On Wednesday, June 9, 2010, John Jay College, the New York State Council on Divorce Mediation, and the Family & Divorce Mediation Counsel of Greater New York sponsored a panel discussion on the Proposed Maintenance Guidelines. The panel was comprised of three attorneys, Steven Abel, Esq., Alton L. Abramowitz, Esq., Emily Ruben, Esq. and forensic accountant and business valuation expert, Mark S. Gottlieb, CPA. The program was moderated by Rod Wells, CFP.
Emily Ruben, Esq. (Attorney-in Charge of the Brooklyn Neighborhood Office of The Legal Aid Society) pointed out that many couples going through a divorce do not have substantial assets to divide and that their greatest asset of the marriage is frequently the income of the more-monied spouse. That being said, moderate and low-income spouses usually cannot afford the often costly litigation required to establish a right to maintenance.
Considering the unpredictable and inconsistent climate of maintenance awards, the less-monied spouse will usually settle, albeit under some pressure, to avoid costly litigation.
The New York legislative houses are each considering possible legislation to establish guidelines for post-marital income sharing not dissimilar to the Child Support Standards Act. By establishing guidelines for both the amount of maintenance to be awarded and the duration of the award, post-marital guidelines would provide the consistency and predictability for spousal support that the Child Support Standards Act has provided for child support.
So we are prompted to ask: Is this Bill a long-awaited solution? Is it indeed the new approach consistent with Chief Judge Judith Kaye’s call for a “cultural revolution” to reduce drastically the time and costs—both financial and emotional—of matrimonial cases?
Senator Hassell-Thompson, who introduced the Bill in the Senate, has said, “Neither spouse should feel financially compelled into accepting potentially detrimental or unfair settlements. Post-marital income guidelines will simplify the basis on which a predictable and equitable settlement between two divorcing spouses may be reached.”
According to Senator Liz Krueger, “As it is, divorce is a very emotional and painful process, the State should not be making it more difficult through antiquated laws and a lack of guidance to our courts. As legislators, if we can help people during this difficult time by improving the process and making it easier for them to get on with their lives, then we need to explore these options.”
Many agree with these Senators’ views on setting guidelines. Currently, trial courts have broad discretion in deciding whether to award maintenance and in determining its duration and amount. It’s for this very reason that spousal maintenance often becomes one of the most contested issues in divorce proceedings.
“The real battleground for financial issues,” Catherine J. Douglas, Executive Director inMotion has said, “is maintenance (formerly called alimony), for which outcomes are troublingly unpredictable and inconsistent. A spouse who may well be entitled to substantial maintenance and who may badly need this income for basic economic security has two choices: engage in the ritualized battle that is litigation or abandon the claim for maintenance altogether.”
The goals of the proposed guidelines recognize that marriage as an economic partnership. However, as Steven Abel, Esq. (founding member and President of the Board of Directors of the New York State Chapter of Association of Family and Conciliation Courts) stated, “the devil is in the details.”
To achieve a fairer version of what is now called maintenance, a formula will be used to arrive at a presumed award amount, and a second formula will be used to determine how long this amount will be paid. Judges can vary the formula results when the amounts seem unfair for specific cases.
The amount of the post-marital award will depend on the incomes of the divorcing spouses. In practice, their post-award incomes will range from a 30%-70% split of combined income (when one spouse has no pre-award income) to a 40%-60% split of combined income (when pre-award incomes are closer to equal). The divorcing parties can present reasons for deviating from the guidelines.
Post-marital income payments would be tax-deductible to the payor and taxable to the payee. As a result, the after-tax income for spouses making payments under the post-marital income guidelines will actually be higher than the 60%-70% of combined income and lower than the 30%-40% of combined income for spouses receiving payments.
Judges can vary the required time period for payments if deemed necessary. Suffice to say, the longer the marriage of the divorcing couple, the longer the post-marital payments will last.
Not all divorcing couples, however, will use the proposed guidelines. Couples with combined assets over $1,000,000 will have their cases resolved differently since marital assets are likely to include much more than the future ability of the former spouses to earn income—including significant property that will subject to equitable distribution.
The guidelines would help those who do not have the means to pay for lengthy, expensive divorces. Under the existing law, it is so difficult to make a claim for maintenance that the majority of lower-earning spouses from low and middle income families simply give up claims for maintenance.
One of the more controversial aspects of the current New York law is the assumption that all a spouse requires after a marriage, no matter how long its duration, is a brief period of “rehabilitative” maintenance. But even a short time out of the labor market has repercussions. And for older individuals who have not been employed for years at a time face rather bleak prospects in the labor market.
Still, there are those distinguished members of the legal community who feel that the proposed changes are problematic. In a series of articles for the New York Family Law Monthly, Alton L. Abramowitz, Esq. (partner in the law firm Mayerson Stutman Abramowitz, LLP) has written that, among other things, 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.
Mr. Abramowitz also says that it is readily apparent that this is not a proposal for support of a spouse following a divorce, but is disguised “wealth distribution” or, even worse, “compensation” for having been married.
So is the possible legislation to establish guidelines for post marital income sharing a long overdue “just due,” especially for those many litigants who have no real choice. Or, in Mr. Abramowitz’s words, would the legislation create “mischief of untold proportions” by tinkering with discrete portions of the financial aspects of our divorce laws—without making adjustments to the other aspects of those laws—so as to allow a court to piece together all of the parts in an equitable fashion?
After each attorney on the panel provided their comments on the proposed bill, Mark S. Gottlieb, CPA provided a calculation template he designed to compute the maintenance award as prescribed in the existing bill. This exercise, as well as the comments from the members of the panel, made this program both informative and practical.
We will continue to keep a watchful eye on the progress of this bill, as well as comments offered by its supporters and critics.