Ross v. Ross: Celibacy pending adultery claim

On August 23, 2016, the New Hampshire Supreme Court issued an opinion in the . It is a fascinating case about adultery and new relationships during a divorce. The outcome is a cautionary tale for persons seeking fault grounds for divorce.  

The Facts

Husband and wife met in dental school and later married. Husband, who had his own endodontist practice, helped his wife open and build her orthodontist practice. Considerable money was put into the venture. The couple separated the day that husband discovered wife was having an affair with another dentist. Wife filed for divorce 5 days after the parties separated alleging both fault and irreconcilable differences as grounds. Husband cross-petitioned for divorce on fault-based grounds, due to the wife’s alleged adultery and irreconcilable differences. The parties had been married for 9 years at the time they filed for divorce.

Approximately 11 months after the divorce was file, husband began a sexual relationship with the ex-wife of the dentist wife was dating. Wife filed a motion to dismiss the adultery grounds pled against her. She argued the defense of recrimination, or in other words that the husband was no longer an “innocent spouse” because of his own adultery. The trial court agreed with wife and dismissed the husband’s fault grounds. The trial court issued a decree of divorce based on irreconcilable differences that divided the property with an intent to split it equally.

The Appeal

Husband appealed the dismissal of the fault-based ground in his cross-petition for divorce, arguing that his sexual relationship, which occurred eleven months after the parties’ separation, could not be used as a basis for the defense of recrimination. Husband asserted that such a holding would require parties to remain celibate during years of litigation in a contentious divorce. Wife argued the trial court did not err in granting the motion to dismiss because the respondent was not an “innocent party” within the meaning of the statute. RSA 458:7 (2004).

The Court examined RSA 458:7, which states that a divorce “shall be decreed in favor of the innocent party.” The statute requires that one be an “innocent party” at the time of the decree. The statute makes no exception for fault based grounds that arise prior to the final decree, regardless of whether they arise before or after the filing of the divorce petition. Therefore, the trial court correctly considered Husband’s post-petition conduct when deciding the motion to dismiss.
The Court further stated the fact that Husband’s adultery did not lead to the breakdown of the marriage does not bar recrimination as a defense, stating “Causation is not an element of the defense of recrimination.”

The Court affirmed the trial court’s decision to dismiss the fault grounds and grant a divorce on irreconcilable differences.

The Takeaway

The conclusion of husband’s brief argues: “It is not reasonable to suggest, in these times of protracted discovery and litigation, that a party to a divorce must remain celibate for the duration of the proceedings – here already longer than four years.” I happen to agree with him. Litigation can be a long and arduous process. While most divorces will settle within 6 months to 1 year, a small percentage can drag on. The longest divorce I have seen from start to finish has been 5 years. That is a long time to wait to date.

Why pursue the adultery grounds in the first place? It appears in this case that there was some significant bad blood between the parties. Husband had helped wife open her orthodontic practice and contributed financially and emotionally to that endeavor. In return, wife carried on an affair with a colleague for approximately five years. Wife changed the locks to the house two days after husband left. Husband may have been pursuing the emotional victory of a fault based divorce for wife’s cheating.

Husband may also have been pursuing the adultery grounds for the financial benefit. RSA 458:16-a, II provides that a court may divide property unequally when it would be appropriate and equitable to do so after considering one more of the statutory factors. One of the factors reads:  “The fault of either party as specified in RSA 458:7 if said fault caused the breakdown of the marriage and: (1) Caused substantial physical or mental pain and suffering; or  (2) Resulted in substantial economic loss to the marital estate or the injured party.” With the dental practices, marital home and savings and investments on the line, an uneven split make a substantial difference in the outcome.

However, in my experience, most judges are not persuaded to award a significantly higher portion of the property to the “innocent spouse,” even if they can prove that the adultery caused the breakdown of the marriage and substantial economic loss to the marriage or injured spouse. More than a 45/55 split without other contributing factors would be unusual.

The moral of this story is that there must be a careful cost benefit analysis when filing adultery. Is the litigant willing to remain celibate no matter how long the litigation takes? Is there substantial property up for division that would make even a small deviation from 50/50 worthwhile? Is the time, money and celibacy for a finding that the other spouse cheated sensible?

 

Courthouse Divorce File: What's Private?

“All human beings have three lives: public, private, and secret.” 
― Gabriel Garcí­a Márquez, Gabriel García Márquez: a Life

The public thirsts for gossip, apparent in websites like TMZ and Perz Hilton. Celebrity splits are big news such as Tom Cruise and Katie Holmes to Mariah Carey and Nick Cannon. While most of us do not enjoy celebrity status, the small town rumor mill can be just as virulent as celebrity gossip. Divorce litigants should beware the rules regarding public access to their divorce file. Anyone can head down to the local courthouse and view all the happenings in the neighbor's divorce or co-worker's custody battle.  

The prominent case on this issue is the Petition of Keene Sentinel issued by the New Hampshire Supreme Court on August 27, 1992. During the 1990 political campaign for New Hampshire’s Second congressional seat, The Keene Sentinel sought to gain access to one of the incumbent’s, Charles Douglas III’s divorce records. The clerk granted the Keene Sentinel only some of the divorce records, citing privacy concerns. The Keene Sentinel brought suit and Charles Douglas III sought to intervene, asking the Superior Court to dismiss the suit. The Superior Court ultimately denied the Keene Sentinel’s request.

The Keene Sentinel appealed, arguing that “disclosure should have been permitted pursuant to RSA chapter 91-A, the Right to Know Law.” The Supreme Court held that a party in a divorce proceeding cannot have the records sealed simply for the sake of general privacy concerns.  The Court held that “[b]efore a document is ordered sealed, the trial judge must determine that no reasonable alternative to nondisclosure exists.” If a trial judge does make such a determination, it must use the least restrictive means available to secure the parties’ privacy rights.

This generally requires that the orders, pleadings and other materials in the file are open to the public for viewing. An exception is a financial affidavit. A party is required by the court to complete and submit a sworn financial affidavit, detailing all income, property and debts. This document usually contains very personal information such as social security numbers, bank information and paystubs. Family Division Rule 2.16 and RSA 458:15-b requires financial affidavits to be confidential for non-parties. In practice, this means that the court file contains an envelope which the clerk will remove if you are not a party to the case. Financial affidavits filed in divorce, legal separation, annulment, or parenting petition cases shall be confidential to non-parties. Access to such financial affidavits shall be pursuant to Family Division Rule 1.30. However, a person not otherwise entitled to access may file a motion under Family Division Rule 1.30 to gain access to the financial affidavit. 

The Associated Press v. NH gives some context to the rule regarding financial affidavit confidentiality. The New Hampshire Supreme Court issued its holding in this case on December 30, 2005.   After RSA 458:15-b took effect on August 10, 2004, which, inter alia, made financial affidavits in divorce proceedings only accessible to parties to the proceeding and their attorneys of record, the Associated Press filed suit claiming the law was unconstitutional. The Associated Press argued that the law “violated the public’s right of access to court records” under the State Constitution, and that it was an impermissible restraint on freedom of speech per the State and Federal Constitutions.  The trial court determined that the law was not unconstitutional, and dismissed The Associated Press’ suit. The Associated Press appealed the trial court decision, arguing that the trial court erred in finding that the law was constitutional.

 The Supreme Court agreed with the trial court, and finding RSA 458:15-b constitutional. The Court ruled that although the public has a right to access government documents, including court documents, the right is not unlimited.  It opined that "the right of access may be overcome when a sufficiently compelling interest for nondisclosure is identified,” which included the compelling interest to prevent exposing divorce litigants to identify theft and fraud. The Court’s ruling was narrow, however, and only applied to keeping financial affidavits sealed. 

In general, the Court may upon request consider keeping confidential case-related materials for collateral cases that are already confidential pursuant to New Hampshire law. These include termination of parental rights, adoption, juvenile criminal records and abuse/neglect cases and DCYF records.  

 

Norberg v. Norberg: Alimony Cannot Be Waived By Agreement

When negotiating a settlement, it is important to keep in mind that New Hampshire law does not allow parties to waive future alimony. The 1994 case of Norberg v. Norberg is controlling. It explains that although property division is not modifiable, alimony is an entirely different matter. Even if the parties enter into an agreement that expressly waives their right to seek alimony, the court retains the authority to revise its orders under RSA 458:14

How this factors into settlement negotiations will depend on the facts of your case. First, whether you go to trial or reach a settlement, the court will retain the authority to modify alimony. It should be carefully considered when providing the other party with  a larger division of the assets or taking on additional debt in exchange for a reduced term or amount of alimony. Knowledge of the standards for modification, especially in light of the recent Lyon decision, will also be important to come to a knowing and voluntary settlement. 

In Re Lyon: Extension or Renewal of Alimony to be Made as Justice Requires

On May 30, 2014, the New Hampshire Supreme Court issued an opinion In the Matter of Lyon. This decision clarifies the standard to be applied in requests to extend or renew alimony. 

The Facts

Husband and Wife divorced in May 2007. They entered into a permanent stipulation that was incorporated into their divorce decree that required Husband to pay to Wife $3,000 per month in alimony from January 1, 2007, through June 30, 2007, and $5,000 in monthly alimony from July 1, 2007, through June 30, 2012, “or until the death of either party, whichever first occurs.”

A month before the scheduled termination of the alimony, the Wife petitioned for an additional three years. She alleged that her newly diagnosed attention deficit hyperactivity disorder necessitated an extension of alimony so that she could afford her medication and finish her education. The Husband filed a Motion for Summary Judgment, arguing that the Wife had failed to establish an unanticipated or unforeseeable substantial change in circumstances. The trial court granted the motion and dismissed the petition.  

The Appeal

The Wife appealed and argued that the trial court erred by applying the standards that govern a motion to modify alimony to her petition to extend. Although the standard to modify required a person to prove that a substantial change in circumstances had occurred since the original award that made the amount of alimony either improper or unfair, she argued that she was not required to meet that test. Instead, she said that she was subject to the same standard as an initial award of alimony.

The Holding

The Supreme Court held that when a party seeks to extend or renew, either in modified or unmodified form, “the burden is upon the party in whose favor the order is to run to establish that justice requires a renewal or extension, and if so, what justice requires as to amount[,] . . . in the light of all the circumstances then existing.”

The Takeaway

The standard articulated in the Lyons decision will be easier to meet for alimony recipients as opposed to a substantial change in circumstance test.  This has the potential to create a chilling effect a person’s willingness to agree to pay alimony as one can be less certain of the end date for the payments. Even so, the recipient must still prove that justice requires an extension. While the facts do not require a substantial change in circumstances, it seems likely that the trial court would still examine all of the circumstances to determine why, if short term alimony was awarded, the recipient has not put him or herself into a position to be self-supporting.

 

What to Bring to a Pretrial Hearing

Before your final trial, the court will conduct a pretrial hearing. Learn here what will happen at the hearing and what needs to be prepared and filed at the hearing. 

Alimony in New Hampshire on You Tube

There's a new batch of You Tube videos about divorce and family law in New Hampshire. Here is the first, a segment about alimony. 

 

A New Hampshire Alimony Primer

I am always surprised when a potential client comes in to meet with me and says “there’s no such thing as alimony in New Hampshire, right?” Be assured, there is alimony in New Hampshire. 

Alimony is governed by RSA 458:19. The law says that the recipient must have the need for alimony, and the payor must have the ability to pay. The alimony award must take into account the lifestyle of the parties during the marriage. In determining the amount of alimony, the court must consider the length of the marriage; the age, health, social or economic status, occupation, amount and sources of income, the property awarded to either party, vocational skills, employability, estate, liabilities, and needs of each of the parties; the opportunity of each for future acquisition of capital assets and income; the fault of either party as defined in RSA 458:16-a, II(l); and the federal tax consequences of the order.

Things to know about alimony:

  • Alimony is gender neutral. Men and women can receive alimony.
  • The court has broad discretion when awarding alimony, and there is no formula in New Hampshire for either an amount or a term.
  • Alimony cannot be waived in a divorce stipulation. The law provides either spouse with the right to petition for alimony within 5 years of the date of the divorce decree, or if alimony has been ordered for a definite time period, within 5 years from the date of the last payment.
  • Alimony is tax deductible to the payor, and is taxable income to the recipient.
  • The primary purpose of alimony is rehabilitative, meaning the support is intended to allow the recipient time to become self-supporting. However, the court has the authority to order alimony for an indefinite period of time where appropriate.
  • Agreements that contain a provision for the payment of alimony often include language about the terminating alimony upon the recipient’s remarriage or cohabitation with a romantic partner. 

Unbundled Legal Services

Unbundled legal services, also known as limited scope representation, allow you to hire a lawyer to do certain parts of your case, instead of the traditional soup to nuts representation. Some clients choose unbundled services because they cannot afford full representation, and some advice is better than no advice. Other clients feel capable of handling certain parts of the case, but need assistance with other portions.

Unbundled services can be customized to fit your needs, and can include

  • Representation at a specific hearing, such as a temporary hearing
  • Draft proposed orders or pleadings
  • Attending mediation
  • Assisting with discovery preparations
  • Consulting during your case to provide assistance and advice  

Payment arrangements for unbundled services can be tailored to the specific service. For example, paying a small retainer for ongoing advice, or paying for an hour at the end of a meeting to prepare documents.

Lawyers providing unbundled services will ask the client to sign a consent form that clearly spells out what services are, and are not, going to be provided, in addition to a fee agreement. 

Raybeck and Raybeck: Providing a definition of cohabitation

The Facts

Husband and Wife divorce after forty-two years of marriage in 2005. The divorce decree divides the property and requires the Husband to pay $25,000 per year for ten years. However, the decree provided that alimony would stop if the Wife cohabitated with “an unrelated adult male.”

In 2010, the Wife moved from her home, and rented it to reduce her expenses. She moved into the upper level of a single family home that was owned by a man she met through an online dating service. The man lived on the lower floor, and they had shared space on the middle floor of the home. The Wife did not pay rent, but she did pay $300 per month for food and often cooked for him.

The Husband stopped paying alimony when he learned of the move, and Wife sought enforcement of the alimony obligation. The trial court ruled that the Wife was not cohabitating under the terms of the decree and enforced the alimony obligation.

The Appeal

The Husband appealed the trial court’s order, initially arguing that the trial court erred in concluding that the Wife was not cohabitating. However, at oral argument the Husband abandoned that argument, and instead argued that the trial court did not a have a workable definition of cohabitation and urged the court to adopt a standard.

The Holding

The Supreme Court defines cohabitation as “a relationship between persons resembling that of a marriage.” Whether two people are cohabitating will depend on the facts and circumstances of each particular case. The Supreme Court offered guidance on factors to be considered:

  • Whether the couple is living together continually
  • What the financial arrangements between the couple are and to the extent that they are entangled, including whether there are shared expenses, to what extent one supports the other, whether there are shared investments or retirement planning, if the couple have joint bank accounts, and whether there are life insurance policies naming the other.
  • The extent of the personal relationship, including the intimacy of the connection, shared vacations, shared friends and social connections, and a sexual relationship (although not necessarily dispositive)
  • Whether the couple share and enjoy each other’s personal property, such as household furnishings, appliances, vehicles, and personal items, such as toiletries or clothing
  • The age of the couple may be an important consideration, which may give more or less weight to the support of one by the other and estate planning providing for children of prior relationships
  • Whether friends, family or the community view the couple was engaging in a personal intimate relationship

The Takeaway

The guidance provided in this case should assist a trial court in determining whether a coupld is cohabitating, even though the facts and circumstances in each particular case. Perhaps the old adage “if it walks like a duck, and quacks like a duck” is most appropriate.   
 

The temporary hearing: A critical phase of your case

Continuing the series of You Tube videos, this edition discusses a very important hearing in your case: the temporary hearing. Watch to find out why, and what you need to do to be prepared and help achieve a good result.

Here are the forms you need for a divorce temporary hearing with children:

Thanks to Jeremy Collins at Ellipsis Entertainment, you were great to work with on this series!

Tips for Completing your New Hampshire Family Division Financial Affidavit

This blog has been a great way to reach out to people who need information about divorce, parenting and family law, and it has been a great experience hearing feedback from colleagues and watching the number of readers grow throughout the years. I hadn't considered branching out into You Tube until I read a blog post on Kevin O'Keefe's Real Lawyers Have Blogs called Are Law Firms Underutilizing You Tube? The idea of a audio/visual piece to this blog appealed to me. Much like I like to hear the audio tour in an art museum instead of reading all the tags next to a painting because it is easier to absorb the information, I think that a video can help convey information in a good way.  

So without further ado, the following is my first You Tube video on the topic of completing your financial affidavit.

Click here for the Financial Affidavit form for theNew Hampshire Circuit Court, Family Division.

Thank you to Jeremy Collins at Ellipsis Entertainment for being easy to work with and producing a great product.

Contempt of Court

Throughout my years practicing law and in my role as a guardian ad litem, I often hear misconceptions about contempt. Usually I hear statements along the lines of “I don’t want a criminal record” or “if I am found in contempt I will be arrested.” This post is intended to dispel some of these misunderstandings and to set the record straight.

Contempt can be civil or criminal, direct or indirect. The difference between civil or criminal lies in the purpose of the punishment. Direct or indirect contempt contrasts between acts committed either in the presence or outside of the presence of the court.

Civil Contempt

A finding of civil contempt results in an order that is remedial, coercive and for the benefit of the other party. The punishment is intended to force the contemnor’s compliance with court orders. Examples of the consequences of a contempt finding include money fines, orders directing compliance with the court orders, or even an indefinite jail sentence until the contempt is cured. It is often said that the contemnor “holds the key to the jail in his pocket” because curing the contempt will set him free. In family matters, motions for contempt are often brought for failure to pay child support, failure to abide by the parenting schedule, or selling or encumbering property in violation of a non-hypothecation order. Jail is a remedy of last resort, and one that usually only follows repeated, intentional refusals to abide by court orders or extreme behavior. The court will usually exhaust other remedies, such as payment of the other parties’ attorney’s fees, before sending a person to jail for civil contempt. A civil finding of contempt does not appear on a person’s criminal record.

Criminal Contempt

In contrast, a person who has been found in criminal contempt does not hold the keys to the jailhouse, and remedying the contempt will not set him free. The punishment is punitive, and intended to protect and preserve the dignity and authority of the court. Indirect criminal contempt proceedings must generally follow to procedural formalities of criminal proceedings. The defendant is entitled to reasonable notice, providing a date and time for the proceeding and warning that the contempt is considered criminal. The prosecutor must prove the elements of contempt beyond a reasonable doubt, and the contemnor is entitled to counsel and holds the right against self-incrimination. If the court intends to impose a sentence of greater than six months, the defendant has the right to a jury trial.

An example of criminal contempt, and the confusion that can result between criminal and civil contempt, is the New Hampshire case of Mortgage Specialists v. Davey. Mortgage Specialists sued the defendants for violation of trade secrets. Following a preliminary injunction, the defendants destroyed documents in violation of the court order. The court found the defendants in contempt, believing that they had thumbed their noses at the trial court’s authority and thwarted the dignity of the process, and issued penalties including attorney’s fees, fines and a penalty of three times the amount of profits unjustly reaped from the violation of trade secrets. The Supreme Court vacated the finding because the defendants were not provided notice that the contempt proceedings would be criminal.

Indirect Contempt

Indirect contempt is conduct that takes place outside of the presence of the court. The court does not have first-hand knowledge. Instead, the acts of contempt must be proved through evidence. An interesting case that distinguishes direct contempt versus indirect contempt is Kristen McGuire v. Suzanne Collins. In McGuire, a litigant in a custody matter arrived at the courthouse smelling of alcohol. The court security officer approached the litigant, and a state trooper performed a preliminary breath test. The results were not provided to the litigant, or her attorney. However, when she appeared before the court for the hearing, the judge informed her that she had blown a .20, well above the legal limit. However, the litigant displayed no disorderly behavior in the courtroom. The judge sentenced to litigant to 30 days in jail for direct, criminal contempt for appearing before the court in an inebriated state. However, the sentence was overturned by the Superior Court following a filing for a writ of habeus corpus because the family division judge had not personally observed the elements of contempt. Instead, the court had to rely on the observations of the court staff and the preliminary breath test conducted by the state trooper to prove the elements of contempt. Therefore, the court did not have direct knowledge and could not conduct summary proceedings resulting in the immediate incarceration.

Direct Contempt

Direct contempt takes place in the presence of the court where the judge personally observes all of the elements of contempt. The following is a perfect example of direct contempt from Maryland in the case of Patrick Smith v. State of Maryland:

THE DEFENDANT: What is the maximum on contempt, sir?

THE COURT: What is the maxim um on contempt? If I am going to give you in excess of six months, I believe I have to give you a jury trial, is that correct . . . ?

[STATE’S ATTORNEY]: Yes.

THE COURT: Mr. Smith, I am not going to give you in excess of six months.

THE DEFENDANT: Let me tell you something.

THE COURT: What?

THE DEFENDANT: You say you won’t give me in excess of six months.

THE COURT: Yes.

THE DEFENDANT: You know what? You have been sitting up there in the trial in every hearing I have had for this far, right? From day one, you have been very prejudiced to the defense. I asked you, right, a while ago, you tried to skip out on even bringing forth an allegation. You say it is only a bald allegation. I am not asking you to believe me. I am asking you to bring forth the witnesses in this case who could testify --

THE COURT: I asked you if you had anything you want to say as to what sentence the Court should impose --

THE DEFENDANT: Yeah. You know what? You can give me six more months, motherfucker, for sucking my dick, you punk ass b itch. You should have a white robe on, motherfucker, instead of a black. Fuck you.

THE COURT: I find you in contempt again.

THE DEFENDANT: Fuck you in contempt again.

THE COURT: I find you three times in contempt --

THE DEFENDANT: Fuck you. And fuck.

THE COURT: On each charge, the Court will impose a sentence of five months to run consecutive to each other and consecutive to any sentence you are now serving or obligated to serve.

THE DEFENDANT: Yeah. You better leave now, you, Ku Klux Klan.

Other examples of direct contempt include assaulting another person in the courtroom or refusing to testify when ordered to do so. When direct contempt occurs, the court may skirt procedural formalities required of indirect contempt in light of the court’s direct knowledge of the contempt. The word “summarily” does not refer to the swiftness of the punishment, but rather the dispensing with the formalities that accompany a conventional trial such as service of process, notice of hearing, and submission of evidence. Instead, the court must give the contemnor oral notice of the contempt observed, an opportunity to speak in his defense, where after the court may issue a finding of guilty and pronounce sentence.  

Understanding Same-Sex Divorce

In November, I authored an article on same-sex marriages in the New Hampshire Bar News geared towards helping practioners understand unique issues in same-sex divorces. I reprint here the full article:

Practicing family law in one of the six states that recognizes same-sex marriage requires an understanding of the unique challenges that same-sex couples face in a divorce. Usually, a divorce provides a mechanism to dissolve the legal relationship, divide property and establish parental rights and responsibilities. Although same-sex couples can dissolve their marriage in New Hampshire, reaching a fair and reasonable property division or establishing parental rights and responsibilities is much more difficult.

Marriage & Divorce

New Hampshire practitioners have limited precedent to guide them on several thorny issues that are distinctive to same-sex couples. Ironically, one of the few cases involving same-sex relationships, which is still good law, is now inconsistent with the state’s recognition of same-sex marriage. In the Matter of Blanchflower held that adultery does not include homosexual relationships. The court based its decision on the definition in New Hampshire of adultery, which excludes all non-coital sex acts, no matter the gender of the persons engaging in the act. Thus, although other fault grounds may be pursued, adultery is off the table for same-sex divorcing couples. The Blanchflower Court noted that it was not the function of the judiciary to extend past legislation to provide for present needs.

A common dispute in same-sex divorce is the calculation of the length of the marriage. In cases where the parties’ cohabitated long term prior to the marriage, one party may attempt to tack on the cohabitation to increase the length of the marriage and impact alimony and property division. This argument stems from the claim that had the parties been able to marry, they would have. Without New Hampshire precedent, the court may look to Massachusetts for guidance, where the Massachusetts Supreme Judicial Court has held that marriage benefits apply prospectively to the legalization of same-sex marriage. In addition to the cohabitation argument, the question also remains whether domestic partnerships, like those in California or New Jersey, might be similar enough to a marriage to tack on and create a long-term marriage.

Alimony

The IRS identifies alimony as payments made between spouses or former spouses pursuant to a divorce or separation agreement. Typically, alimony is deductible to the payor and includable as income to the payee for federal income tax purposes. However, the Defense of Marriage Act prohibits the federal recognition of same-sex marriages, and in turn precludes the IRS from recognizing a same-sex spouse as such. Although the IRS has not provided specific guidance on the issue, it seems clear that alimony payments are not tax deductible to the payor and may incur a gift tax liability. The IRS might alternatively consider the payments compensation for past services, with income tax, self-employment tax and possible withholding obligations. Either treatment will incur tax consequences that could be financially devastating to the family.

Property Division

In "traditional" divorces, opposite-sex couples rarely invokes tax consequences during the division of their marital assets. Such property transfers meet specific IRS exemption rules. Same-sex couples on the other hand can be saddled with a large tax liability as a result of property division.

The Defense of Marriage Act disqualifies same-sex spouses from the tax exemptions for property transfers made pursuant to a divorce decree. Instead, same-sex couples incur a gift tax liability for most transfers made between the spouses or former spouses in excess of $13,000. For example, if one spouse transfers $30,000 to the other spouse for property settlement, $17,000 would be taxable. In addition to gift tax, same-sex couples must be aware of capital gains tax when the home is transferred from joint ownership to one spouse.

A specific part of property division is the ability of a spouse to transfer property to a spouse or former spouse by qualified domestic relations order (QDRO) pursuant to the federal Employment Retirement Income Security Act (ERISA), a portion of a retirement plan or tax sheltered annuity. The tax treatment of such transfers depends on the word "spouse." In other words, in order to qualify for the tax-free transfer benefits, the relationship must be recognized by the IRS as a marriage. Under the Defense of Marriage Act, which defines marriage as between a man and a woman, a QDRO is not a vehicle available to same-sex couples to transfer retirement assets tax-free. Instead, same-sex couples must pay taxes and early withdrawal penalties on transfers made to the other spouse, regardless of whether it is deposited into the other spouses’s retirement account.

Parental Rights & Responsibilities

New Hampshire follows the legal principal that a child born into a marriage is presumed to be the legal child of both spouses. This presumption of legitimacy may be attacked however, and if successful could drastically affect the non-biological parent’s right to seek parenting rights and responsibilities, including residential responsibilities. Although the step-parent statute might be a useful tool in this circumstance, the parenting rights accessed through this avenue could look much different than the rights of a legal parent. Co-parent adoption is the safest way to establish protected parenting rights for each spouse.

Tax considerations for divorcing couples

During a divorce, the tax consquences of a settlement often take a backseat to heated issues such as parenting rights and asset division. However, tax consquences can have a very big impact on the outcome of a case and are an important factor to consider.  Attorney Jason C. Brown of Brown Law Offices, P.A. posted an informative piece on his Minnesota Divorce and Family Law Blog with tax tips for divorcing couples. Attorney Brown suggested the following issues to consider during a divorce:

  1. Child Support. Child support is not income to the recipient and is not deductible for the payer. Keep this in mind if your spouse is seeking alimony. Child support payments that they receive are not taxable and, as a result, increase their net income each month dollar for dollar. As a result, the "need" of your spouse will be diminished and you may be able to argue that their imputed gross income exceeds their gross pay coupled with untaxed child support.
  2. Alimony. Alimony is income to the recipient and is deductible for the payer. High income earners can reduce their taxable income by paying alimony. If your spouse's tax bracket is low, the government winds up picking up the tab for a good share of the alimony obligation.
  3. Sale of Homestead. The sale of the marital homestead usually does not involve a taxable event. Capital gains (up to $500,000) from the sale of your marital homestead are not taxable if you've lived there for two of the last five years. Nor is a transfer of title to the residence, allowing your spouse to keep some or all of the equity. Many couples opt to forego alimony payments in, instead, pay a disproportionate property settlement to their spouse. In other words, they "buy off" alimony by giving a larger share of home sale proceeds, or equity, to their spouse. The result? No tax implications for either. Ideal for alimony recipients in a high tax bracket.
  4. Filing Status. The status of your marriage on December 31 of the relevant year determines whether you file as single or married. If you are divorced by that date, you file as single for the entire year. If your case appears to be coming to a close near the end of the year, best to speak with a tax preparer about the consequence of holding up at bit or expediting matters. We find that courts are usually willing to facilitate bringing matters to a close by the end of the year if tax implications in doing so are substantial.
  5. Dependents. While the law provides that the custodial parent is entitled to claim the relevant dependency exemptions, most couples agree to share them. Offering a non-custodial parent the right to claim the dependency exemption under the condition that their child support is current at the end of the relevant tax year provides them with incentive to keep current with payments.
  6. Child Care Credit. Custodial parents who incur work-related child care costs can deduct up to 30% of the cost. It is for that reason that the child support guidelines usually require a custodial parent to assume responsibility for a greater share of daycare expense.
  7. Liabilities and Refunds. Taxes owed, or refunds received, are usually treated as "marital" and are, therefore, split equally among the parties. In the heat of the moment, some spouses will intercept a tax refund and cash it without the other's knowledge. All funds must be accounted for and it is likely that if they do so their share of the final property settlement will be reduced proportionately. Because income is "marital," a tax liability is a shared responsibility.
  8. Attorney Fees. Any fees paid to a lawyer for tax advice are deductible. Ask your attorney for to break out all billable time devoted to tax issues and you can save big.

A good family law attorney will point out these and other issues to consider during your divorce. It is also important to discuss your divorce and the tax consquences of any settlement with a knowledgeable accountant.

Gender equality in alimony

A recent article on CNN highlighted the modern day movement that it called "manimony," where a wife pays alimony to her husband. Historically, alimony derived from the principle that a husband has a duty to support his wife. The ecclesiastical courts in England only recognized judicially approved separations, and so the husband continued to have a duty to support his wife even after a physical separation. Today, that duty to provide support after a legal separation or divorce is gender-blind and the court will award alimony where appropriate, regardless of which spouse pays.

An Alimony Primer for New Hampshire Residents

Alimony, also called maintenance or spousal support, is payments made to a spouse or former spouse under a court order. Alimony in New Hampshire is "rehabilitative' and is based on the theory that both spouse should be able to provide for their own financial needs. Therefore, when alimony is awarded, it is designed to encourage the supported spouse to establish an independent source of income. However, the New Hampshire Supreme Court has ruled  that this theory is not controlling when the alimony recipient "suffers from ill health and is not capable of establishing an individual source of income, or where the supported spouse in a long-term marriage lacks the requisite job skills to independently approximate the standard of living established during the marriage."

In order to award alimony, the court must find that the supported party lacks sufficient income, property, or both to meet their reasonable needs and be self-supporting and that the paying party can provide for their own reasonable needs and those of the other spouse. The court should also consider the style of living to which the parties have become accustomed during the marriage in determining their reasonable needs.

How much will the court award in alimony? The court relies on several factors to determine the amount of alimony to be awarded, including:

  •  the length of the marriage;
  • the age, health, social or economic status, occupation, amount and sources of income, the property awarded in the divorce decree, vocational skills, employability, estate, liabilities, and needs of each of the parties;
  • the opportunity of each for future acquisition of capital assets and income;
  • the fault of either party;
  • the federal tax consequences of the divorce order. 
  • the economic contribution of each party to the value of their respective estates
  • the non-economic contributions to the family unit.

To read New Hampshire's law on alimony, click here.