New York Family Law and Divorce

In my prior post on the now infamous kidney case, the husband was claiming a distributive award for the value of the kidney he donated to his wife.In a non shocking decision, Referee A. Jeffrey Grob denied the husband’s request for an expert to give testimony to value the donated kidney. The court ruled:

At its core, the defendant’s claim in appropriately equates human organs with commodities

Referee Grob noted that public health law Section 4307 prohibits the transferring of anything of value, any human organ for use in human translation, and that a violation is considered a class E felony. The court stated that the husband’s request would not only run afoul of this statute, but may subject him to criminal prosecution as well.

So there you have it. Donated organs are not subject to equitable distribution. It probably took the husband tens of thousands of dollars in legal fees to have a court rule on this too.

Tags: Bizarre, Decisions of Interest, Equitable Distribution // 1 Comment »

This is one of my pet peeves. Spend five minutes on google, and you’ll find any number of New York lawyers who claim to “specialize” in any given area of law, including divorces and family law.

The problem is, doing so is an ethical violation of Part 1200 - Rules of Professional Conduct, Rule 7.4 provides that:

[a] lawyer or law firm shall not state that the lawyer or law firm is a specialist or specializes in a particular field of law …

Lawyers can use the term “concentrate” to describe which area of law they dedicate the bulk of their practice to. Lawyer can state which areas their practice is limited to.

But an attorney cannot use the word “specialize.”

A New York lawyer who does hold themselves out to be a family law or divorce specialist either doesn’t care or doesn’t know about the ethical rule’s prohibition on this term. And if they don’t know that basic bit of information, odds are they won’t know other critical aspects of divorce law. Once I even met a self proclaimed divorce specialist who kept talking about how New York divides community property. (Hint #1 - We don’t. New York is an equitable distribution state. Hint #2 - See Hint #1).

Choosing a divorce lawyer is hard enough to begin with, it’s one of the most important decisions anybody will ever make. Avoiding lawyers who don’t know they are violating ethical rules is an easy way to weed out some of the less than desirable choices when finding a divorce lawyer.

Tags: Ethics // 4 Comments »

Buried in DRL 240(1-b) and FCA 413(b)(5) is this often missed clause:

iv) at the discretion of the court, the court may attribute or impute income from, such other resources as may be available to the parent, including, but not limited to: … (A) any depreciation deduction greater than depreciation calculated on a straight-line basis for the purpose of determining business income or investment credits, …

I’ve seen this clause confuse judges and litigants, giving child support orders that are either too high or too low. So what exactly does this mean? In short, it means that some legitimate business deductions permitted by the IRS will not be allowed for determining income for child support.

Let’s take it one step at a time.

Straight Line Depreciation

First, what exactly is depreciation and what is meant by a straight line basis? I’m going to make up some numbers to make it easier to follow. For this example, all expenses are legitimate; there is no hidden income or artificially inflated expenses.

Let’s assume someone is self employed, and has gross revenue of $500,000 per year. Obviously, there are certain expenses associated with running a business, and those expenses should be deducted off the gross income. For example, rent, the cost of goods sold, salaries paid and utilities are all deducted off the gross income to determine profit. For this example, let’s say there are $275,000 in legitimate business expenses and all are valid deductions by the IRS. Other than depreciation, there are no other expenses. That leaves $225,000 in profit so far.

Now let’s assume the business owner purchases a new piece of equipment for $100,000. Since $100,000 was spent as a legitimate business expense, you’d think that it would be acceptable to deduct this expense from the gross income, giving a profit of $125,000.

Nope says the IRS. Even though you paid for this piece of equipment in full, you have to spread out its cost over its useful lifetime. And, the IRS being what it is, has charts saying what the useful lifetime is for every conceivable item. For this example, let’s say the IRS says the lifetime is 10 years.

So, to determine the business deduction, you divide the cost of the equipment ($100,000) by its useful lifetime (10 years) giving you a permitted deduction of $10,000 per year for 10 years. This type of depreciation gives an equal amount for each year, and if you draw a line on a chart for the annual depreciation, you get a straight line. Somebody decided to call this “straight line depreciation” So far so good. So for out example, the $225,000 in profit would be reduced by $10,000, reflecting one year’s worth of straight line depreciation.

Accelerated Depreciation

Now here’s where it starts to get complicated. In 1981, Congress said it would be a good thing to allow business owners a tax break if they bought new equipment. To accomplish this goal, accelerated depreciation was invented, otherwise known as the Accelerated Cost Recovery System, known as ACRS for short. Using hypothetical numbers, ACRS would allow our business owner to obtain more depreciation early on at the expense of less depreciation down the road. For example, ACRS might allow 60% of the cost to be deducted the first four years, 20% of the cost spread out over the next two years, and the remaining 20% spread out equally over the remaining four years. Thus, under ACRS, the depreciation might be 15%-15%-15%-15%-10%-10%-5%-5%-5%-5%.

In 1986, Congress said that ACRS needed to be changed, and modified the depreciation schedule, giving us the Modified Accelerated Cost Recovery System, otherwise known as MACRS. Using hypothetical numbers, the depreciation schedule for our machine was changed to 20% the first year, 20% the second year, 15% for the third, 15% for the fourth year, and 5% for each of the remaining years. Thus under MACRS, the depreciation would be 20%-20%-15%-15%-5%-5%-5%-5%-5%-5%.

Separate from ACRS and MACRS, there is also the Section 179 expenses, which in simple terms, allows a business to deduct 100% of the expenses associated with certain qualified property in the year in which it was purchased. And for those who have made it this far, a Section 179 expense deduction is an exception to the depreciation rule. Remember, our tax code consists of rules, exceptions to the rules, and exceptions to the exceptions.

So turning back to the example, let’s say we are using MACRS, and the equipment is in the second year of service, giving a 20% depreciation deduction. Thus, for tax purposes, the net income is $125,000 less 20% of the cost (20% of $100,000 being $20,000), for a bottom line of $105,000.

But for child support, DRL 240 (1-b)(b) (vi)(A), and its twin companion, FCA 413 (b)(5) (vi)(A) require that any depreciation over the straight line be added back in. The straight line depreciation gives 10% of the total cost, or $10,000. The business properly deducted $20,000 under MACRS. Thus, any amount of depreciation over $10,000 is added back in. As $20,000 - $10,000 = $10,000, the income for child support is properly determined to be $105,000 plus $10,000, or $115,000.

In reality, the IRS has numerous classification of property, ranging from three to twenty years for personal property, and 27.5 & 30 years for buildings.

Examples

Now for two real examples. In one case, I represented the custodial parent, and got the credit for the increased depreciation added back in when the non custodial parent’s income was determined. In another case, I represented the non custodial parent. The judge was about to disallow all depreciation expenses, since they were only “paper losses.” I showed the judge this section of the statute, and preserved the deduction, thereby lowering the child support obligation.

For both cases, I anticipated that the court may not properly apply this section of the statute, and had several hard copies of the section ready to show the court. As a practice tip to any attorney dealing with the self employed, I’d recommend doing the same, highlighting the section helps greatly too.

One final point that’s worth repeating - this section of the child support statute simply disallows a legitimate deduction. There is no artificial manipulation of income or expenses going on.

Tags: Child Support // Add Comment »

We want your liver

This divorce could be straight out of a Monty Python skit.

 Both Newsday and The New York Post have reported about what can only be one of the most bizarre divorces cases, ever.

Doctor and nurse meet and fall in love, and vow to spend a lifetime together in marital bliss. Unfortunately, the wife had severe health problems, which resulted in both kidneys failing. Following two failed kidney transplants, the doctor donated one of his kidneys in 2001, thereby saving his wife’s life.

Two years later, the wife is claimed to have began an extramarital affair with physical therapist.

The wife filed for a divorce in 2005, with the doctor alleging to have been served with the divorce summons in the operating room.

Four years into the divorce action, the doctor is now demanding the kidney back, or to otherwise treat it as part of the marital estate with it being worth $1.5 million.

Assuming that the wife did cheat after receiving a kidney from her husband, nobody can dispute that was a pretty crummy thing to do. And if she really did have the doctor served with the divorce papers in the operating room, that too was even more crummy. Granted, she must have had one heck of a process server, or perhaps the process server was posing as the patient. Who knows.

So assuming all this is true, the doctor certainly has real reason to feel betrayed.

But to ask for a distributive share of the donated kidney as part of equitable distribution takes this divorce to the land of the surreal poka dot bunny rabbits, otherwise known as the place of going from right to wrong.

Like most stories, I’m sure there is a lot more going on than what is being reported by the press. But whatever those facts might be, there is something seriously wrong with a divorce relying on In Re Monty Python’s The Meaning of Life’s “Live Organ Transplants” as controlling law.

“We’re here for your liver”

“But I’m not done using it!”

Tags: Bizarre, Equitable Distribution // 1 Comment »

Two new articles are posted on my website, http://www.jdbar.com/.In New York Estate, Probate and Administration Basics, estate versus non estate assets are explained, followed by a brief discussion as to how an estate is handled when someone dies with and without a will.

The New York Default Last Will and Testament is exactly that; the will which everybody has if they don’t make their own.

Edit to add:

I’ve also started working on a new site, the New York Uncontested Divorce, which should be up in mid to late January 2009. This site will be dedicated towards uncontested divorces alone. More to come soon.

Tags: Administration, Estate, Probate, Surrogate's Court // Add Comment »

I was recently introduced to Alexander Korotkin’s family law blog, and found this excellent summary of grandparent’s visitation rights in New York.

Grandparents’ Right of Visitation

December 21st, 2008
In New York, grandparents have a right to seek assistance of the court to obtain visitation with their grandchildren. That right is included in both the Domestic Relations Law and the Family Court Act. Section 72(1) of the Domestic Relations Law states that

“[w]here either or both of the parents of a minor child, residing within this state, is, or are deceased, or where circumstances show that conditions exist which equity would see fit to intervene, a grandparent may apply to [supreme or family court] and . . . the court, by order after due notice to the parent or any other person or party having the care, custody, and control of such child, to be given in such manner as the court shall prescribe, may make such directions as the best interest of the child may require, for visitation rights for such grandparent or grandparents in respect to such child.”

Section 72(1) “does not create an absolute or automatic right of visitation. Instead, the statute provides a procedural mechanism for grandparents to acquire standing to seek visitation with a minor grandchild”. Wilson v. McGlinchey, 2 N.Y.3d 375, 380 (2004). When grandparents seek visitation under §72(1), the court must undertake a two-part inquiry. “First, [the court] must find standing based on death or equitable circumstances”; and “[i]f [the court] concludes that the grandparents have established the right to be heard, then it must determine if visitation is in the best interest of the grandchild”. Emanuel S. v. Joseph E., 78 N.Y.2d 178, 181 (1991).

Since 1976, visitation may be awarded to grandparents in matrimonial actions. The 1976 amendment added the following to DRL §240: “Such direction [of a court in a matrimonial action] may provide for reasonable visitation rights to the maternal or paternal grandparents of any child of the parties.” In New York, the statute provides that grandparents may obtain visitation rights even though their child is not deceased, and the nuclear family is intact.

Last year, the Court of Appeals in E.S. v. P.D., 8 N.Y.3d 150 (2007), unanimously rejected a constitutional challenge to New York’s grandparent visitation law. …

Visit the Rochester Family Lawyer blog for the rest of this article.

Tags: Grandparent Visitation, Visitation // Add Comment »

In Miller v. Miller, the father filed a petition to modify the existing child support order on the basis they children now lived with him. In calculating the mother’s child support obligation, the Support Magistrate was required to calculate the combined parental income. Since the income exceeded the statutory cap of $80,000, the Magistrate was also required to either apply the statutory percentages to the amount exceeding $80,000 or set forth a detailed reason on how the support for the income over $80,000 was calculated.Since the Support Magistrate did neither, the Appellate Division, 4th Department remitted the matter back to Family Court for a calculation of Child Support in accordance with FCA 413 and Cassano v. Cassano.

What’s really surprising here is not only did the Support Magistrate fail to follow the well established rules in calculating child support, but a Family Court judge failed to do so as well, since the objections were denied by Judge Rivioli.

Tags: Child Support, Decisions of Interest // 1 Comment »

One of the benefits of having kids is that you get to search for all kinds of neat things on the internet. My twin girls are now seven, and have expressed an ever growing desire in horses. So like any diligent parent, I began my online quest to indulge their equine interests. I make no such promises of this kind of diligence when they express an interest in boys however, other than to let any potential suitor know that I own a shotgun, shovel, and 500 acres of unmarked land somewhere upstate. But I digress.

I was absolutely floored when I found my riding instructor from decades ago. It seems she is still on Long Island, and is still teaching. After the initial shock of finding each other wore off, we started talking about where our lives have taken us, and it turns out that my instructor is now a certified real estate appraiser.

Janine’s real estate specialties, in her own words:

I specialize in appraising high end homes in the Hamptons and North Fork of Long Island, and Apartment buildings in Brooklyn and Queens, New York. How diverse can you get?

Her other specialty, once again in her own words:

I also specialize in training “Chronologically Challenged” horse owners who have developed a fear of riding and horse owners who have lost that “special connection” to their horses.

In case you’re wondering where this post’s title came from, it’s simply a quote from one of Janine’s sites - “Will Appraise for Hay.” Horse people are like that.

So why is this on my family law blog? Well, it’s a cool story. But we’re also talking about her submitting some guest articles on my website.

But for now, I suppose my next question is whether I will actually ride again. While my riding days are long, long over, and I classify myself as more of a “never was” than a “has been,” stranger things have been known to happen.

Tags: Odds and Ends, Real Estate // Add Comment »

New York’s Chief Judge, Judith Kay has turned 70 which is the mandatory retirement age. Last month, she gave her farewell speech, as reported in the New York Times.During her tenure, she has campaigned for massive reorganization of New York’s fractured court system. Various proposals such as merging Family Court with Supreme Court, abolishing the Surrogate’s Court, and raising the number of Supreme Court Justices were part of her noble agenda. Unfortunately, her plans for greatly simplifying our unnecessarily complex court system fell victim to various opposing forces, and only incremental changes were made.

However, last summer she helped launch a new court, the foreclosure court, as reported in this Wall Street Journal article.

Judge Kaye has also been leading the push for higher judicial pay.

Judge Kaye was appointed to Chief Judge in 1993, following the Sol Wachtler scandle.

Tags: Courts // Add Comment »

Graev v. Graev is one of those cases where once standard language is turned on its head by the courts, creating a sea of uncertainty it what was assumed to be a fairly straightforward provision of most divorce agreements.

In order to understand Graev, some background is necessary.

Spousal maintenance may be set either by the court or by agreement. Domestic Relations Law Section 248 gives the default conditions on which maintenance may be terminated. DRL 248 provides as follows:

§ 248. Modification of judgment or order in action for divorce or annulment. Where an action for divorce or for annulment or for a declaration of the nullity of a void marriage is brought by a husband or wife, and a final judgment of divorce or a final judgment annulling the marriage or declaring its nullity has been rendered, the court, by order upon the application of the husband on notice, and on proof of the marriage of the wife after such final judgment, must modify such final judgment and any orders made with respect thereto by annulling the provisions of such final judgment or orders, or of both, directing payments of money for the support of the wife. The court in its discretion upon application of the husband on notice, upon proof that the wife is habitually living with another man and holding herself out as his wife, although not married to such man, may modify such final judgment and any orders made with respect thereto by annulling the provisions of such final judgment or orders or of both, directing payment of money for the support of such wife.

The bold text is added.

Thus, if a wife who is receiving maintenance lives with her boyfriend, there shall be no termination of maintenance unless is “holding herself out as his wife.”

Ignoring the gender wording of this statute, which is a holdover from a bygone era, parties are free to stipulate to a different set of conditions under which maintenance will be terminated. One of the most common agreed upon conditions is to provide that maintenance will terminate when the wife cohabitates with an unrelated male or adult. The intent here of course, was to provide for a termination event when the former wife does not marry her live in significant other.

With this background in place, Graev v. Graev can be understood.

The facts in Graev are simple. When the Graevs divorced, their settlement agreement provided that Mrs. Graev’s maintenance would terminate upon her “cohabitation of the Wife with an unrelated adult for a period of sixty (60) substantially consecutive days.” The agreement was silent, as are most agreements, as to the definition of “cohabitation.”

Following the divorce, Mrs. Graev lived with an unrelated adult male, and Mr. Graev stopped paying maintenance. Mrs. Graev filed a motion to enforce the agreement, and Mr. Graev filed a cross motion to terminate his maintenance.

Following a hearing, the Supreme Court found in favor of Mrs. Graevs, holding that “an essential element of cohabitation is a shared residence with shared household expenses” and that Mrs. Graev did not function as an economic unit with her new boyfriend.

Mr. Graev appealed, and the Appellate Division affirmed in favor of Mrs. Graevs, holding the word “cohabitation” meant more than a romantic relationship, and required a sharing of finances or an economic relationship. In affirming, the Appellate Division found that Mrs. Graev and her boyfriend living together for sixty days in 2004, and were romantically involved in 2003 did not constitute “cohabitation.”

Mr. Graev appealed to the Court of Appeals, which reversed, holding the term “cohabitation” does not have a plain meaning, and that extrinsic evidence of the parties’ intent was necessary to determine what they meant in their stipulation of settlement. Therefore, the reversal required the case to be sent back to the Supreme Court for a hearing to determine what the parties meant by cohabitation.

In closing, Footnote 4 of the main opinion notes that

The wisest rule, of course, is for parties in the future to make their intention clear by more careful drafting.

The result now will be a new section in divorce agreements which define the term cohabitation in greater detail.

Tags: Agreements, Decisions of Interest, Maintenance // 1 Comment »