UPDATE: Governor Cuomo signed the bill into law on September 25, 2015. The Temporary Maintenance provisions are effective for divorce cases filed on or after October 25, 2015, and the balance of the law is effective for cases filed on or after January 23, 2016.
Long-awaited revisions to the spousal maintenance laws of New York State have recently passed the State Senate and Assembly by wide margins and are expected to be signed into law by the Governor soon. The changes revise earlier amendments to section 236B of the Domestic Relations Law that had created a statutory formula for determining a temporary maintenance award to the less-monied spouse while a divorce case is pending. In addition to changing the formula for temporary maintenance, the new amendment bases maintenance awarded in the final judgment of divorce on the revised formula as well.
The use of a formula for determining maintenance in the final judgment of divorce is a major departure from existing law. Currently, without a formula, the parties are left to wonder how much maintenance will be awarded after trial because the law directs the court to base a maintenance award upon its consideration of numerous qualitative factors. The major factors are pre-separation standard of living, ability to pay and the reasonable needs of the payee. But even looking closely at the finances of the parties, reasonable minds have disagreed on how to apply these factors. The situation is made even more complex (and unpredictable) by a further list of twenty factors (i.e. age and health of the parties, future earning capacity, and the length of the marriage, among them) which the statute currently directs the court to consider in establishing both the amount and the duration of final maintenance.
By getting rid of the weighing-of-factors approach, the new law promises to make settling cases much easier. Many cases have gone to trial where everything is agreed except maintenance since asset division is often (not always) 50/50 and usually easier to agree upon. With a formula in place, all financial issues gain predictability. Now, except for outlier cases with unusual circumstances, people will know what to expect at trial and can more easily settle their entire case to avoid that expense.
The new law will also be more reasonable towards the monied spouse. First, there is a much lower cap on the amount of income that will be subject to the maintenance formula. Under current law, temporary maintenance is calculated on income up to $543,000. The new law brings this figure down to $175,000 for both temporary and final maintenance awards. The court remains free to award additional maintenance on income above that figure, but the burden switches: Now, if the less-monied spouse wants additional maintenance, she/he will have to resort to an argument employing factors set forth in the statute, which is never easy.
The formula itself has been revised in the amended statute in a way that will often help the monied spouse. Typically, the monied spouse is the non-custodial spouse. The statute will now provide a different calculation that will result in lower maintenance awards where the monied spouse is the non-custodial parent or where there are no children. Under existing law, the court is directed to perform two (2) calculations using the parties’ incomes and the lower result is the presumptively correct maintenance figure. Using the lower figure will still be the rule, but the first of these two calculations is changed under the new amendments. Instead of subtracting 20% of the less-monied spouse’s income from 30% of the monied spouse’s income, the court will now subtract 25% of the less-monied spouse’s income from 20% of the monied spouse’s income. The second calculation remains the same — the less-monied spouse’s income is subtracted from 40% of the combined total spousal income — but the savings will be significant for many non-custodial parents, as the following example comparing the existing law to the new law and using hypothetical incomes, illustrates:
Monied spouse income: $150,000; less-monied spouse income: $50,000
Under Existing Law:
$150,000 X .30 = $45,000
$50,000 X .20 = $10,000
$45,000 — $10,000 = $35,000/yr.
$150,000 + $50,000 = $200,000
$200,000 X .40 = $80,000
$80,000 — $50,000 = $30,000/yr.
Lower figure is annual maintenance: $30,000/yr.
Under New Law:
$150,000 X .20 = $30,000
$50,000 X .25 = $12,500
$30,000 — $12,500 = $17,500/yr.
(same as above) $30,000/yr.
Lower figure is annual maintenance: $17,500/yr.
Clearly, the new law will provide a significant break for the non-custodial parent. Using this example, and figured on a monthly basis, the savings is over $1,000 per month in reduced maintenance.
A further benefit to the non-custodial monied spouse comes indirectly in the calculation of child support. The new law provides that maintenance is to be calculated before determining child support and that the amount of maintenance to be paid is subtracted from the payor’s income before considering child support. At least in the calculation of child support in a temporary award, this is a huge departure from existing law, where the courts are directed to use the income reported in the previous tax year, which, in theory, cannot include a deduction for maintenance because the obligation did not exist then. Under the new law, if the court is using the Child Support Standards Act to calculate child support (in a temporary award this is not always the case), the reduction in income used in the formula to calculate support means a lower child support award.
In addition to changes in the way that maintenance is calculated, the amendments provide suggested time periods for the duration of the final maintenance award. For marriages of 0 to 15 years, maintenance would be awarded for 15% to 30% of the length of the marriage. For marriages of more than 15 years and up to 20 years, maintenance would be 30% to 40% of the marriage’s length. Finally, for marriages longer than 20 years, maintenance would be 35% to 50% of the marriage’s length.
This will be a big change in the law. There is currently no statute that directs maintenance duration. Case law from the appellate courts has not been much help either. Only if the trial court has “abused its discretion” in setting the duration of an award will an appellate court step in to change the result at trial. And, when it does, the results are often inconsistent from case to case. Now, with guidelines for the duration of maintenance being put in place, the results after trial will be more consistent. Again, as with the formula for maintenance, consistency means predictability, and more cases will settle as a result.
A long-awaited change to the law included in the amendment is the elimination of enhanced earning capacity as a separate asset to be equitably distributed. Currently, under existing law, if a spouse has obtained a college degree or professional license during the marriage, the court will usually give some of the value of that degree or license to the other spouse. Value is established using an actuary, who provides a report showing the difference between the pre-degree/license income and the post-degree/license income, multiplied by the remaining working years in the degree-holding spouse’s life up to retirement age, with discounting for present value, and risks of attrition and mortality. Even with discounting, values for professional degrees and licenses tend to be large, and can easily hit six figures.
Many in the matrimonial law community have been unhappy with enhanced earning capacity, and will not be sorry to see it go. It strikes many as arbitrary and unfair. Although the new law specifically eliminates enhanced earning capacity as a separate asset to be distributed, it leaves the door open for the court to “consider” the contributions of the non-degree holding spouse in making an equitable distribution of assets generally. What this will mean in practice, is anyone’s guess.
The effective date of the new statutory amendment is 120 days after the governor signs the bill into law, with the exception that the provisions regarding temporary maintenance will go into effect 30 days after the bill is signed. Cases that have already been commenced prior to the effective date will not be subject to the revised statute. During this period of waiting for the statute to take effect, those considering starting a divorce would be wise to consult with an attorney to review their situation carefully. For some, such as non-custodial monied spouses, waiting for the new law might be best. For others, the opposite may be true. Strategic planning in advance of any litigation has always been important, but now more than ever.