Being Proactive with Retirement Planning: New Jersey Alimony Statute Permits Court to Terminate or Modify Alimony Obligation based on Obligor’s Prospective Retirement Date

By Robert B. Kornitzer, Esq. and Zach Levy, Esq.

While one should always seek to responsibly manage their finances throughout their entire life, at no point is prudent financial planning more critical than at the time of retirement. As a result of leaving the workforce one often loses a significant source of their income, and therefore one must think carefully about all their expenses and debts (e.g. mortgage, food, alimony, etc.) that they will continue to have after retirement, and ultimately decide whether they can actually afford to retire at a certain age. Therefore, the age of retirement is a natural time for an alimony obligor to seek termination or modification of their alimony obligation to their former spouse based on their changed financial circumstances, and in consideration of the factors set forth in New Jersey’s Alimony Statute, N.J.S.A. 2A:34-23(j).

Of course, an obligor is free to wait until the time they actually retire to petition the court to have their alimony terminated or modified, but this approach comes with one notable drawback. Indeed, if the obligor first retires and then seeks termination of their alimony obligation, they are taking the chance that the court will disagree with their position and decline to modify the alimony obligation. An outcome like this can place a heavy financial burden on the alimony obligor, as they must continue to make alimony payments notwithstanding their reduced income. Thankfully, this State’s Legislature provided an alternative approach to have one’s alimony obligation modified in consideration of their retirement. To avoid situations like the above, the New Jersey Alimony Statute actually permits alimony obligors to petition the court in advance of retirement to have their alimony obligation terminated or modified. The court can then make ruling as to what the alimony obligation will be at the future date of retirement based on the reasonably anticipated post-retirement circumstances of the parties. Accordingly, the alimony obligor will be able to know in advance of retirement whether they must continue with their alimony obligation, or whether the alimony obligation will be reduced or terminated. This can be extremely important information when it comes to retirement planning; the obligor will be able to whether they must be financially capable of affording continued alimony payments before actually leaving the workforce. As explained by the Honorable L.R. Jones, J.S.C., in the recent case of Mueller v. Mueller:[1]

The amendment permitting a court to presently consider an obligor’s prospective retirement, as opposed to an actual retirement, is logically designed to avoid placing an obligor in a “Catch 22” financial situation. Specifically, if an obligor is considering the possibility of retirement in the near future, he or she logically benefits from knowing in advance, before making the decision to actually leave the workforce, whether the existing alimony obligation will or will not change following retirement. Otherwise, if the obligor first retires and unilaterally terminates his or her primary significant stream of income before knowing whether the alimony obligation will end or change (and if so to what degree, i.e., termination vs. modification), then the obligor may find him/herself in a precarious financial position following upon such voluntary departure from employment if the court, for whatever specific reason, does not terminate or significantly reduce the existing alimony obligation.

For this reason, when an obligor reasonably approaches retirement age, and files a motion setting forth a specific proposed plan for a prospective and projected retirement in the near future, a court may now address and consider the merits of same under the amended alimony statute, and render a prospective ruling regarding a proposed termination or modification of alimony, to take effect upon the obligor’s actual retirement in accordance with the proposed plan.

At the end of the day, alimony obligors should consider whether making use of the Alimony Statute’s prospective retirement provision is right for them. Having advanced knowledge of whether one will need to be able to afford alimony payments after leaving the workforce can be critical knowledge when it comes to planning for retirement.

[1] Opinion available at http://www.judiciary.state.nj.us/decisions/Mueller%20opinion%20X.pdf

Can I Pay Less Child Support While I Go Back To School To Earn A Degree?

By Robert B. Kornitzer, Esq. and  Zachary Levy, Esq.
rkornitzer@pashmanstein.com and zlevy@pashmanstein.com

Child support obligations are not set in stone, and courts have broad discretion to set aside or modify such obligations for several reasons, including simply because the circumstances of one or both of the parents have changed since the support order was originally entered. A parent losing their job or suffering a significant reduction to their income are likely good reasons for the court to modify a support order, but it is also well established that relief from support obligations should not be granted if a party is voluntarily unemployed. The same rule is also applicable in instances when a parent is voluntarily under-employed; for example, a highly skilled computer programmer who could earn $100,000 per year in that field choosing to work as a substitute teacher instead and earn just $30,000 per year.  Most would probably agree that a parent should not be permitted to escape their child support obligation because they made the decision not to work or not work up to anywhere near their full potential. Notwithstanding this general rule, consider the following: A husband and wife have a child; upon divorce, the parents enter a consent order requiring the husband to pay the wife an amount each month for child support; a few years later, the husband, who is still in only in his late-twenties and working two jobs, realizes that neither of his jobs have any opportunity for growth and he has no long-term future with either company; the husband concludes that if he is to establish a well-paying career and be a good provider for his child he must earn his Bachelor’s Degree; therefore, in order to better himself and provide a better future for his child, the husband decides to leave both jobs in order to attend college full time to earn a degree; the husband believes attending school full time, rather than keeping one or both jobs and attending school part time, is the better choice for himself and the child because he will be able to earn his degree much faster, and therefore be able to generate more income for the child’s benefit in a shorter period of time; accordingly, the husband asks the court to have his child support obligation substantially reduced while he is attending school and not working.

A request to have a child support obligation modified based on the above facts seems a lot more legitimate and genuine than when the same request is made by a parent who doesn’t want to be employed simply because they are lazy, unmotivated, or just don’t care. Perhaps many would agree that reducing child support on a short term basis in order to permit a parent to earn a college degree, which will likely result in that parent earning a much higher income, is actually in the child’s best interest, albeit for the long term.  After all, in this day and age it is very difficult to establish a well-paying career for one’s self without (at least) a Bachelor’s Degree, and having a higher income will be very helpful for paying expenses such as the child’s college education and other necessaries.   Recently, however, a court rejected, and the Appellate Division affirmed, an application to temporarily reduce child support based on very similar circumstances to the above hypothetical in the case of Zavaglia v. Bray. The trial court noted that the husband’s loss of employment while he would be attending college was not only voluntary, but also temporary, and therefore no modification of the support order was justified.

Overall, while one’s desire to better themselves and increase their earning potential for the benefit of their child is certainly commendable, based on Zavaglia, it does not appear that courts will permit parents to forsake their child support obligations, even on a short term basis, for this reason alone.

Can I Pay Child Support Directly to My Child?

By Zachary Levy, Esq.
zlevy@pashmanstein.com

When children are involved in a divorce, determining an appropriate child support obligation for the non-custodial parent is a key function of Family Court judges. In cases where child support is necessary, the judge will typically order the non-custodial parent to pay a specific amount each month (or other predetermined amount of time) to the custodial parent to ensure that there are adequate funds available to meet the child’s needs. A recent opinion authored by the Honorable L.R. Jones, J.S.C., however, addressed an interesting alternative approach: if the child is over the age of eighteen, can the non-custodial parent can make child support payments directly to the child rather than to the custodial parent.[1]  It is called child support after all.

In the case of Kayahan v. Kayahan, the defendant/father (the non-custodial parent) requested that the court modify his child support obligation, and permit him to make payments directly to the parties’ daughter, who was over the age of eighteen and attending college at the time, instead of to the plaintiff/mother (the custodial parent). Although the father’s request to make payments directly to the child was ultimately denied in this case, Judge Jones noted that such a payment methodology could be permissible in certain circumstances, and identified three main factors that should be considered when determining if direct parent-to-child support payments should be permitted. The first factor is the child’s maturity and history of responsibility. Otherwise put, can the child be trusted to use the support money for its specific intended purpose? If the court feels that the child does not possess the requisite fiscal responsibility or would be too susceptible to the temptations typically associated with being eighteen years old and being away at college, direct payment to the child should not be permitted.

The second factor is the non-custodial parent’s history of paying timely child support. This factor is important because if the non-custodial parent fails make a support payment to the child, the child is far more likely to succumb to guilt or other pressures not to seek recourse for non-payment than the custodial parent would be. Finally, and perhaps most importantly, the court should consider whether there would be sufficient remaining child support funds for the custodial parent to continue reasonably maintaining the child’s primary home without significant economic hardship. In Kayahan, Judge Jones recognized that if the court were to permit a portion of the child support to be paid directly to the child, the remaining portion paid to the mother would not be enough for her to maintain the home and basic budget for the child’s benefit. This, of course, would not be in the best interest of the child, because even though the child was a college student, she was still dependent on her mother for support at this stage in her life.

At the end of the day, Family Court judges have broad discretion to fashion unique remedies based on the specific circumstances of the controversy before them. Although not the norm, direct parent-to-child support payments might be a worthwhile alternative option if appropriate based on the facts and circumstances of the case.

[1] Judge Jones’s opinion can be found here: http://www.judiciary.state.nj.us/decisions/kayahan%20%20opinion%20P.pdf

Cohabitation Facts To Consider – Part 1

By Valerie Jules McCarthy, Esq.
vmccarthy@pashmanstein.com

It is becoming more and more common for couples to cohabitate; that is, live together, in a relationship without the bond of marriage.  Many couples find this arrangement to be a great way to “test the waters” before jumping into marriage.

If you are divorced, receiving alimony from a former spouse and are thinking about “testing those waters,” you should read this article carefully, because your romantic life may have a significant impact on your financial future.  If you are paying alimony, you should be aware of the changes to the law, as they may impact your obligation to continue to pay alimony.

Most divorcees are aware that if they receive or pay alimony, the obligation will automatically terminate if the recipient remarries (in most cases).  Many divorcees also know that if the recipient of alimony lives with their significant other, it may impact alimony.  The new alimony statute, N.J.S.A. 2A:34-23(n) enacted on September 10, 2014 provides clarification to help Courts and practitioners to determine if a party is cohabiting.

A noteworthy addition to the law regarding cohabitation is the Legislature‘s overt recognition that some couples may be cohabitating without living together full-time. The new statute specifically states that a Judge cannot find the absence of cohabitation based on “grounds that the couple does not live together on a full-time basis.” This language certainly changes the game, as many people may have believed that if a couple was maintaining two separate households, that factor would carry the day in defining whether or not cohabitation was occurring. The moral of the story is that a person may be deemed to be cohabiting even if he/she maintains a separate residence from their significant other.

Social Security Disability and Alimony

By Robert B. Kornitzer, Esq. and Caitlin Dettmer

The previous blog mentioned that when courts impute income, they consider the earning capacities of each party.  One of the things that can affect the way a court perceives earning capacity is a disability.  If a party has been declared disabled by the Social Security Administration (“SSA”), the court assumes that they are unable to work and will impute a lower income; however, the court allows the other party to challenge that presumption.  Golian v. Golian, 344 N.J. Super. 337, 342 (App. Div. 2001).

Such a challenge can be an important tool for litigants because a declaration of disability does not mean that an individual is entirely incapable of producing income.  The SSA allows disabled individuals to work so long as the work is not “substantially gainful.”  20 C.F.R. § 404.1571.  Substantially gainful activity is defined as work which “involves doing significant physical or mental activities . . . for pay or profit.”  20 C.F.R. § 404.1572.

Proving that a disabled spouse is able to do non-substantially gainful work may increase the amount of income that a court imputes to the spouse seeking support.  For payors whose former spouses are declared disabled, this may lead to paying less alimony.  For payees whose former spouses become disabled, a successful challenge may lead to receiving a lower alimony payment.

Parties whose spouses obtained Social Security disability benefits during the marriage may have a difficult time challenging the presumption that their former spouse is unable to work.  In Gilligan v. Gilligan, the court emphasized that it would be unfair to “permit a divorce litigant to . . . challenge his or her spouse’s disability after (a) having previously assisted the spouse in obtaining [their disability] status, and (b) having previously spent the [disability] funds during the marriage.”  428 N.J. Super 69, 78 (Ch. Div. 2012).

Litigants should also be aware that  Social Security disability status is not necessarily permanent.  The SSA reviews those who receive benefits periodically.  Individuals with disabilities that are expected to improve with time are reviewed more frequently than those whose conditions are not expected to improve.  If an individual’s disability status were changed or revoked by the SSA, this would surely constitute a change in circumstance, as is required to modify alimony awards.

Though highly influential, an individual’s disability status is still just one of many factors which will be considered by a court when imputing income (to both supported spouse as well as supporting spouse) for the purpose of determining an alimony award.

If you would like to speak with an attorney about disability or alimony in New Jersey, please contact Robert B. Kornitzer.

Considerations When Imputing Income to Determine Support

Robert B. Kornitzer, Esq. and Caitlin Dettmer
rkornitzer@pashmanstein.com

Courts consider a variety of factors when determining what amount of alimony is appropriate.  Among these factors are the actual needs of the person requesting the support, the financial wherewithal of each party, and the earning capacities of each of the parties.  N.J.S.A. 2A:34-23(b).  This last factor may require the court to consider what income, if any, should be imputed (assigned) to a spouse who is either not working or underemployed.  This “imputation of income” is important in determining the extent to which the party requesting support can contribute to his/her own support, as well as the ability of the other party to pay support.  For a party seeking alimony, a higher imputed income to her/him may result in a lower alimony award, so this issue is the subject of much litigation.

An interesting illustration of one way the courts approach imputation of income in the unreported (non-binding) 2014Maine v. Maine. This case discusses an alimony request by a spouse who has some vocational training, but who was not employed in that field  during the marriage.  The wife in Maine sought support and explained that during the marriage, her husband had been the primary financial provider, earning $68,000 a year while she earned only $10,000 a year as a part-time custodian.  The husband argued that the wife should have a higher income “imputed” to her because she was capable of earning more money ($32,400 according to the N.J. Department of Labor (“DOL”)), having trained as a medical assistant during their marriage.

The court determined that while it would impute income to the wife, it would not do so without further inquiry and blindly use the average income of a medical assistant as reported by the DOL.  Instead, the court took into consideration the time it may take the wife to find work at the average income level of a medical assistant, due to her minimal work history in the field.  The wife was assigned an income of $23,000 which the court found she could earn immediately if she were to work forty hours a week at her current hourly rate.  The wife was also given four months to demonstrate that she had sought and was unable to obtain employment at a higher income level, before the court would reconsider her imputed income.

While the DOL’s averages provide helpful guidelines for determining what income should be imputed to someone who has training in a particular field, they are not necessarily representative of the income that a court will impute to a spouse who has a spotty work history in that field.  The Court will examine all specific circumstances surrounding the spouse for whom income is sought to be imputed and will not solely rely on a government statistic offered in a vacuum.

The Reality of “Changed Circumstances” and the New Alimony Reform Act

By Robert B. Kornitzer, Esq., and Caitlin Dettmer
rkornitzer@pashmanstein.com

When the spouse paying alimony seeks to reduce his support, the New Jersey Supreme Court requires the lower courts to consider (among others) two factors set out in Lepis v. Lepis, 83 N.J. 45, 157 (1980): (1) whether there is an initial of “changed circumstances” and (2) whether the supporting spouse has the ability to pay what he was previously paying.   Examples of changed circumstances include unemployment of the supporting spouse, changes in the supporting spouse’s income, illnesses, and changes in the dependent spouse’s living arrangements.  Courts will not modify alimony if the change in circumstances is only temporary.  Unfortunately, there is no perfect rule by which to measure when a changed circumstance is severe enough and has endured long enough to warrant a modification of support.

While there is no set amount of time that constitutes changed circumstances, recent changes to New Jersey’s alimony law (N.J.S.A. 2A:34-23) establish that an application for modification of alimony may be filed once a party has been “unemployed, or has not been able to return to or attain employment at prior income levels” for 90 days. The law maintains that factors other than the amount of time a party has been involuntarily unemployed or subject to a reduction of income are to be considered, but in theory, the law now recognizes that changed circumstances may exist after only three months of continued unemployment or inability to return to the level of income that existed at the alimony was set.  This three-month rule was considered to be a major reduction in the burden carried by the supporting spouse.

However, any celebrating by supporting spouses seeking to reduce support may have been somewhat premature.  In the recent unreported (meaning non-binding) case of Beschloss v. Beschloss, the court seemed to place more weight on factors other than length of time being unemployed when considering an application for downward modification of support.  In Beschloss, the Appellate Division upheld the denial of the defendant’s request for downward modification even though his income had been reduced by approximately one-third of his former income and despite a period of unemployment.

It therefore remains unclear as to how meaningful the impact of the revised alimony statute will be in determining future support modification applications.  We can look forward to many new cases continuing to define the issue of what constitutes “changed circumstances.

New Jersey Alimony Law Increases the Need for Financial Planning During Divorce

By guest author: Rosemarie Moeller

There has been much discussion in recent weeks about the legal implications the new alimony bill will have on current and future cases. However, changes to the law which impact the tenure and certainty of alimony are particularly detrimental to the payee spouse, increasing their need to understand the longer term implications of the settlement before signing a Property Settlement Agreement.
Consider the major components of the bill – Permanent alimony has been eliminated; there is a limitation on the duration of alimony for marriages of less than 20 years; more clarity around modification or termination of alimony upon retirement; the potential for retroactive relief in cases of changes circumstances; and potential of suspension or termination of alimony in cases of cohabitation – all of these threaten the income stream that the payee spouse needs to maintain a suitable lifestyle.

Merely obtaining an alimony settlement that meets the expenses necessary to allow the payee spouse to remain in the marital residence doesn’t set the payee spouse up for success in the longer term of what happens when the stream of alimony ends. What this means in financial terms is that the money is going to run out at some point and payee spouses have to plan for that eventuality.
Consider the demise of a 15 year marriage which involves a payee spouse, in their mid-30’s with three school age children who will not be attending college for at least another 8 years. Let’s say this spouse has been getting pendete lite support for the 2 year period during the divorce process. At most, the payee spouse will be awarded 15 years of alimony which can now be reduced by the pendete lite support if any, paid during a divorce proceeding. So in this case, by the time alimony ends, this payee will only be their late 40’s, too young to retire and perhaps out of the workforce too long to obtain gainful employment that will enable them to support themselves.

The duration of alimony is even threatened in marriages of over 20 years by the retirement or loss of employment of the payor spouse. What does the payee spouses financial life look like in the circumstance where the payor retires at normal retirement age of about 67? So a 50 year old who has been married for 30 years with emancipated children may have to plan for a change in their income about 17 years after their divorce. This is a challenging task when mortality tables expect that individual to live for another 30 years in retirement.

Another threat to post marital lifestyle is the prospect of alimony being suspended or terminated if the obligee spouse cohabits with another person. “Cohabit” is defined as involving a “mutually supportive, intimate personal relationship in which a couple has undertaken duties and privileges that are commonly associated with marriage or civil union but does not necessarily maintain a single common household.” Dating is defined as: “a process whereby two people meet socially for companionship, beyond the level of friendship, or with the aim of each assessing the other’s suitability as a partner in an intimate relationship or marriage”. Not a huge distinction between the two with the only remedy being that alimony will end either for a period of time or permanently as a result.

The bill makes significant changes to the alimony laws which are effective immediately upon signing and is applicable to current and future cases. Decisions made during this settlement period will affect the payee spouse for many years to come. The decisions need to be made in the context of long term planning which allocates alimony to both the short and long term needs of the payee spouse. Financial planning during the divorce process will give the payee spouse the guidance they need to make informed decisions that are pivotal to their post marital lifestyle and allow the payee spouse the confidence to sign the settlement having some indication of its longer term impact under various scenarios.

Rosemarie Moeller CFP®, CLU©, CFDP is Managing Director of Freedom Divorce Advisors a division of AEPG® Wealth Strategies located in Warren, NJ. She specializes in matters related to divorce. She can be reached at rmoeller@aepg.com or (908) 727 3594.

The Value of Information in Divorce Litigation

Every consultation with a prospective family law client begins with a very similar request from the prospective client “Please tell me what results I can expect, both financial and custodial”.  The financial questions include (but are not limited to) those pertaining to expected results as to payment/receipt of spousal and child support, division of liquid and investment assets, division of retirement assets, division of personal property and the necessity of carrying insurance to secure various obligations.  The custodial questions include (but are not limited to) those pertaining to legal custody, physical custody, relocation of one parent with the children, parenting schedules and parenting dispute resolution.

It is not a difficult task for a family law attorney to spout endlessly as to the statutory and case law pertaining to the above-referenced subjects. In fact, once you get many of us started, like many other professionals, it may be difficult to get us to stop discussing the nuances of our fields of expertise.  But the general knowledge that we can impart upon first meeting a prospective client is relatively meaningless to that client.  Why? Because each client is a unique individual with a unique set of circumstances.  Those unique circumstances create almost a limitless set of possible settlement/trial scenarios that must be explored prior to devising a final strategy.

I am a firm believer that no two sets of litigants (spouses, partners, non-married parents) are alike.  In a divorce, a client and her spouse bring to the litigation an extensive number of variables.  For instance, as to alimony alone, we must explore the ages of each party, the number of years married, the education of each spouse, the earnings of each spouse, the numbers of years in the workforce, the parental responsibilities of each spouse, the health of each spouse, and much more.  As to division of the value of a family business, we must explore the business tax returns, the total benefits derived from the business, the source of funds used to create the business, the involvement of each party in the business, the stability of the business, and on and on.

For each issue to be properly explored it is essential for the attorney to request specific information from the client and it is essential for the client to provide that information to the attorney. The specific information will allow the attorney to tailor advice and create a strategy that is tailored to the client.  Divorce is not “one size fits all”, even though many attorneys do attempt to take a simplistic cookie-cutter approach to divorce litigation.

During the course of litigation, gathering the necessary information takes on an important role towards optimizing the final settlement/trial terms for that client.  But it is also just as important for each attorney and client to understand that not only are each client’s “facts” different, the client’s “wants” are different as well.  It is the combination of maximizing wants based on what the facts have revealed that allows a client to achieve optimal results.