NOTES AND COMMENTS
Should Marriage Be Viewed As a Co-Equal Economic Partnership
By: Elliot D. Samuelson, Editor
Recent trends appear to be leaning in the direction of awarding the lion’s share of a business marital asset to the spouse who has formed and run the business. Generally, the longer the length of the marriage, the greater the percentage will be awarded to the non-operating spouse. But awarding 50% of the fair market value of such assets, is beginning to be the exception, rather than the rule. It is not unusual to see an award of 25%, 33% or 40% in lieu of a 50-50 division. The question that must be addressed in such instances is whether such division is fair to the non-working spouse? Put another way, should not the marital contributions of a homemaker, including rearing children to enable the working spouse the ability to devote his or her full energies to the enhancement of the business asset, and the diminution of a career by the other, be a sufficient contribution to divide the asset equally on divorce, especially in a seasoned marriage.
When O’Brien v O’Brien, 66 NY2d 576 (1985) was first decided by the Court of Appeals it held that marriage was “an economic partnership” but did not complete such definition by adding the words “of co-equals.” It left open the question of whether marital assets should normally be divided equally, and only reduced because of special negative circumstances which might include a spouse’s deliberate attempt to undermine the business activities of the company or other egregious conduct.
When a couple is married for 20 years and a wife has given up her employment and career opportunities to remain home with the children, she will never be able to recoup the years on an experience curve, and will be forced to enter the employment market at an entry level position, and never command the same income level as her husband who may have over 20 years experience in the business world. This disparity in itself might make a strong argument for an equal division of a business asset.
Others may argue that each marital asset must be treated separately; that a spousal contribution, standing alone, is insufficient to qualify for a larger percentage of a valuable business asset established by dint of the hard work and creative efforts of the titled spouse, especially where other assets and investments, including the marital residence, will, normally be divided equally. Moreover, where the marital estate is significantly large, and the non-working wife receives a generous dollar amount as her marital share, she would have sufficient assets to maintain her pre-separation standard of living, and may even generate a sufficient income from such assets, for a judge to deny maintenance.
Of course, an award of maintenance will be made where there is a financial necessity to do so and the duration of such award can be tailor-made to once again maintain the pre-separation standard of living.
Simply put, because equitable distribution gives the court wide latitude and discretion to fashion marital asset divisions, unlike community property states that are compelled to make arithmetic division, it appears that the New York law is fairer to both litigants because it must include all of the statutory enumerated factors of DRL §236B that impact the marriage and each parties’ financial prospects and contributions, in reaching a final determination. Under such parameters, the courts are free to make a case by case determination based upon the peculiar circumstances of each case, to do equity and recognize the marital partnership, albeit that it might not be determined an equal one.
In presenting your case at trial, it is essential that proof be offered as to each enumerated factor contained in DRL §256B (5)(d)(1-13), some of which can be offered by your own client, and other testimony must by necessity, be offered by an expert. Some of the elements that are often overlooked, or not given sufficient attention, include (4) the loss of inheritance rights, (8) the probable future financial circumstances of each party, and (9) the improbability or difficulty of evaluating any component asset.
In many instances, a spouse’s loss of inheritance rights might exceed their claim for a share of the marital assets, especially where the monied spouse might have extremely large separate property components to his net worth received by gift or inheritance, or the ownership before marriage of assets that have substantially increased passively, without any efforts by the monied spouse. Under such circumstances, it would be wise to consider calling an estate and trust lawyer as an expert to quantify the loss of such inheritance rights, and once established, an argument can be made that a larger percentage of marital assets should be awarded the non-monied spouse, to compensate for such loss.
There are often situations where the separate property component could be millions of dollars, and the marital portion de minimus, perhaps in a ratio of 80% to 20% or even less. Without receiving recognition for the loss of inheritance rights, your client will be severely prejudiced and disadvantaged. It is felt that the legislature anticipated such inequity in enacting this sub-division, especially in a long-term marriage. In doing so, the trial court can apply a division to the remaining marital assets, that will do equity under the unique circumstances of the case.
Subsection 8 pertaining to the future financial circumstances of the parties would certainly require an employment expert to testify as to what impact the years being out of the job market will have on the ability to obtain employment and the years of experience necessary to complete in order to earn a meaningful income. In a person in their 50′s or 60′s, it may not be possible to enter the job market, even on a professional level, let alone have a sufficient span of time to obtain the experience that will permit increased earnings. Certainly, such evidence, may impel a court to award a larger percentage of marital assets, and certainly consider non-durational maintenance at a higher level.
Finally, Subsection 8 of the enumerated factors leads to the conclusion that if a marital asset is too difficult or impossible to evaluate, after expert testimony is given, it may create a circumstance where a division in kind may be warranted, which could take the form of an order directing an assignment of a specified percentage of the asset. This may be a logical choice in non-publicly traded securities, stock options, or future pension rights only partially vested.
In the final analysis of what constitutes a fair division of marital assets, the length of the marriage, the number of children, and the stay at home spouse’s direct contribution to a specific asset must certainly be included in the mix. Nonetheless, the ultimate determination necessarily boils down to how much is enough or expressed another way, when is enough, enough? In a $100 million marital estate, would not an award of $25 million be sufficient to maintain an upscale opulent life style, affording every luxury of life, and where such award would throw off, even at 5%, $1,250,000 in annual income. Under such facts, an unequal division, where the principal assets, a business, was responsible for the growth of the parties’ net worth, may be just as fair as a larger percentage distribution. What courts will do will vary from Judge to Judge so there is no reliable way to predict the ultimate outcome, but it does appear that the recent trend is to make unequal divisions of business properties or professional licenses and practices.
Elliot D. Samuelson is the senior partner in the Garden City matrimonial law firm of Samuelson, House & Samuelson, LLP and is a past president of the American Academy of Matrimonial Lawyers, New York Chapter and is included in “The Best Lawyers of America” and the “Bar Registry of Preeminent Lawyers in America.” He has appeared on both national and regional television and radio programs, including Larry King Live. Mr. Samuelson can be reached at (516) 294-6666 or info@samuelsonhause.net