The website of Fox Rothschild LLP, a large firm of nearly 750 lawyers, features a blog to help you deal with the divorce process. Fresh and useful posts, regular updates and a professional approach to a common situation.
At the risk of appearing obsessed, I write a second time about the separation of Jeff and Makenzie Bezos. This time my subject is again borrowed from the Wall Street Journal, but it’s not about the money. Rather, the Journal produced a prominent and adulatory article about the divorce announcement by the couple (actually Jeff) on Twitter. I thought it interesting because anyone who separates from a spouse or long time relationship is left asking; how do I let people know?
In olden days, this was done either by phone or in person. It creates an awkward moment because if you are the person getting the news, you are not certain just how to react. After the “I’m sorry to hear that….” the question becomes how far does the inquiry go? It seems cold to stop with the vague “I hope it works out.” Yet, is the person making the announcement asking for absolution? Therapy? There is no happy answer.
So, I think there is merit to a public announcement and despite my general abhorrence of Twitter, I see benefit in getting the word out. I don’t know whether it requires a “joint” announcement as the Bezos posting suggested. For most of us, separation does not suggest that we need to “calm the market” in Amazon stock. However, the many lawyers and therapists who commented upon the Bezos announcement liked the idea of controlling the message and communicating that the problems either have been or will be handled with civility.
If you read what was posted by Mr. Bezos, it was a bit treacly. In part, it says:
“After a period of loving exploration and trial separation, we have decided to divorce and continue our shared lives as friends.”
Perhaps this was all so amicable, but the news was immediately accompanied by reports that Herr Bezos already has a girlfriend. It also throws shade on the ambiguous phrase “loving exploration.” But, back to the main point… People want to know if you are separating. If they truly care about you, they would like to know things will be civil even if that is merely an aspiration. It is also a good way to signal to your spouse how you want him or her to respond. The beauty of the electronic approach is that it gets the word out and allows friends to control a responsive dialogue on their own terms.
I don’t do Twitter because I have witnessed a thousand prominent people see their public persona crash and burn. They did not think before they wrote. Twitter is best known as a place where people say stupid things. But perhaps Twitter might actually become an instrument of civility rather than a semantic battleground.
What to say? Well it may be ideal to issue a joint announcement. It is rare for couples to be finished with each other at the same time. Usually, one spouse is the catalyst. If that is your situation, keep it simple and avoid what will be perceived as over the top sentimentality.
“I wanted to let friends and family know that (Jeff ) and I are separating. I am hopeful that this process will preserve our dignity and not draw you into a conflict where you will feel the need or desire to take a side. I hope our friends will remain just that although we may no longer be a couple.”
Message sent. Now, when you run into the neighbor in the frozen food aisle, they “know” and can ask either how it’s going or confine the conversation to whether chicken Florentine is good with arugula. The recipients also know that you want to be an adult during the process.
So am I on the road to conversion as a Twitter acolyte? Perhaps. But then there is the recurring fear that if I joined the social media band no one would “follow.”
While writing about high profile divorces is a means of attracting readers, it really leaves most of us feeling “empty” when it comes to how it relates to our ordinary lives. But the announcement this week of the divorce agreement between Jeff and MacKenzie Bezos made the front page of the Wall Street Journal. There is a reason for this. Unlike the split of say P. Diddy and Cassandra Ventura announced in October, the Bezos divorce actually could affect our lives if we own anything besides a token piece of Amazon. Can that be? NBC announced the story Wednesday morning just as markets opened. Stock price then $1,656. It closed the day at $1659. But when markets opened this morning (1/10), they did so at $1,640. We don’t know what causes these variations but the Bezos divorce was front page of today’s major news outlets.
Why would anyone care? Mr. Diddy is estimated to be worth almost a billion dollars. What composes that billion is unknown to us. But Jeff Bezos is worth $150 billion and the far biggest piece of that is 16% of all Amazon stock, about 79,000,000 shares. If $150 billion is an accurate estimate and $130 billion of it is in AMZN stock, a lot of that stock is in play in the divorce process.
This was a long-term marriage (25 years) in an equitable distribution state. The latter phrase means that Mackenzie does not automatically get 50% as she would in a community property state. But, this transaction was most likely not: “you take the house(s) and the cars, I’ll keep my stock.” Lots of ink has been spilled in the Jack Welch and Frank McCourt divorces about what a non-entrepreneur spouse should get. But even if Ms. Bezos took only 30-40% of the marital estate and kept the house and 401(K), she is still going to walk away with a piece of Amazon that would rival those held by Vanguard and Blackrock. Vanguard and Blackrock represent hundreds of thousands of investors. Mackenzie Bezos is a party of one. As one of the tiny pieces of Vanguard, I bought knowing that Bezos was the lead dog and that lead dogs understand the responsibilities of owning 16% of the entire kennel. But all I know about Ms. Bezos is that she is a novelist who married her husband when Amazon was still a book distributor and that today she may have the power to put stock to the market in some ways that could create dangerous volatility for those of us with smaller stakes. If there is a consolation for the small investor, it is that the Bezos’ appear to live in Medina Washington where community property presumptions of 50/50 don’t apply. Then again, the Bezos do have homes in a couple of community property states so their real residence state may be not what we think. A community property state could signal a $75 billion dollar settlement and a larger piece of Amazon.
So what has this to do with mere mortals? The answer is liquidity. We commonly see business entrepreneurs or their spouses in a world where 70-90% of their wealth is enmeshed in a closely held business. They are divorced as commonly as anyone else is but they typically ignore the liquidity crisis which divorce can trigger. Folks like Bezos have some relief from this particular headache. Their stock is public and can be sold. But ask any senior executive in a publicly traded company how much freedom public securities offer them and they will respond: damn little. There are blackout periods when they cannot trade and every time they do, the investor community is combing the SEC records to see who sold and wonder why stock was sold unless the sky was ready to fall.
You don’t have to be a Bezos to have this problem. Every day we insure houses and their contents based upon an unlikely casualty contingency. In so doing we anticipate and hedge against a remote possibility. We do the same with both life and disability insurance policies. But few of us ever look at our own portfolio of assets and ask; what if my spouse announced “Game over.” It is not a pleasant thing to think about. But chances of a house fire are pegged at about 1:3000. The number of divorces in the United States exceed the number of house fires by 2:1.
Most people reading this will dismiss it. “I’m not getting divorced.” Those deniers seem to think that they are the only spouse who could be unhappy in their marriage. So why diversity and attempt to arrange the balance sheet so that illiquid assets are a smaller piece of the portfolio. There is actually a second reason. It is reflected in the Greek tragedy called “Theranos” where a $10 billion dollar valuation in 2015 turned into criminal indictments of management three years later. Enron was $92 a share in 2000 and half that price a year later. GE lost half its market capitalization between June 2017 and the same time this year. It has declined another third since then. So there are many reasons to accept the bromide that there can be too much of a good thing. Even if you are a Bezos and even if you have 200 shares in your retirement plan.
Just before Christmas last year, Congress passed and the President signed a major tax reform package that contained a surprising wrinkle. It abandoned a decades long provision that permitted payors of alimony or spousal support to deduct their payments from income and required recipients to report the payments and pay tax on them.
The effective date of this change was/is December 31, 2018. Orders and Agreements in effect on that date maintain the old tax treatment. Still taxable to payee. Still deductible by payor. But Orders and Agreements formed in 2019 will be tax neutral unless the deal is a modification of a pre-2019 instrument (i.e. Agreement or Order), and it expressly retains the former tax treatment. To address this, Pennsylvania support guidelines needed to adopt amendments to deal with two systems: one where the payments are taxable and one where they are not.
When the Pennsylvania Supreme Court Rules Committee began their review, they observed that every other state approaches child and spousal awards differently. In Pennsylvania we have always calculated child support first and then used that result to calculate spousal and alimony awards. The Rules Committee is recommending that we adopt a different approach. Under proposed rules currently out for comment, we will solve first the issue of spousal support/alimony and then plug the results into a child support calculation. If there is an Order in effect before December 31, 2018 the calculation does not change. If the obligor makes $5,000 a month net and the obligee $2,000, you subtract the lesser number from the greater and start with the $3,000 result. If there will be child support due, the spousal award is 30% of the difference or $900. If no child support is involved the percentage remains 40 and the result is $1,200. Both payments will remain taxable and deductible.
But, if the case involves a new Order or the parties should decide they want an Order to be reflective of the Trump tax reforms, the calculation becomes a little more complex. Here we go; dealing first with a case where child support is not involved:
Obligors net monthly income
Less payments due to other families
Adjusted net income available for support
$1,650 (this is new)
Obligee’s net monthly income
$800 (also new)
Subtract the $800 from the $1,650 and nontaxable support will be $850. This contrasts with $1,200 taxable/deductible under the ancien regime.
Now, on to a case with the same incomes but a child support element:
Obligors net monthly income
Less payments due to other families
Adjusted net income available for support
$1250 (this is new and a lower % than above)
Obligee’s net monthly income
$600 (also new, also lower % than above)
Subtract the $600 from the $1,250 and you get spousal support or alimony of $650.
These results will now become part of the child support calculation. The spousal award will be subtracted from obligor’s income and added to obligee’s.
Net incomes available for support
Spousal support/apl adjustment
Adjusted income available
Combined income for support $7,000
Guideline amount 2 children 1,660
If the obligor has 45% of overnights the support is adjusted with a 15 basis point discount to 47%.
Then we allocate health insurance, private education, and activities (w/o discount) 62% Obligor and 38% Obligee.
These are recommendations to the Supreme Court and they are not yet law. But, given the fact that the federal tax law will change in less than ninety (90) days and something must be done in that period, don’t be surprised to see the proposed regulations adopted at least as a temporary matter.
This was a summer where prenuptials arrived in profusion, and what made it interesting is that just about all of them involved folks who were either beginning or in the middle of their earning careers. Most prenuptials involve couples who already have kids from former marriages and money they want to preserve for those kids. But we also see prenups for young people who have wealth already transmitted from their parents; parents who want that wealth to stay on their child’s side of the column even after a marriage occurs.
When going through this process with young folks or even people who are in their forties, lawyers ask lots of questions that can be uncomfortable. No one ever really asks a couple how they want to live their financial lives together and yet as McKenzie Frankel, a financial planner in Wayne, PA has observed, a lot of relationships would work far better if those questions were addressed. When it comes to how we manage family and money our expectations are often hard baked into our personalities by our own life experiences. Millennials can be especially interesting to work with because many of them are raised to eschew family and money stereotypes (e.g., mothers stay at home and dad’s do the financial stuff).
I read the Money Personality Quiz developed by Frankel and her partner Joslyn Ewart with interest, but I also considered some far more basic questions that young people in love should be asking each other. I also believe that the answers to some of these questions might be worth incorporating into agreements. Permit me to try my hand at my own “personality quiz:”
How important is it to your relationship that you have children, with a “0” reflecting no interest in raising a family and “5” indicating that it was indispensable to agreeing to marriage?
Indicate the optimum number of children you would want to have with your intended spouse.
Indicate the outer limit of the number of children you think you would want to have.
If fertility becomes an issue for either of you, would you be prepared to incur the expense and physical challenges which fertility treatments may involve?
If fertility is an issue, indicate your receptivity to adoption and whether there are limits to how far you were willing to adjust to the alternative options adoption may require.
If you had a child who suffered physical, intellectual or emotional limitations that prevent one of you from being able to work outside the home, how would you decide which of you would make that financial sacrifice and how would that sacrifice be compensated if the marriage were to dissolve?
If your child(ren) had no limitations but you decided that one of you did not want to return to work in order to devote energy to full time parenting, how should that be compensated if the marriage were to dissolve? How should you reduce or limit your lifestyle/expenses once the decision is made and the household income is reduced?
If you both had jobs earning equal amounts of money and one of you was offered employment that would require relocation to another city, how much more compensation would the spouse offered the job have to receive before you would agree to move, especially if no substitute job was immediately available in the new market.
How important is it to you that your child have the benefit of private school when a reasonable public school is available?
Do you see it as your responsibility to provide children with either vocational or academic training after they have completed high school? In a day (today) when a four year public school undergrad degree costs $80,000 and a private school $160,000, what should be your contribution and how do you want to finance the parent portion (e.g., savings or when it comes)?
In a day when the average social security benefit for a retiree is about $17,000 a year and the maximum benefit, if you contribute the maximum ($8,000 per annum) and defer to age 70, is $44,000 a year, what kind of retirement income do you hope to have and when do you intend to start financing that via savings? Can you agree now that a portion of your earnings go into some form of retirement and that you would continue that percentage?
How important is it to you that you own your home rather than rent a dwelling, “0” being of no consequence and “5” being an absolute necessity?
If you earned $30,000 per annum what do you consider a reasonable amount for a monthly auto payment excluding any trade in value (i.e., “0” down)? If your income doubled, would your expectations change and by how much?
Is there a level of income where you would prefer to devote additional energy to non-income producing endeavors like charitable work, creative work or occupations which sometimes pay lots of money but typically are low on the income ladder (e.g., acting, writing etc.)?
Between 1 and 5, rank your future spouse’s financial stability in terms of their approach to money. If your intended could earn $100,000 but would likely spend more than he earned, that’s a low rank. If your spouse would earn $30,000 but be more likely to still have money for savings he/she is more toward a 5.
What is your intended spouse’s current credit rating and what does the credit history look like? Shakespeare said it best: Past is prologue. And it’s a delicate subject, but have tax returns for recent years been filed?
Hobbies and collectibles are often a tell-tale signs of financial distress. Gambling, sports or clothing addictions and “collections” (whether cars, handbags, guns or memorabilia) can often take even solid wage earners over the edge. The latter expense often masquerades as an “investment.” We have worked with clients who have tried this. Very few profit from their efforts and many owe large sums on what they do own.
What’s the child support situation? Don’t be surprised to find out that a prospective mate who otherwise seems an honorable person owes tens of thousands in back support. There can be many explanations for this and some may be more reflective of neglect than malice but it won’t make any difference, when the $10,000 bonus you deposited to the joint bank account for a trip to Orlando is seized to pay his past due support.
Criminal background. This can be a painful look but today Pennsylvania has data online about prior criminal history. It does not include juvenile offenses (which occur before age 18), but any adult bad behavior tends to linger. Make certain you are looking at the right name and verify if possible with a birthdate and/or a social security number. You may be planning a driving honeymoon while your future bride is juggling her second DUI arrest.
So there are two stories here. Know the past of the person you love and talk about the future and how to address it. And while you are discussing the future you may want to think about an agreement that protects you with some promises that could be legally enforceable.
When you marry you usually take on obligations of support for each other. The property you acquire (except by gift) is divisible in divorce. The debt is as well. Most people file joint tax returns which means that any monkey business with the return affects both monkeys even though only one monkey was cooking the books. And except for credit card debt, lots of consumer debt including mortgages are “joint and several.” That’s legalese for “you’re on the hook for the mortgage even though you consistently gave him cash to make the payment.” He just had other priorities.
The author has plenty of real life stories to back up the scary things he just described. What makes the stories tragic is that they were actually avoidable if someone had asked some of the questions before. We have all heard the stories about people online creating an avatar; an identity that does not reflect who they really are. Don’t allow a love-based fantasy to ruin your otherwise stable reality.
It is axiomatic that divorce is an emotional process. Samuel Johnson summed up domestic life best when he wrote, “To be happy at home is the ultimate result of all ambition.”
One of the great challenges of representing clients going through this highly emotional chapter of life is that their focus tends to be on the present. Certainly, there are many daily issues that do merit attention. We live day-to-day. But, when I do an initial interview with a client, two of the questions I try to focus on are: (1) how many years does this client have until their productive (i.e., income producing) life will end, and (2) how is the client suited to prepare for that day?
These issues have become more acute over time. When I began working as a divorce lawyer in the 1980s, some elements of life seemed fixed. Retirement was at age 65. Most clients aged 40-60 either had stable employment or were married to spouses who had stable employment. Stable employment meant mid to long-term employment in a stable industry for a stable business. All of that has changed.
Today I am meeting with people who have not reached 50 who report that they are concerned about whether their employer will still exist another decade or whether they will survive as employees. What has changed so dramatically in the past decade is that it is often the most senior business executives who are talking about such vulnerabilities. Many of these people have very solid retirement assets today, but they have job insecurity. When we explore that issue, these often highly talented people are seeing a future as consultants working spasmodically or experiencing long periods between jobs.
The September 4, 2018 edition of the Wall Street Journal focuses on a subject too often forgotten in the divorce process. How will we prepare for a retirement in an age when we may find ourselves effectively “retired” years before we expected it?
As the Journal article correctly observes, financial needs in retirement have been more the subject of “convention” than actual study. The conventional wisdom is that we will need 70% of our final annual income in retirement. The financial services industry has promoted 80% for reasons that are self-evident. The Journal article by Dan Arierlt and Aline Holzwarth challenges these assumptions and correctly observes that all of us whether going through divorce or not, can actually do the necessary homework ourselves. It can be uncomfortable work, but it is highly necessary work.
Realize first that many of us are being forced to pull down retirement assets long before we expect. That can be caused by unusual life events or even something as simple as being terminated while a loan is outstanding on one’s qualified retirement plan.
The starting point is to look at what retirement mechanisms are out there. Social Security is the most ubiquitous and the same issue of the Journal contains an article debating the merits of taking that benefit at 62 in contrast to normal retirement (roughly 66) or deferring to age 70. Then some of us still have defined benefit plans or annuities, which will begin to provide monthly income for life. Finally, we turn to the defined contribution accounts, whether IRAs, 401k’s or 403B plans. With these accounts, the question revolves around how and when to draw. The goal of that game is to die while still solvent although an increasing number of Americans are dying in significant debt.
The Journal article notes and we have observed that many people launch into retirement having lost their regular salary but acquired an additional 8-10 hours a day on their hands with not much to do. Many of us dream of time to golf or attend the theater. Golf is a $40 a day activity. Broadway is a bad example, but the average ticket is over $100. Still want to see your pro sports team live? Baseball $40 a day. Pro football is Sunday only but $172 for the ticket alone. Most of us do not really consider downsizing things like auto purchases and we now have 365 days a year to visit Florida in winter or friends and family the rest of the year. In short, we have witnessed clients who retired at 65 with $700,000 in retirement who seem to think they can maintain a $6,000 a month lifestyle. They can, so long as they don’t plan to live more than 10 years.
The article encourages people to actually wander into the weeds of these mundane daily costs while acknowledging that things like uncovered medical and long-term care expenses are unknowable given the state of our health care system. But, the article does not pay sufficient attention to what I will call the “core expenses” Will you retire with a mortgage and if so when will it be retired? Can you really afford to live in the home you have grown to love and nurtured with 30-40% of your pre-retirement household income? The answer may be yes but the price may be a golf membership or the annual pilgrimage to the seashore. People don’t like to make these choices but you risk burning through your retirement too quickly unless you assess costs. Keep in mind as well that as you grow older, some things you do yourself like mowing lawns or cleaning windows and gutters will have to be outsourced unless you want to budget for some inpatient rehab when the hip breaks.
The other area not discussed but an area of high vulnerability for retirees is unbudgeted “child needs.” As attorneys, we have seen divorce clients who had large portions of their savings dispersed to subsidize a child’s drug rehabilitation, criminal defense or creation of a new business enterprises, built more upon hope than expectation. Their children have effectively made a once secure retirement far less secure. The parents providing these resources underwrite these or even more frivolous expenses (e.g., family vacations), ignoring the fact that as retirees, they have no ability to replace spent assets.
The electronic version of the article links to an Excel spreadsheet that identifies expenses by categories. Anyone contemplating retirement needs to look at that budget. A similar one can be found on the Pennsylvanian support rules by clicking on Income and Expense Statement.
Retirement is an uneasy subject especially in a world where the vagaries of employment may leave us retired long before we expect. But we need to look carefully at a day when we cannot replace what we consume with additional labor. And, in my world, we also deal with taking a retirement that might comfortably support two people in one household, which becomes stretched beyond normal limits because divorce has now taken a common resource and demanded it support two independent homes. The truth is that we are living a long time; a fact underscored by watching 106-year-old Roberta McCain bury her octogenarian son. Therefore, whether you are enduring a divorce or just thinking about your future, those thoughts need to focus on what you will need in the years ahead and how you will “mind the gap.”
Every year, both in April and in October, divorce lawyers face a dilemma. While April is the official tax deadline, just about everyone knows that “complex” returns are almost never complete when spring rolls around and many filers defer to October. But, when couples split they often ask for the first time whether they should be filing jointly with their spouse. This often presents difficult questions for the lawyers because we are not accountants and we are latecomers to the financial history of the marriage. The easy answer is to say “Never!” in response to the inquiry, but that usually means the marital estate will have additional tax burdens. It also is often a financial shot across the bow of the primary breadwinner, causing aggravation that can set a decidedly negative tone to the negotiation process.
Inevitably, once the discussion about joint versus separate returns gets underway, one of the parties introduces another term, “innocent spouse.” For many years, if one spouse was seriously hedging in reporting income or by deducting improper expenses, the spouse who did not produce the income or determine the expenses could claim that they should not be held liable for the taxes, interest and penalties. This was because he or she did not know and could not reasonably have known about the tax evasion. It is an area where laypeople seem to think they are expert when they most certainly are not.
On Saturday, the Wall Street Journal reported on the story of Rick Jacobsen. Rick filed jointly with his wife. In 2012, the IRS found that Mrs. Jacobsen had embezzled about $500,000.00 from a non-profit where she did accounting. Most people don’t realize this, but if you steal money, the government classifies it as income and you owe taxes on it. So the IRS sent the joint filing Jacobsen’s an “assessment” for $100,000.00 in income tax due but unpaid. Jacobsen contested the assessment contending that he did not know about the “income” and should not be assessed for something his wife did without his knowledge. Last month the U.S. Tax Court agreed.
How come the IRS did not just get the money from Mrs. J? You know. She was in prison and the money had disappeared. So, Mr. Jacobsen filed his own Form 8857 and claimed he knew nothing about the income or the tax associated with it. He was underway when a new wrinkle emerged. His now “ex” told the Service he did know about the money taken. Innocent spouses are not innocent if they either knew about or “profited” from the wrongdoing spouse’s conduct. Thus, if you are reporting $4,000.00 a month in income and you are making mortgage and car payments of $5,000.00 a month, the term “innocent” may not fit comfortably around your financial neck. The IRS denied Herr Jacobsen relief and he appealed to the Tax Court, which heard his case in 2017. By the time the case was heard the tax due had swollen to $150,000.00 with penalties and interest. His happy news is that the Court decided for him on almost all of the unreported income.
How did he prevail against the government? First, he showed that he was financially unsophisticated. His wife was an accountant. He had an associate’s degree and worked in a cheese factory. Second, and most important, he could show that the money embezzled did not inure to his benefit nor was it apparent from his wife’s lifestyle. The couple did gamble a lot, reporting $160,000.00+ in gaming income and corresponding losses in one year. The couple filed electronically and husband said his only involvement in tax preparation was providing his W-2 wage statement to his wife. Not only did their lifestyle not improve, at one point their utilities were suspended for non-payment. The Tax Court accepted his testimony that his gaming activity was quite modest and involved only slots. One can picture the IRS attorney wincing during that testimony. The Court also did not credit wife’s testimony that her husband knew because it was not supported by any evidence.
Other intangibles are credited with his win as well. He is a disabled veteran who is no longer married to the offending taxpayer and aside from the issues associated with his joint filing, all other returns he filed showed income properly reported and taxes properly paid.
The Opinion reported as T.C. 2018-115, is worthy of review as the presiding judge marches through the statutory facts and case law to reach her conclusion. She found that husband was “out” for most of the tax liability arising from 2010, but had to pay tax on a small piece of unreported income in 2011 because he filed a joint return, even after his wife was charged with embezzlement. Note also that the case is decided under precedent from the Seventh Circuit Court of Appeals. Other Circuits may employ other standards or analysis.
Also important to know is the statistical trend. In 2013 there were roughly 35,000 innocent spouse cases presented for disposition. Relief was denied in just over 10,000 of those cases and granted in some form or the other in 25,000. In 2017 the number of requests had fallen to 25,000 and in that year the denial rate soared so that the chance of denial was equal to that of getting relief. As Sgt. Esterhaus said best, “Let’s be careful out there.” And, beware that the tale of an ill-advised joint return may come with a tail of never ending tax obligations.
On June 19, 2018, the Pennsylvania Supreme Court, in an Opinion that could be described as unanimous, ruled that the trial court was correct when it decided that it could deviate from presumptive minimum guidelines in a high-end child support case. The case has been floating about for quite some time. We wrote about the Superior Court decision back on December 7, 2016 and we provided the incomes the Delaware County Court had to look at:
The case arises from a property settlement agreement which stated that the parties would exchange tax returns and calculate child support annually based on respective net income “and Pennsylvania guidelines, provided,…either party may apply to the court to adjust child support…based on relevant factors.” Those last few words may have made a world of difference because if the sentence ended without reference to “relevant factors”, the obligor may have been stuck with the presumptive minimum contained in the guidelines. Recall that the right to support as a matter of contract in a divorce setting may yield a far different result than one decided in support court.
One cannot fault the majority opinion of Justice Baer, which is itself, lauded by the concurring opinion of Justice Wecht. The line of reasoning is fairly clear. Child support guidelines are premised upon economic studies of child needs. However, as income climbs higher and higher, needs become less easily calculated. When it adopted “guidelines” for families netting more than $30,000 a month, the Court merely extrapolated and largely speculated about those needs. So, even though there is a guideline amount and that guideline amount in Hanrahan, produced a support order in the range of $60,000 a month, the parties should have the right to make a record about the specific needs of such families and dip into the evidentiary well known as “lifestyle.”
What concerns this writer is, just what is a trial court to do with this “lifestyle” question and just how far does the evidence go? Needless to say, the law seems quite clear that if I make $7,500 a month and my ex brings down $2,500, my “lifestyle” testimony is not going to get very far. I have to fit my lifestyle around the guidelines, and unless my kids have some very unusual needs, their “lifestyle” is not going to get any more consideration than mine or that of the prodigal mother.
But once the income balloon ascends above 30,000 feet, the door of Melzer v. Witsberger appears to spring open despite the language of Mascaro v. Mascaro. This means inquiries into “lifestyle” and that is a pit, which has no bottom. The facts in Hanrahan illustrate the point. Look at Mr. Hanrahan’s income. A million or two a year invites travel on timeshare jets or acquisition of a reasonably fancy Cessna. Get to four million in income and now a Learjet 35 falls into play. As I reach the million a month club, I have arrived in Gulfstream territory although my plane will probably be an older model and I may not be able to lug around more than seven friends and family.
Are judges supposed to hear this? Moreover, what wisdom can their life experience impart when the pinnacle of their lifestyle is an upgrade to first class on a scheduled commercial airline? At what level of income do we abandon commercial aviation or propeller driven transportation in favor of jet aircraft? In addition, what do we do in instances where the income is a one off; e.g., a lottery win or sale of a business, or the magnificent income is not sustained. Once children have gone “private”, can we ask them to downgrade back to commercial aviation?
I have participated in these trials and suffice to say, after a few hours they become tedious. The obligors love to wax on about how frugal they can be and “in touch” with their humble beginnings, whether real or imagined. Obligees remember seeing Parsifal from the box seats at the Bayreuth Festspielhaus and knocking back glasses of Krug Clos du Mesnil at intermission with the Obligor before the champagne and the marriage soured. The judge has to listen to how much the fourteen year old adores Wagner and the “Ring Cycle” while the judge wonders whether the “ring cycle” is a setting on the Whirlpool in his laundry room.
Reason tells us that $2,000 a day is a lot of child support. The Supreme Court was right to say that in settings such as this, expenses do matter. But, in communications I have had with lawyers who lived through the days of Melzer, there is fear that unless someone limits the “needs” and “expense” testimony, we will have courts hearing days of testimony. Taxpayers in a setting will underwrite the judicial time where this obligor’s 2012 daily income rivaled the annual household income of the mean Pennsylvania household. That is not good for anyone, except perhaps the lawyers asking whether little Rachel eschews cotton as she has grown used to cashmere.
A recent case published by the Superior Court gives us some insight into one issue which has thus far evaded appellate review and affirms in principle that alimony remains a secondary remedy and one which is awarded based upon need.
Core facts are:
Both employed in health care industry.
Husband’s net: $16,000
Wife’s net: $10,400
25 year marriage
Wife received support $2,200 in support since 2012.
Court awarded 55/45 split in favor of Wife. The gross estate is $7,000,000+ pensions.
Wife asserted that Husband had dissipated $4.4 million of property on an extramarital relationship. She appealed claiming the award did not give sufficient consideration to that fact. The Trial Court opinion acknowledged expenditures outside the purposes of the marriage but concluded, “It is not the role of the Court to recoup expenditures made during the marriage by one party that the other party does not know about or does not agree with or to make a party whole again.” It then added that in effecting an equitable distribution “considerable consideration” to contributions to creation of and dissipation of assets.
It appears that the Trial Court made its distribution with a blanket statement that it had “reviewed all the factors.” The Superior Court concludes that the Trial Court carefully examined the distribution factors and that Wife’s lack of specificity on this issue was dismissed as waived.
On the $4.4 million dissipation issue, Wife presented a list of purchases and expenditures which she considered a dissipation as the month was spent for the benefit of an adulterous relationship. As noted, the Court found that its role is not recoupment of dissipated assets but distribution of what remained. It was sufficient that the Trial Court “considered” monies used by husband during the course of the marriage. Hopefully this meant the monies “misused” during the marriage but that is not the word employed.
Another issue was that of whether alimony was appropriate. The Trial Court had denied it stating that the expenses presented were not reasonable and, even if credited, did not exceed Wife’s income supplemented by the equitable distribution award. The Superior Court, quoting Teodorski v. Teodorski noted that, “Alimony is based upon reasonable needs in accordance with the lifestyle and standard of living established by the parties during the marriage as well as the Payor’s ability to pay. Moreover, alimony following divorce is a secondary remedy and is available only where economic justice and the reasonable needs of the parties cannot be achieved by way of an equitable distribution award and development of appropriate employable skill.”
The alimony language is interesting to see in a day when alimony appears to be more guideline than needs driven. The language about the merit of preparing and presenting a dissipation case must be disheartening to many. It appears that while there was a lot of “evidence” presented about dissipation, the Trial Court skated by stating that it heard and considered that evidence but had no responsibility to keep score or formally evaluate the dissipation claim in an economic sense. Those who come to attorneys with stacks of evidence of funds spent on non-marital relationships will need to be warned that such a presentation will be certain in cost but not in outcome. We don’t know how much of the $4.4 million in dissipation claims were solidly established. What we do know is that in a 25 year marriage where the parties depart with husband having a 3:2 advantage in net income, the equitable distribution advantage to wife was roughly $350,000.
New York’s highest court, the Court of Appeals ruled on February 13, 2018 that a Facebook account holder’s designation of a posting as “private” did not preclude a litigant from obtaining copies of those postings where they may be relevant to the litigation.
The ruling comes from a personal injury case where the plaintiff claimed to suffer permanent injury in an equine fall. The plaintiff’s claims included those typically associated with loss of enjoyment of life. The defendant sought to secure plaintiff’s entire Facebook account. Plaintiff opposed production of any private posting and the intermediate appellate court agreed that privacy protection was available. Further, appellate review was allowed.
The Court of Appeals reversed the Appellate Division, noting that its ruling would allow a party to effectively “hide” otherwise discover-able material simply by marking it as private or otherwise curating their own social media postings. It permitted the Defendant to review post accident postings in search of evidence to rebut Plaintiff’s claim to have suffered cognitive injuries and loss of life’s enjoyment caused by the accident.
The ruling was not open ended however. The trial court had ordered all pre and post accident photos to be produced without regard to privacy settings except those involving nudity or romantic encounters. It also ordered Facebook to produce records of the frequency and length of the postings so that pre and post accident activity could be compared. The Court of Appeals upheld those limitations but added that a request for these kinds of materials needs to be reasonably calculated to yield relevant information.
Needless to say, in the world of divorce, the scope of relevancy will be considerably broader than that associated with a claim for physical injuries. But, the ruling is an important one.
This is not a political outlet. So, I will confine my “political” comment to a single set of facts. 17 people killed yesterday. 32 school days so far this year. Time Magazine reports 18 school shootings. So a school shooting every other day.
The interviews I heard last night on television provided a haunting reminder of a conversation I had earlier that day with a colleague who treats families going through divorce. We spoke about a common case. The child we were discussing was enduring an acrimonious divorce. The child is caught in the middle and is traumatized by the experience. The therapist related to me that part of his concern was that the child we were discussing seemed to have no friends; no social connection of any substance. The kid is in a lot of pain and his parents are so absorbed by their own suffering, they have little empathy to give. So, the child spends hours of time alone in his home immersed in social media.
Last night I listened to coverage of the 19 year old shooter. I heard interviews with his classmates. The child was a loner with no identifiable friends despite efforts on his part to connect with peers directly and via social media. Children in the high school who knew the shooter before he was expelled described him as strange and his efforts to connect with his fellow students were rejected because he was odd. So, this child posted some very troubling things online and exercised his right under Florida laws to acquire an AR-15 automatic weapon shortly after attaining 18. That gun fires more than 700 rounds per minute.
Last year Parkland was named Florida’s safest city. The mayor described the community as “close knit.” Like Columbine, Colorado, Sandy Hook, Connecticut and Nickel Mines, Pennsylvania, these are towns where mass shootings are not supposed to happen. But, let us be plain, we are not a close knit society. Our kids are more vulnerable to this kind of aberrant conduct than we would like to think. If you watched the interviews with the affected children, you can tell they don’t even know what they have just lived through. If anything, they are far too poised for people who have witnessed the death of mentors, classmates and come closer than they can consider, to being among those for whom there will never be another Valentine’s Day.
Eighty nine years ago yesterday, America learned of the brutal murder of seven men in a garage on North Clark Street in Chicago. The killings became a part of American history. Three months ago we watched 58 people killed and 851 wounded in Las Vegas. Cellular phones and computers can make us more connected than we could have ever dreamed possible a generation ago. But, we are less close knit and more disconnected than ever. When will we realize that “connectivity” is not just a reality? It is also a mirage.
President Trump has concluded that the nineteen year old shooter was mentally disturbed. That should be self evident. But, a child like this lurks in just about every high school in America. The question is, do we accept school shootings as part of the American way of life or are we going to do something to find these kids and give them help before more children die.