2d Dept 1989).
(iv)
Failure to Sign Joint Tax
Return: Any adverse financial consequences of a party's refusal to sign a joint and/or amended tax return proffered by the other spouse can be taken into account in distributing the marital
property. Teich v. Teich,
240 A.D.2d 258, 658 N.Y.S.2d 599 (1st Dept
1997).
See, IX. "Tax Impacting" and Tax
Indemnification Letter (Ex. D).
(11) The wasteful dissipation of assets by either spouse.
(i) Where a wife dissipated marital assets and attempted to conceal same, at least a portion of the amounts she dissipated should be charged against her share of the marital assets. Lenczycki v. Lenczycki, 152 A.D.2d 621, 543 N.Y.S.2d 724 (2d Dept 1989).
(ii) Where a spouse transferred assets to trusts and
other corporations which were, in essence, his alter ego, a distributive award was necessary to achieve an equitable result in the distribution of property. Goldberg v. Goldberg, 172 A.D.2d 316, 568 N.Y.S.2d 394 (1st Dept 1991).
(iii) The shared liability caused by a spouse's failure to properly report income to the taxing authorities. Moody
v. Moody, 172 A.D.2d 730, 569 N.Y.S.2d 116 (2d Dept 1991).
(iv) Wife
awarded seventy percent of the marital property
where husband had tangled financial records,
dissipated marital assets through gambling, was evasive and attempted to
secrete moneys. Conceiaco v. Conceiaco, 203 A.D.2d 877,611 N.Y.S.2d
318 (3d Dept 1994).
(v) Wife awarded sixty percent of the marital
assets where husband refused to obtain employment for a two year period prior to trial and withdrew large sums of cash for his expenses. Southwick
v. Southwick, 202 A.D.2d 996, 612
N.Y.S. 2d 704 (4th Dept 1994).
(vi) Wife awarded sixty-five percent of the marital
property where husband secreted assets into foreign bank accounts and
squandered sizable sums on luxury items
and admitted adulterous affairs. Maharam v. Maharam, 245 A.D.2d 94, 666 N.Y.S.2d 129 (1st Dept 1997).
(vii) Wife awarded seventy-five percent of the value of the marital residence where husband wastefully dissipated marital assets. Ferdinando v. Ferdinando, 236 A.D.2d 585, 654
N.Y.S.2d 652 (2d Dept 1997).
(12) Any transfer or encumbrance made in contemplation of a matrimonial action without fair
consideration.
(13) Any other
factor which the court shall expressly find to be just and proper.
2) "Egregious
Fault"
A) Domestic Violence Cases Awarding Victim/Spouse
More Than 50%
1. Havell
v. Islam, 301 A.D.2d 339, 751 N.Y.S.2d 449 (1st Dept 2002).
Wife was
awarded 95% of the marital assets which had a value of approximately 20 million
dollars, where the Husband broke into the Wife's room, pinned her to the bed
with his knee and beat her viciously with the barbell on her face, neck and
hands. Her screams brought the parties' three daughters into the room and the
oldest called 911, which resulted in the Husband renewing his attack with a
pipe. The Wife's injuries were severe
and in addition to facial and dental surgeries, she suffered pain, dizziness,
headaches, nightmares, sleeplessness and post-traumatic stress syndrome.
The Husband's
contention that egregious fault requires interference with the spouse's ability
to be or to become self-supporting was wrong. Impairment of economic
independence is not a requirement of a finding of egregious fault. There is a
requirement that the conduct grievously injures some highly valued social
principle.
2. Brancoueanu
v. Brancoveanu, 145 A.D.2d 395, 535 N.Y.S.2d 86 (2d Dep't 1988).
Wife was
awarded 60% of the net proceeds of the marital residence because the Husband's
attempt to hire a person to murder the Wife constituted "particularly
egregious and shocking" marital misconduct.
The court
also held that a "great injustice would result if the Husband, who
unsuccessfully contrived to have his Wife murdered" were to be awarded a
portion of the value of the Wife's dental practice.
3. Wenzel
v. Wenzel, 120 Misc.2d 1001, 472
N.Y.S.2d 830 (Sup. Ct. Suffolk Co. 1984).
Wife was
awarded 100% of the marital residence and the Husband's police pension, taking
"into consideration" the Husband's vicious attack and "partly to
compensate the Wife for child support and maintenance, which were uncollectible
due to the Husband's incarceration."
Husband
stabbed the Wife numerous times and fled the marital residence "leaving
her for dead." The Wife required
extensive hospitalization, surgery and therapy. The Husband was arrested 5 months later, convicted of attempted
murder and at the time of the decision was serving an 8-1/2 to 25-year prison
term.
B) Husband's Refusal to Grant A GET
(1) By
withholding a Get to extract economic concessions, the husband forfeited his
right to a distributive award. Schwartz
v. Schwartz, 235 A.D.2d 468, 652 N.Y.S.2d 616 (2d Dept 1996).
(2) The trial
court properly awarded the Wife all property listed on the parties' statements
of net worth if the husband did not grant her a Get within a specified time
period. Pinto v. Pinto, 260
A.D.2d 622, 688 N.Y.S.2d 701 (2d Dept 1999).
C) Cases
Rejecting "Egregious Fault" argument
1. Generally, marital fault is not a relevant
consideration unless the conduct is so egregious that it shocks the conscience
of the court. Blickstein v.
Blickstein, 99 A.D.2d 287, 472 N.Y.S.2d 110 (2d Dept 1984.
(a) Wife's
involvement in an adulterous relationship did not rise to the level of such
egregious or uncivilized conduct as to warrant depriving her of an equal share
of the marital assets. Lestrange v.
Lestrange, 148 A.D.2d 587, 539 N.Y.S.2d 53 (2d Dept 1989).
(b) Husband's
fraudulent promise to have children, resulting in Wife having passed the age of
child bearing, did not constitute egregious marital fault. McCann v. McCann, 156 Misc.2d 540,
593 N.Y.S.2d 917 (Sup. Ct. N.Y. Co. 1993).
III. Marital v. Separate Property
1) Definitions
"Marital
Property" is defined in Domestic Relations Law ("DRL") §236[B][1](c)
as follows:
"c.
The term "marital property" shall mean all property acquired by
either or both spouses during the marriage and before the execution of a
separation agreement or the commencement of a matrimonial action, regardless of
the form in which title is held, except as otherwise provided in agreement
pursuant to subdivision three of this part. Marital property shall not include
separate property as hereinafter defined."
"Separate
Property" is defined in DRL §236[B](1)(d) as follows:
"d. The term separate property shall mean:
(1) property
acquired before marriage or property acquired by bequest, devise, or descent,
or gift from a party other than the spouse;
(2) compensation for personal injuries;
(3) property acquired in exchange for or the
increase in value of separate property, except to the extent that such
appreciation is due in part to the contributions or efforts of the other spouse
(emphasis added);
(4) property described as separate property by
written agreement of the parties pursuant to subdivision three of this part."
2) Burden of Proof
Judson
v. Judson, 255 A.D.2d 656, 679 N.Y.S.2d 465 (3d Dep't 1998)
"Property
acquired during the marriage is presumed to be marital property and the party
seeking to overcome such presumption has the burden of proving that the
property in dispute is separate property."
Pullman
v. Pullman, 176 A.D.2d 113, 573 N.Y.S.2d (1st Dep't 1991).
There is a presumption that assets commingled with other property acquired
during the course of the marriage are marital property.
3) Commingling
and Transmutation
A. Financial Accounts
While the act of depositing separate
funds into a joint account creates a presumption of an intent to convert those
funds into a marital asset, this presumption may be rebutted. The party claiming the funds to be separate
bears the burden of rebutting the presumption.
In order to rebut the presumption, the party seeking to have the asset
classified as separate must prove, by clear and convincing evidence, that the
commingling of funds was solely for his or her own convenience.
Imhof
v. Imhof, 259 A.D.2d 666, 686 N.Y.S.2d 825 (2d Dep't 1999)
- "Separate property can be transmuted into marital property when the
actions of the titled spouse demonstrate his intent to transform the character
of the property from separate to marital [ . . . .] Here, there is every indication that the husband intended to
commingle his funds by depositing the proceeds of the sale of his separate property
into joint the accounts and by sharing the proceeds for family and business
purposes."
Geisel
v. Geisel, 241 AD.2d
442, 659 N.Y.S.2d 511 (2d Dept 1997) - By placing the assets in both
parties' names as joint tenants with the right of survivorship, the husband
demonstrated his intent to transform the character of the asset to
marital."
Rosenkranse
v. Rosenkranse, 290 A.D.2d 685, 736 N.Y.S.2d 453 (3d Dept 2002) While an inheritance acquired by
one spouse during a marriage and retained separately from marital funds would
be considered separate property, the transfer of these assets into a joint
account raises a presumption that the funds are marital property to be
disbursed among the parties according to the principles of equitable
distribution. This presumption cast[s] the burden on defendant to establish, by
clear and convincing proof, that the joint account was created only as a matter
of convenience [citations omitted].
Defendant conceded that he
placed his wife's name on the accounts with the express purpose of
making those funds available to her, for her convenience, not his. Thus,
Supreme Court properly held that defendant failed to rebut the presumption and
we find no reason to disturb the court's determinations regarding the
distribution of assets."
Gundlach
v. Gundlach, 223 A.D.2d 942, 636 N.Y.S.2d 914 (3d Dep't 1996) -
"Although compensation for personal injuries is, as defendant alleges,
usually considered separate property, a presumption that each party was
entitled to an equal share of the deposit arose when defendant deposited the
settlement money into a joint account (see, Banking Law §675[b]; Krinsky v.
Krinsky, 208 A.D.2d 599, 600, 618 N.Y.S.2d 36; Giuffre v. Giuffre,
204 A.D.2d 684, 685, 612 N.Y.S.2d 439). This presumption cast the burden on
defendant to establish, by clear and convincing proof, that the joint account
was created only as a matter of convenience (see, Krinsky v. Krinsky, supra; Giuffre v. Giuffre,
supra). Defendant failed to meet this
burden. The evidence of various transfers from the joint account into and out
of other accounts confirms plaintiff's testimony that all of the parties' money
was handled jointly, regardless of the source."
Diaco
v. Diaco, 278 A.D.2d 358, 717 N.Y.S.2d 635 (2d Dept 2000)
- "The Supreme Court properly found that the plaintiff commingled separate
funds with marital funds, and that he failed to overcome the presumption that
those assets available for distribution constituted marital property."
Chambers
v. Chambers, 259 A.D.2d 807, 686 N.Y.S.2d 199 (3d Dept 1999)
- "Defendant concedes that the amounts sought by him were placed in a
joint account and then later placed in certificates of deposit or other
accounts in his own name. In such instance,
a party will not be credited for separate property if he fails to establish by clear and convincing evidence that the account
was created only as a matter of convenience."
Krinsky
v. Krinsky, 208 A.D.2d 599, 618 N.Y.S.2d 36 (2d Dept 1994) -
"As the wife correctly asserts, the husband's one-half interest in a joint
account which he held with his father should be deemed a marital asset. It is well settled that both depositors
named on a joint account presumptively have an undivided one-half property interest
in the moneys deposited [.... ] That
presumption may be refuted by direct proof or substantial circumstantial proof,
which is clear and convincing and sufficient to support an inference that the joint account had been opened in
that form only as a matter of convenience."
Presumption
of Marital Property Rebutted Because Separate Property Placed In Joint Names
Merely As A Matter of Convenience.
McGarrity
v. McGarrity, 211 A.D.2d 669, 622 N.Y.S.2d 521 (2d Dept 1995)
- "The husband testified at trial that he inherited in excess of $250,000
from his mother and his brother. The
major portion of those inheritances was received subsequent to the parties'
physical separation. The husband
deposited certain of these funds into the parties' joint accounts. As a result, the wife argues, these funds
were transmuted into marital property, of which she is entitled to her
equitable share. The husband
sufficiently traced the funds from his inheritances to deposits into the
parties' joint bank accounts. Moreover,
he established that he simply deposited the money into whatever bank account
was most convenient, whether near his office in Manhattan, or near the marital
residence. Significantly, the bulk of
the inheritance money was not received by the husband until after the parties
were living separately, thus demonstrating the absence of any donative intent
by the husband despite the wife's continued access to the accounts."
Giuffre v. Giuffre, 204 A.D.2d 684, 612 N.Y.S.2d 439 (2d Dept 1994) - "Pursuant to Banking Law §675(b), when one spouse places separate property in a joint account, a presumption arises that the parties are entitled to equal shares of the account. See, Di Nardo v. Di Nardo, 144 A.D.2d 906, 534 N.Y.S.2d