Thursday, December 23, 2010

No-Fault Law Strings -- Temporary Spousal Support Formula

“Everything is more complicated than you think.” - Charlie Kaufman

To follow up on my prior blog post, the new No-Fault Law in New York did not come without strings attached. One of those strings has to do with the spousal support formula that came into effect as part of the new matrimonial legislation.

Before October of this year, in the State of New York, child support was calculated pursuant to a formula that has been in effect for decades. When it came to spousal support, which means the money that the spouse that makes less money would receive from the spouse that makes more money following a divorce, there was no formula or guideline to follow.

There were some generally accepted guidelines and a list of factors for a judge to consider. Some of these were based on:
  • Case law
  • Length of the marriage - The longer the marriage, the bigger the chance that the non-moneyed spouse would be awarded some kind of post-divorce monthly income.
  • Ability of non-moneyed spouse to be self-supporting - whether the non-moneyed spouse was able to get a job or had the education and/or skills that could transfer into some type of employment
  • Lifestyle of the marriage
As an example, let’s say we have a marriage where the husband makes about $100,000, the wife is a homemaker and the marriage is more than 25 years long. The children are grown but the wife doesn’t have any skills or education that would allow her to make more than $20,000-$30,000. In this case, there would be some kind of maintenance that would be awarded for a certain length of time.

In recent years it would be very rare to see an award of lifetime maintenance unless it was clear that the non-moneyed spouse could never work or there was some kind of a serious medical issue or serious fault on the other side. If the wife cannot work at all often the duration of maintenance was tied to the date of retirement of the moneyed spouse. So let’s say, in the standard situation, the husband who earns $100,000 retires approximately at the age of 67. The court may decide that the wife will get some kind of maintenance until he retires, at which time the wife, instead of maintenance will get half of his pension.

Courts in New York State are divided into four different departments. The first Department, for example, includes the island of Manhattan. The second would cover Queens, Brooklyn, Long Island, etc. There was often disparity among the four Departments in terms of how the maintenance was calculated so, the amount and duration of the maintenance varied depending on the department you were in and the judge you were in front of.

As of October, the legislature came up with a formula, but the formula addresses only temporary maintenance, temporary meaning during the pending of the lawsuit. If the parties filed for divorce, in the beginning of the divorce process, there can be a motion made by either party for the courts to set some kind of temporary orders of child support and maintenance. This temporary maintenance will be in place for the duration of the court proceeding and that is what is really addressed by the statute.

Before, the courts would still order temporary maintenance, but there was no formula used to calculate the amount. The new formula does take subjectivity out of that piece of the process, but it doesn’t give us enough guidance to say “well, this is the formula that should be applied as permanent maintenance and this is how long this maintenance will be payable.” However, it is possible, that ultimately, judges are going to use the new maintenance formula as a guide in the way that they look at maintenance awards going forward.

Basically the formula is this:

Income < $500,000
A. 30% of Payor Income - 20% of Payee Income
B. (Payor Income + Payee Income) x 40%
C. “B” - Payee Income
D. Use the lower of “A” or “C
If “C” =0 ===> maintenance = 0

Income > $500,000
Use guidelines up to 500K ==> additional maintenance based on the factors

One problem with this formula is that it does not really address the duration at all. It will tell you how much the monthly amount should be, but it does not tell you how long it should last. It doesn’t say if the marriage is 10 years long you pay this maintenance for 3 years or anything like that. That is still up to the courts and the judges, who are very subjective. They are supposed to determine duration based on a number of factors that are asserted in the statute but it is still a list of factors and dependent on the judge’s interpretation. The long and short of it is that litigating the divorce is still extremely unpredictable and dependent on which court they are in and which judge they are in front of.

But when it comes to the final financial picture of a family going through a divorce process, the new maintenance formula provides little guidance. It doesn’t really give us any sense of predictability as to what a particular court would ultimately decide to do in a given situation. So it is still quite a gamble for a husband or a wife to say “I would rather have a judge determine the issue of maintenance”. A spouse may think that he or she would do better in court, but a lot still depends on how a particular judge would decide to use the new formula in making the final decision on maintenance.

The best way to achieve a good result is still for the couple to negotiate with each other the fair amount and duration of maintenance in a safe and productive environment with the guidance of neutral professionals and/or lawyers who will help them reach the best solution in the most cost-effective process.

Some families come to mediation with a good idea of what is fair, and even after they receive information of what is likely to happen in a litigated divorce, they still decide to follow their own sense of “fairness”. Then there are others that come in and say, “Well what would the court do?” For them, what’s important is to negotiate something that is not very far from what they would get in court. The new formula can be helpful in the latter case, since it gives people the opportunity to plug the numbers in and see what might happen on a temporary basis if a court process is started.

Most people seek mediation during a separation or a divorce, because they hope that staying out of court would allow them to move on with their lives with dignity and remain in a civil relationship with each other, their children and their extended families. Others are attracted to divorce mediation to save money on legal fees. Both are valid reasons, and in most cases, the mediation process should be viewed as the ideal option for families in transition.

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