New York's Post-Marital Compensation

When the essence of this proposal is laid bare, it becomes readily apparent that this is not a proposal for support of a spouse following a divorce, but is disguised “wealth redistribution” or, even worse, “compensation” for having been married. In essence, the post-marital income guidelines proposal treats the “earning capacity” of each of the spouses as if it were “marital property” (see DRL '236.B5) to be distributed upon the termination of a marriage without giving any credit or other consideration to whether that earning capacity was achieved prior to the marriage thereby constituting separate property that is made up of what economists term “human capital.” Among the other separate property components of human capital are such things as innate talent and intelligence, as well as pre-marriage achievements in the form of prior employment experience, educational degrees, professional licenses and certifications, celebrity status, etc. This flies in the face of the conceptual underpinnings of New York's scheme for the equitable distribution of “marital property” upon divorce; namely that a divorce is the dissolution of a “partnership,” where the assets of that partnership are divided or “distributed” upon the termination of a marriage and the parties are freed to go their separate ways. That is, except to the limited extent that one spouse may need spousal maintenance from the other in order to provide for his or her reasonable needs viewed in the context of the marital standard of living and of the rehabilitative concept of the amount of time required for education, training or work experience to enable the needy spouse to become essentially self-supporting, wherever possible.

Changes in Marital Status Or in a Party's Financial Circumstances

The proposed legislation does not provide for review of the post-marital income award upon a change in the marital status of the parties. Significantly ' and presenting a dramatic alteration in our state's jurisprudence ' there is not even a readjustment, much less termination, of post-marital income payments upon the payee's remarriage. This lack of review could result in significant inequities, as the remarried payee may be in a completely different financial situation after remarriage than he or she was in prior to remarriage. It has long been in the fabric of our domestic relations law that it is not fair to impose on divorced spouses the responsibility of supporting their former spouses in a new marriage. Proponents of the proposal say that post-marital income payments after the payee's remarriage are appropriate because the payments are intended to reflect participation in the marital partnership, not support. However, participation in the marital partnership is recognized by way of equitable distribution of assets acquired during the marriage, not a division of future income. The post-marital income proposal makes the mistake of confusing distribution of current assets with distribution of future income.

Without review for changed circumstances, a payor who is involuntarily terminated, incapacitated, or experiences other significant changes in income may be placed in the position of having to meet inequitable and unattainable payments.

There is no recalculation of, or reduction or offset to, post-marital income in the event the payee begins to earn after the divorce either an income for the first time or a higher income than at the time the maintenance award was made. This is another area of concern.

The proposed post-marital income formula also fails to take into account the party's ages, proximity to retirement, and income earning potential, as well as other financial obligations that they may have. While the proposed schedule provides for judicial review of a list of factors, this is in no way guaranteed. Significantly, where couples cannot afford representation, judges may, in the interest of time, use the proposed schedule in an effort to avoid lengthy investigations or consideration of the list of factors. When given this opportunity to utilize a faster and approved way to determine the appropriate Post-Marital Income, there is a strong risk that this flawed formula will be used in the most sensitive of cases.

Moreover the long and potentially permanent payouts in long-term marriages may, or may not, be equitable. Following a long-term marriage, the parties may be dividing material marital property, including retirement assets, while, at the same time, the spouse with greater earnings is on the verge of retirement, or already retired. To require a retired or soon to be retired spouse to support an ex-spouse who already has the benefit of the marital savings and retirement assets accumulated during the marriage, may be an inequitable result. The currently existing statute gives our courts discretion to consider the assets being distributed, as well as the age of both parties, along with all other relevant factors in fashioning the award.

Additional Considerations

In next month's issue, we will explore more of the things the Bill does not adequately address, such as child support, maintenance calculation methods and tax consequences.

Alton L. Abramowitz, a member of this newsletter's Board of Editors, is a partner with New York's Mayerson Stutman Abramowitz Royer LLP.

Last month, in the first part of this article, we discussed the controversial proposal to replace New York's current maintenance scheme with “Post-Marital Income Guidelines.” That discussion described the background leading up to the proposal and laid out the details of legislation that has been sponsored by Assembly Member Amy Paulin, which mirrored a proposal by the Coalition for Post-Marital Income Guidelines. What follows is a critique of the proposed legislation, based in large measure on a report of the Legislative Committee of the Family Law Section of the New York State Bar Association. This writer is one of the co-chairs of that committee, and a co-author of the report. The other authors of that report were Elyse Goldweber, Esq., of Goldweber & Epstein LLP, Marcy Wachtel of Katsky Korins LLP, and Adam John Wolff of Kasowitz Benson Torres & Friedman LLP.

What the Legislation Is Not

We turn now to the legislation introduced by Assembly Member Paulin (A.10466). The proposal does not constitute a comprehensive approach to reforming the current equitable distribution law; rather it alters one aspect of the law without considering the overall effect on each party. And, it fails to adequately account for the distribution of marital assets upon divorce, such as the imputed income that those assets could or should generate if fairly invested, as well as income streams already distributed to the non-income or lesser income producing spouse in the form of distributive awards for licenses, degrees, and other forms of enhanced earning capacity or career enhancements. The proposed formula fails to address crucial aspects of maintenance calculations as to tax treatment, adjustment upon payee's remarriage or upon the parties' future change in financial circumstances, and child support payments. In fact, the Bill wholly ignores the vast body of case law that has accumulated since the Equitable Distribution Law became effective some 28 years ago on July 19, 1980. The failure to address these variables will undoubtedly yield inequitable results.

When the essence of this proposal is laid bare, it becomes readily apparent that this is not a proposal for support of a spouse following a divorce, but is disguised “wealth redistribution” or, even worse, “compensation” for having been married. In essence, the post-marital income guidelines proposal treats the “earning capacity” of each of the spouses as if it were “marital property” (see DRL '236.B5) to be distributed upon the termination of a marriage without giving any credit or other consideration to whether that earning capacity was achieved prior to the marriage thereby constituting separate property that is made up of what economists term “human capital.” Among the other separate property components of human capital are such things as innate talent and intelligence, as well as pre-marriage achievements in the form of prior employment experience, educational degrees, professional licenses and certifications, celebrity status, etc. This flies in the face of the conceptual underpinnings of New York's scheme for the equitable distribution of “marital property” upon divorce; namely that a divorce is the dissolution of a “partnership,” where the assets of that partnership are divided or “distributed” upon the termination of a marriage and the parties are freed to go their separate ways. That is, except to the limited extent that one spouse may need spousal maintenance from the other in order to provide for his or her reasonable needs viewed in the context of the marital standard of living and of the rehabilitative concept of the amount of time required for education, training or work experience to enable the needy spouse to become essentially self-supporting, wherever possible.

Changes in Marital Status Or in a Party's Financial Circumstances

The proposed legislation does not provide for review of the post-marital income award upon a change in the marital status of the parties. Significantly ' and presenting a dramatic alteration in our state's jurisprudence ' there is not even a readjustment, much less termination, of post-marital income payments upon the payee's remarriage. This lack of review could result in significant inequities, as the remarried payee may be in a completely different financial situation after remarriage than he or she was in prior to remarriage. It has long been in the fabric of our domestic relations law that it is not fair to impose on divorced spouses the responsibility of supporting their former spouses in a new marriage. Proponents of the proposal say that post-marital income payments after the payee's remarriage are appropriate because the payments are intended to reflect participation in the marital partnership, not support. However, participation in the marital partnership is recognized by way of equitable distribution of assets acquired during the marriage, not a division of future income. The post-marital income proposal makes the mistake of confusing distribution of current assets with distribution of future income.

Without review for changed circumstances, a payor who is involuntarily terminated, incapacitated, or experiences other significant changes in income may be placed in the position of having to meet inequitable and unattainable payments.

There is no recalculation of, or reduction or offset to, post-marital income in the event the payee begins to earn after the divorce either an income for the first time or a higher income than at the time the maintenance award was made. This is another area of concern.

The proposed post-marital income formula also fails to take into account the party's ages, proximity to retirement, and income earning potential, as well as other financial obligations that they may have. While the proposed schedule provides for judicial review of a list of factors, this is in no way guaranteed. Significantly, where couples cannot afford representation, judges may, in the interest of time, use the proposed schedule in an effort to avoid lengthy investigations or consideration of the list of factors. When given this opportunity to utilize a faster and approved way to determine the appropriate Post-Marital Income, there is a strong risk that this flawed formula will be used in the most sensitive of cases.

Moreover the long and potentially permanent payouts in long-term marriages may, or may not, be equitable. Following a long-term marriage, the parties may be dividing material marital property, including retirement assets, while, at the same time, the spouse with greater earnings is on the verge of retirement, or already retired. To require a retired or soon to be retired spouse to support an ex-spouse who already has the benefit of the marital savings and retirement assets accumulated during the marriage, may be an inequitable result. The currently existing statute gives our courts discretion to consider the assets being distributed, as well as the age of both parties, along with all other relevant factors in fashioning the award.

Additional Considerations

In next month's issue, we will explore more of the things the Bill does not adequately address, such as child support, maintenance calculation methods and tax consequences.

Alton L. Abramowitz, a member of this newsletter's Board of Editors, is a partner with New York's Mayerson Stutman Abramowitz Royer LLP.