State Legislature Passes Landmark Bill on Spousal Support
The original article can be located here
Steven J. Eisman and Hilary F. Simon, New York Law Journal
On June 24, 2015, the New York State Senate unanimously passed a bill that will bring extensive revisions to the Domestic Relations Law and particularly to spousal support guidelines. The bill was previously passed by the New York State Assembly by a margin of 146-1 on June 15, 2015. It is expected that Governor Andrew Cuomo will sign the bill. Among the most anticipated revisions is the elimination of enhanced earning capacity as a marital asset—which means that courts are no longer required to determine the lifetime value of a license or professional degree earned during the marriage.1
The bill had broad support among prominent legal organizations representing the interests of divorcing spouses across all income levels including the American Academy of Matrimonial Lawyers New York chapter, New York Legal Assistance Group, the Family Law Section of the New York State Bar Association and the Women’s Bar Association of the State of New York.
The new bill preserves temporary maintenance guidelines while addressing the inadequacies in the prior law. Under the no-fault divorce package enacted in October 2010, New York established guidelines for calculating temporary maintenance (paid between the filing of a divorce and its completion) based on the respective incomes of the parties. Pursuant to these guidelines, an award of temporary maintenance is determined by applying a formula to the parties’ respective incomes in circumstances where the less monied spouse’s income is less than two-thirds of the more monied spouse’s income.2 By way of example, if the payor spouse has an annual income of $90,000 a year, then a temporary maintenance award is only available if the income of the less monied spouse falls below $60,000. The definition of income in these guidelines is consistent with the Child Support Standards Act (CSSA), and includes any income from property that is subject to equitable distribution.3
While the temporary guidelines enacted in 2010 were intended to protect the less monied spouses by providing predictability and consistency in awards of temporary maintenance, the reality is that in practice over the past five years, the guidelines have created more problems than they have solved. The interim maintenance guidelines shifted the emphasis of temporary maintenance from need and preservation of the status quo to a disproportionate redistribution of income. The law has the dangerous potential to shift income and transform the monied spouse into the less monied spouse and vice versa. For example, in Scott M. v. Illona M.,4 the husband had an income of $156,000 and the wife had an income of $34,000. After an application of the child support and temporary maintenance guidelines, the court found that if the temporary maintenance guidelines were rigidly applied, the husband would be left with an income of $39,000, whereas the wife’s income would be $78,000. Even after the court deviated from the guidelines, the husband still had only $51,000 in disposable income, compared to the wife’s $67,000. See also, C.K. v. M.K.5; Margaret A. v. Shawn B.6; and AC v. DR.7
In addition, the temporary maintenance formula not only fails to address the payment of household carrying charges (such as mortgage or utility payments) but it also ignores the critical issue of the balance between temporary maintenance, child support and counsel fees. In the case of J.H. v. W.H.,8 the husband had an annual income of $107,953, while the wife’s annual income was $11,660. Upon application of the guidelines, the husband was ordered to pay $26,708 per year to the wife in temporary maintenance. After the award of interim maintenance, child support, and tax consequences, the wife had a net income of $58,253, while the husband’s net income was only $41,000. Here, the court recognized that due to the redistribution of income, the husband could no longer be considered the “monied spouse.” As a result, he did not have to pay the wife’s counsel fees.
Judges began to notice the failings of the temporary maintenance guidelines, and many adjusted their rulings accordingly. For example, in March 2012, Justice Norman Janowitz of the Nassau County Supreme Court granted a downward modification of temporary maintenance in Jill G. v. Jeffrey G.9 A year earlier, in March 2011, Judge Janowitz ordered Jeffrey G. to pay his wife, Jill G., over $17,000 a month in temporary maintenance, despite the fact that his net income as an investment banker was only $12,775 per month (which represents his salary, not inclusive of his bonus). Ms. G. was employed as a guidance counselor, with a total net income of approximately $6,416 a month. Mr. G. was laid off in August 2011.
In a decision dated March 12, 2012, Judge Janowitz declared his original decision in this case to be “unjust and inappropriate” and substantially reduced the amount Mr. G. was ordered to pay his wife in temporary maintenance and child support. Mr. G.’s monthly maintenance payments were reduced by almost 50 percent and were made taxable to his wife; child support was reduced to $2,000 from $2,594. In the decision Judge Janowitz wrote that “[t]he Court did not consider how the totality of the court-directed payments would impact the parties’ economic reality on a month to month basis.”
Since interim maintenance awards made under the guidelines use an income-shifting approach rather than considering the actual needs of the parties, the result undermines the language of the revised counsel fee law and can lead to double dipping and an exacerbation of the redistribution problem. The temporary guidelines also did not apply to post-divorce maintenance awards, thereby leaving a gap in the law and unpredictability in decisions concerning post divorce spousal support.
In light of the inherent flaws in the temporary maintenance guidelines, the law was analyzed by New York’s independent Law Revision Commission. Pursuant to Chapter 371 of the Laws of 2010, the commission was directed to review the state’s maintenance law and publish a report on its findings.10 After the governor’s signing of Chapter 371, the commission conducted a review of the revised Domestic Relations Law (DRL) 236B at the request of Assemblywoman Helene Weinstein, chair of the New York State Assembly Judiciary Committee. The Law Revision Commission issued several reports on the shortcomings of the temporary maintenance guidelines and proposed solutions.
Those reports as well as the recommendations of the Office of Court Administration’s Matrimonial Practice Advisory and Rules Committee eventually led to the passage of the bill. (Co-author Steven Eisman is a member of the matrimonial practice advisory committee.) The Matrimonial Practice Advisory and Rules Committee, chaired by Justice Sunshine, drafted the bill which was ultimately presented to the New York Legislature. The committee members were appointed by Chief Administrative Judge A. Gail Prudenti, and included judges and matrimonial and family law practitioners. as well as representatives from bar associations and legal organizations.
Under the new bill, the income cap for the formula portion of temporary maintenance awards has been lowered from the current $543,000 to $175,000 of the payor’s income. The new bill also applies the $175,000 cap to post-divorce maintenance awards as well as listing suggested ranges for the duration of maintenance awards based upon the length of the marriage. It also includes two separate calculations for scenarios in which child support is awarded and is paid by the litigant also paying spousal support and in scenarios where child support is not awarded or is awarded but not paid by the litigant responsible for spousal support.
When child support will be paid in addition to temporary and/or post-divorce maintenance, the new bill states (i) that 25 percent of the maintenance payee’s income will be subtracted from 20 percent of the maintenance payor’s income; then, (ii) the sum of the maintenance payor’s income and the maintenance payee’s income will be multiplied by 40 percent and the maintenance payee’s income will be subtracted from the result; finally, (iii) the lower of the two amounts will be the guideline amount of maintenance.
Without child support, or with child support but where the maintenance payor is the custodial parent for child support purposes: (i) 20 percent of the maintenance payee’s income will be subtracted from 30 percent of the maintenance payor’s income; then (ii) the sum of the maintenance payor’s income and the maintenance payee’s income will be multiplied by 40 percent and the maintenance payee’s income will be subtracted from the result; finally, (iii) the lower of the two amounts will be the guideline amount of maintenance.
Similar to the previous maintenance and child support guidelines, the new bill preserves the judge’s rights to adjust the guidelines amount of maintenance above the cap where the guidelines amount of maintenance would be unjust or inappropriate in consideration of one or more factors provided in the statute. Furthermore, this bill permits the court to award additional maintenance above the cap after consideration of one or more factors provided in the statute.
In order to address the redistribution problem created by the previous guidelines as well as the law’s failure to address the payment of carrying charges on real property and other fixed expenses, the new bill provides the court with discretion to allocate the responsibility for payment of specific family expenses (such as the mortgage and other carrying charges) between the parties in such percentage as the court deems equitable.
With regards to post-divorce maintenance, the bill introduces several new factors that courts will consider in awarding post-divorce maintenance, including but not limited to, termination of child support income or imputed income on assets being equitably distributed. In determining the duration of post-maintenance, the court will be required to consider anticipated retirement assets, benefits and retirement eligibility age. If the bill is signed by the governor, this will be the first time that post-divorce maintenance and spousal support guidelines have been codified under New York law.
In addition to the foregoing, the new law eliminates the concept of “enhanced earning capacity” as a marital asset subject to equitable distribution. Under current law, if a license or professional degree was earned during the marriage, judges are required to award a certain percentage of the lifetime value of that license or degree—a value generally set by the court after testimony by a forensic expert. This law has long been unpopular among litigants and attorneys alike as it often complicated settlements and created diverse, sometimes conflicting, results in court decisions.11 Under the new bill, courts will no longer focus on enhanced earning capacity as a separate asset. The new statute instead provides that advanced degrees earned during the marriage can continue to factor into determination of post-divorce maintenance and equitable distribution.
The provisions of the bill regarding post-divorce maintenance and spousal support guidelines will take effect 120 days after it is signed by the governor and applies to all matrimonial and Family Court actions for spousal support commenced on or after such effective date. The provisions of this bill regarding temporary maintenance would take effect 30 days after the bill becomes law.
The difference in the time frames is due to the fact that courts and litigants are already familiar with procedures for temporary maintenance awards and there are resources available such as a worksheet and temporary maintenance calculator available at the Office of Court Administration’s Divorce Resources website,12 whereas post-divorce maintenance and spousal support provisions of this bill are completely new and it will take some time for the bench and the bar to adapt to same. In addition, there has been concern that the formula in existence has yielded unfair results for temporary maintenance payors with child support obligations, thereby justifying a shorter period for the law to become effective.
This new bill, passed with broad support by the New York State Legislature, is the culmination of many years of hard work and compromise by myriad legal organizations, the Legislature, the bench and the bar. Matrimonial and family law associations, attorneys, judges and litigants across the state are eagerly anticipating that the changes to the temporary and post-divorce maintenance guidelines will provide long-awaited predictability for all divorcing spouses and preserve judicial flexibility in more complex cases.
1. Up until the enactment of this legislation, New York was the only jurisdiction in the United States that considered enhanced earning capacity to be a marital asset.
2. Dom. Rel. L. §236B (5-a).
4. 31 Misc.3d 353, 915 N.Y.S.2d 834 (Sup. Ct. Kings Co. 2011) (Sunshine, J).
5. N.Y.S2d 2011 WL 1563792 (Sup. Ct. Rockland Co. 2011) (Weiner, J).
6. N.Y.S.2d 2011 WL 893015 (Sup. Ct. Westchester Co. 2011) (Connolly, J).
7. N.Y.S.2d 2011 WL 1137739 (Sup. Ct. Nassau Co. 2011) (Falanga, J).
8. 31 Misc.3d 1203(A), 2011 WL 1158653 (Sup. Ct. Kings Co. 2011) (Thomas, J).
9. 31 Misc.3d 1209(A), 2011 WL 1364481 (Table) (Sup. Ct. Nassau Co. 2011) (Janowitz, J).
10. The New York State Law Revision Commission Preliminary Report on Maintenance Awards in Divorce Proceedings, May 2011 available at http://www.lawrevision.state.ny.us/May_11_2011_Preliminary_Report_on_Maintenance.pdf.
If you have questions as to how this article affects you, contact the Matrimonial/Family Law Attorneys at Berger, Fischoff, Shumer, Wexler & Goodman, LLP for a free consultation..