The Reality of “Changed Circumstances” and the New Alimony Reform Act

By Robert B. Kornitzer, Esq., and Caitlin Dettmer
rkornitzer@pashmanstein.com

When the spouse paying alimony seeks to reduce his support, the New Jersey Supreme Court requires the lower courts to consider (among others) two factors set out in Lepis v. Lepis, 83 N.J. 45, 157 (1980): (1) whether there is an initial of “changed circumstances” and (2) whether the supporting spouse has the ability to pay what he was previously paying.   Examples of changed circumstances include unemployment of the supporting spouse, changes in the supporting spouse’s income, illnesses, and changes in the dependent spouse’s living arrangements.  Courts will not modify alimony if the change in circumstances is only temporary.  Unfortunately, there is no perfect rule by which to measure when a changed circumstance is severe enough and has endured long enough to warrant a modification of support.

While there is no set amount of time that constitutes changed circumstances, recent changes to New Jersey’s alimony law (N.J.S.A. 2A:34-23) establish that an application for modification of alimony may be filed once a party has been “unemployed, or has not been able to return to or attain employment at prior income levels” for 90 days. The law maintains that factors other than the amount of time a party has been involuntarily unemployed or subject to a reduction of income are to be considered, but in theory, the law now recognizes that changed circumstances may exist after only three months of continued unemployment or inability to return to the level of income that existed at the alimony was set.  This three-month rule was considered to be a major reduction in the burden carried by the supporting spouse.

However, any celebrating by supporting spouses seeking to reduce support may have been somewhat premature.  In the recent unreported (meaning non-binding) case of Beschloss v. Beschloss, the court seemed to place more weight on factors other than length of time being unemployed when considering an application for downward modification of support.  In Beschloss, the Appellate Division upheld the denial of the defendant’s request for downward modification even though his income had been reduced by approximately one-third of his former income and despite a period of unemployment.

It therefore remains unclear as to how meaningful the impact of the revised alimony statute will be in determining future support modification applications.  We can look forward to many new cases continuing to define the issue of what constitutes “changed circumstances.

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The Value of Information in Divorce Litigation

Every consultation with a prospective family law client begins with a very similar request from the prospective client “Please tell me what results I can expect, both financial and custodial”.  The financial questions include (but are not limited to) those pertaining to expected results as to payment/receipt of spousal and child support, division of liquid and investment assets, division of retirement assets, division of personal property and the necessity of carrying insurance to secure various obligations.  The custodial questions include (but are not limited to) those pertaining to legal custody, physical custody, relocation of one parent with the children, parenting schedules and parenting dispute resolution.

It is not a difficult task for a family law attorney to spout endlessly as to the statutory and case law pertaining to the above-referenced subjects. In fact, once you get many of us started, like many other professionals, it may be difficult to get us to stop discussing the nuances of our fields of expertise.  But the general knowledge that we can impart upon first meeting a prospective client is relatively meaningless to that client.  Why? Because each client is a unique individual with a unique set of circumstances.  Those unique circumstances create almost a limitless set of possible settlement/trial scenarios that must be explored prior to devising a final strategy.

I am a firm believer that no two sets of litigants (spouses, partners, non-married parents) are alike.  In a divorce, a client and her spouse bring to the litigation an extensive number of variables.  For instance, as to alimony alone, we must explore the ages of each party, the number of years married, the education of each spouse, the earnings of each spouse, the numbers of years in the workforce, the parental responsibilities of each spouse, the health of each spouse, and much more.  As to division of the value of a family business, we must explore the business tax returns, the total benefits derived from the business, the source of funds used to create the business, the involvement of each party in the business, the stability of the business, and on and on.

For each issue to be properly explored it is essential for the attorney to request specific information from the client and it is essential for the client to provide that information to the attorney. The specific information will allow the attorney to tailor advice and create a strategy that is tailored to the client.  Divorce is not “one size fits all”, even though many attorneys do attempt to take a simplistic cookie-cutter approach to divorce litigation.

During the course of litigation, gathering the necessary information takes on an important role towards optimizing the final settlement/trial terms for that client.  But it is also just as important for each attorney and client to understand that not only are each client’s “facts” different, the client’s “wants” are different as well.  It is the combination of maximizing wants based on what the facts have revealed that allows a client to achieve optimal results.

Prenuptial Agreement Basics

Prenuptial Agreement
Prenuptial Agreement

Previously in this blog, we have touched upon the use of a prenuptial agreement to shelter business interests and alternative legal mechanisms to achieve the same, or similar, results (i.e. shareholder agreements and trusts). However, prenuptial agreements, or colloquially “prenups,” may be appropriate even when there is not a business interest to protect. For people entering into a second or third marriage, and who as the primary breadwinner earn significant income, they may wish to limit their exposure to lengthy, and costly, litigation over alimony. In other instances, the prenup may specifically insulate one spouse from substantial debt either brought into the marriage by the other or anticipated to be incurred by the other sometime during the marriage. In any event, parties should have a basic understanding of how a prenup functions to better understand how it may, or may not, be a worthwhile investment.

Initiating the discussion of a prenup with your fiance’ will force you to confront some potentially difficult questions. This can no doubt chill the heat of a romance. However, parties avoid this discussion to their own detriment and true love should be able to survive the reasonable concerns that a prenup is intended to address. Much of the negative reputation comes from a lack of basic knowledge regarding the intent and mechanics of the process. As with many things, knowledge is power and can allow the parties to broach the subject of a prenup as rational adults.

Obviously the purpose of a prenup is to fix and establish the rights of each spouse as to the division of property and/or support upon death or divorce. In New Jersey, the standards of such agreements and their enforcement are governed by statute (N.J.S.A. 37:2-38). To be valid, a prenuptial agreement must be in writing. As it is a contract, it must also be supported by proper consideration. That is, there must be a bargained for exchange of the terms. It must be entered into voluntarily, without coercion, and the parties must represent their competence to enter into such agreements. Importantly, the statute provides that the parties must each make a full and fair disclosure of assets, liabilities and income. Finally, it is critical that the parties consult with independent legal counsel, or else waive their right to do so in writing. Once these requirements are met, it is difficult to set aside the agreement, whether in part or in its entirety, though it is possible per the statute. (See N.J.S.A. 37:2-38 (a) – (c)).

The results of prenuptial agreements when put into effect can be far reaching. But people are marrying later in life after having already established careers and accumulated sometimes significant asset portfolios.  Since it is good planning, and with a desire to limit costs of divorce, there is no reason that prenuptial agreements should not become more commonplace – and lose some of the negative connotations that they invoke.

Savings as a Component of Alimony

Let’s assume two fact patterns.  In the first, the couple saved 20% of their income each year.  In the second, the couple saved nothing.  Each couple is now getting divorced.  Which couple is more likely to have savings added in as a component of alimony?

The not obvious answer is that the couple who saved during the marriage is really not more likely to have savings included in the alimony formula.  The key purpose of adding a savings component to an alimony award is for security in the event alimony may be modified downwards at some point.  It is also to anticipate for the eventual time when the paying spouse retires and/or alimony is terminated.  At that time, savings will be needed to continue support for the spouse who needs the support. 

While the marital lifestyle is reviewed to help determine which “lifestyle” expenses should (and can) be maintained after the divorce, savings as a lifestyle expense really should should be primarily viewed as an expense more akin to insurance that ensures a stream of support.

“CAN I EVER RETIRE?”

“Can I ever retire?” is a question often posed by the client who is paying permanent alimony.  It is also a question that I often dread answering when the client is a business owner as what I am really being asked is not whether s/he can retire, but whether s/he can stop paying alimony. 

The good news is that at some point of time, depending on the job and the requirements of the job, it is reasonable for the payor to cut back on work and eventually retire.  Every job is different.  A union worker or even a judge with a mandatory retirement age is not treated the same as a business owner who is often able to cut back but continue operating a business well into their 70s, 80s or even 90s.   As long as the income flow keeps pouring in, permanent alimony may continue.  The term of art “permanent” alimony may truly end up “lifetime” alimony.

So the better question to ask is often not: “Can I ever retire?”, but “When the time comes that I decide to retire, can I be relieved of my obligation to pay alimony?”  Alimony, especially in New Jersey, is a complex subject, so be certain to give yourself plenty of time to discuss with your attorney the nuances of this often maddening issue.

Isn’t Cohabitation Hard to Prove?

Cohabitation with a paramour may be a basis for modifying or even terminating alimony.  So it stands to reason that the spouse receiving alimony may try to hide from the spouse paying alimony that s/he is cohabitating with an unrelated adult.  Post office boxes and false addresses may even be used to thwart discovery of the truth, which can make it very difficult for the payor spouse to piece the proofs needed to prove cohabitation. 

Luckily for the payor spouse, s/he does not have to provide all cohabitation proofs right away.  Initially, the payor spouse needs to present to the Court only sufficient information to convince the Court that more in-depth discovery is warranted.  Then, the paying spouse will be granted the ability to use the force of the Court to compel production of the information necessary to prove or disprove cohabitation by the former spouse.  At the end, a modification or even a termination of support may be warranted.

Assets Purchased By One Party During Cohabitation Prior to Marriage

Often during a divorce, assets purchased by one party during cohabitation prior to marriage are considered marital assets.  But this is not always the case.  Courts need to review the facts surrounding the parties’ relationship.  Questions must be asked, such as: Was the asset purchased as part of a shared enterprise leading to the marriage?  Was the asset purchased as a regular part of the purchaser’s lifestyle and had nothing to do with the plans for a shared life (ie., adding to a comic book collection)?  Did the non-purchaser then act in reliance of an expectation that [s]he would have an interest in that asset?

Additional factors also come into play.  For instance, at the time of divorce, did the non- Continue reading “Assets Purchased By One Party During Cohabitation Prior to Marriage”

Separation of Husband and Wife Before a Complaint is Filed

Often one of the first questions a matrimonial attorney gets asked by clients contemplating a divorce is, “how do I obtain a legal separation?”  The answer is that in the State of New Jersey there is no such thing as a “legal separation”.  If one wishes to separate from their spouse, they simply move out.  Unlike many other states, New Jersey does not have a law on legal separation.  

In this State, one does not have to ask for the court’s permission or obtain a formal decree of any sort in order to be able to move out of the marital home and “officially” separate from his or her spouse.  Of course this freedom to separate is not a license to abandon all financial and domestic responsibilities

Continue reading “Separation of Husband and Wife Before a Complaint is Filed”

Alimony: Does It Work Both Ways?

The “traditional” object of alimony is support of the wife.  In fact, for years alimony has been defined as a continuation of the husband’s duty arising out of the marital relationship to support his wife.  However, as with many gender bias issues that have evolved over the years, the notion that only a wife will receive alimony as a result of divorce is simply not true today.  

Notwithstanding the traditional verbiage contained in case law, alimony may, in fact, be awarded to either party.  The roles of the husband being the breadwinner and the wife being the dependent spouse no longer apply in every divorce situation.  This sociological change was affirmed in the case Lepis v. Lepis, 83 N.J. 139 (1980), when the late Justice Morris Pashman avowed, “traditional notions of sexist stereotypes must be abandoned.”  Thus, for at least the Continue reading “Alimony: Does It Work Both Ways?”