A new law was passed by the New York State legislature and signed by the Governor on September 25, 2015 which portends significant changes to the law of divorce in this state, particularly in the awarding and calculation of spousal maintenance. This article will highlight those areas of the law that will affect parties involved in a divorce in this state. In 2010, the Domestic Relations law was changed to provide a starting point for calculating temporary spousal maintenance; that is during the pendency of a divorce action only.
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A new law was passed by the New York State legislature and signed by the Governor on September 25, 2015 which portends significant changes to the law of divorce in this state, particularly in the awarding and calculation of spousal maintenance.
This article will highlight those areas of the law that will affect parties involved in a divorce in this state. In 2010, the Domestic Relations law was changed to provide a starting point for calculating temporary spousal maintenance; that is during the pendency of a divorce action only. For many years, various interest groups as well as matrimonial attorneys, the Chief Administrative Judge along with a matrimonial practice advisory committee have attempted to achieve a compromise on maintenance guidelines for post-divorce spousal maintenance. Any maintenance formula was not intended to be a “cookie-cutter” approach and a compromise was reached that attempted to address the conflicting concerns.
The law only affects cases commenced on or after January 25, 2016. It does preserve judicial discretion and still allows for attorneys to advocate for their clients and address the realities and specifics of each individual matter while providing some predictability. I will highlight the changes to the post-divorce maintenance formula and the elimination of the valuation of enhanced earning as a component of equitable distribution. There were changes to the temporary maintenance formula as well which I will discuss in another article.
1. Doing Away with the Valuation of Enhanced Earning Capacity as an Asset of the Marriage.
Prior to the passage of the new statute, if one spouse had an “enhanced earning capacity” arising from a license, degree, celebrity goodwill or career enhancement during the marriage, that enhanced earning capacity could be valued and divided as part of the equitable distribution of the parties’ assets and liabilities. The new law eliminates the valuation of enhanced earning as an asset, however, it does not remove it from all consideration. It is included as a factor in the division of marital assets. The seminal case was O’Brien vs. O’Brien,(66NY2d576) in which a husband commenced a divorce action immediately upon completing medical school and receiving his license to practice medicine during which time the wife supported him throughout his education and training. Since he had no earnings at the time of the divorce the Court corrected the problem by valuing the degree and license. With a value, the Husband was ordered to pay the Wife over a period of time just as if it were alimony or spousal maintenance. The law was then applied to all manner of professions as well as earners in which a license of any sort was required ranging from plumbers to teachers to stock brokers as well as to celebrities. As time went on, the percentage share of the spouse claiming an interest in the enhanced earning capacity declined from 50% to a percentage within the Court’s discretion ranging from 50% to 10% or even less.
2. Spousal Maintenance Formula.
a. The “cap” on the payor’s income used for the maintenance formula is $175,000 above which will be a matter of the court’s discretion.
b. There are two (2) formulas under the new law: one in which child support is paid and the other where it is not paid. With child support when the maintenance payor is also the non-custodial parent for child support purposes, the calculations are: (i) subtract 25% of the payee’s income from 20% of the payor’s income; and (ii) multiply the total of both payor’s income and payee’s income by 40% and subtract the payee’s income from the result. The lower of the two amounts is the guideline amount of maintenance. If the maintenance payor is the custodial parent for child support purposes, then: (i) subtract 20% of the payee’s income from 30% of the payor’s income; and (ii) multiply the sum of payor’s income and payee’s income by 40% and subtract the maintenance payee’s income from the result. The lower of the two amounts is the guideline amount of maintenance.
For example: Payor’s income of $100,000 and Payee’s income of $50,000.
Calculation (i) - $25,000 minus $10,000 yields a result of $15,000.
Calculation (ii) - $60,000 minus $50,000 yields a result of $10,000.
The lesser of the two is calculation (ii) or $10,000.
c. Once maintenance is calculated then child support is calculated using the incomes of both parties after subtracting maintenance to be paid and adding it to the income of the payee as received.
d. Where there is income over the cap, the Court may require additional maintenance to be paid, based on the factors set forth in the statute.
e. Another major change is that the statute sets out ranges for the duration of maintenance based on the marriage length. For marriages of zero to 15 years, maintenance would be awarded for 15% to 30% of the length fo the marriage; for marriages of more than 15 years up to 20 years, maintenance would be awarded for 30% to 40% of the length of the marriage and for marriages of more than 20 years, maintenance would be awarded for 35% to 50% of the length of the marriage. The Court can still award non-durational maintenance dependening on the circumstances of the case. The Court is also required to take into account anticipated retirement benefits and retirement eligibility age. Actual or partial retirement will be a ground for modification of maintenance assuming it results in lower income. In fashioning settlements without court intervention, parties and their attorneys should take into account the length of the marriage as well as anticipated retirement age and anticipated retirement income, including retirement income available to both parties.
3. There are twenty-two (22) factors for the Court to take into account in considering a deviation from the income “cap,” including the last one which states: “any other factor the court expressly finds just and proper.”There are fifteen (15) factors set forth as “Post-Divorce Maintenance Factors” also including the “catch-all” factor.
4. A new factor to be considered when awarding spousal maintenance is the income from assets being equitably distributed. For example, the investment income from assets or income from rental property are now to be included in a party’s income for maintenance determination.
Maintenance terminates upon the death of the payor or payee, a recipient-spouse’s subsequent marriage or co-habitation or a specific date in the future.
The new statute does not constitute grounds for modification of an existing agreement or order.
The new statute does not provide for a “one-size-fits all” approach. The factors set forth allow and encourage creativity and strong advocacy by lawyers who understand the law and the practicalities of an entire settlement, including child and spousal support, division of debts and liabilities and the needs and best interests of minor children of the marriage.