Month: November 2017

Imputing Income for Child Support Purposes

This Week’s Blog by Andrew M. Eliot

In Connecticut, the amount of a non-custodial parent’s child support obligation to a custodial parent is directly tied to the respective incomes of both parents. Essentially, pursuant to the Connecticut Child Support Guidelines, parents’ respective incomes are plugged into a mathematical formula, which yields a weekly child support obligation that one parent must pay to the other.

For Divorce and Family Law attorneys in towns such as Greenwich and Darien, it is not uncommon for a client to raise concerns about the amount of child support he or she may be entitled to receive because the would-be obligor parent’s income has either declined dramatically from what it once was, or may decline dramatically in the near future for any number of reasons. In some situations, the decline or potential decline in income may be involuntary, such as where a parent is fired or laid off by an employer.  However, in other situations, the decline or potential decline in the income of a potential obligor may result from voluntary actions on that parent’s part, such as (a) an intentional career change into a less lucrative line of work; or (b) in some extreme cases, intentional and nefarious measures taken by a potential obligor spouse to reduce his or her income for the specific purpose of minimizing child support obligations. Consider, for example, a scenario in which a potential child support obligor voluntarily leaves a high-paying job on Wall Street shortly before a child support award will issue in order to pursue a career as a musician.  Alternatively, consider a scenario in which the same potential child support obligor involuntarily loses his or her high-paying job in finance, but then fails to make diligent efforts to find commensurate employment.

Notably, Connecticut courts have a means of addressing what lawyers often refer to as “voluntarily unemployment” or “voluntary underemployment,” in order to ensure that children receive adequate and fair financial support. Voluntary unemployment or underemployment occurs when a parent voluntarily makes less income then he or she formerly received or, upon experiencing an involuntary reduction in income, subsequently fails to make diligent efforts to find employment at a level equal to or better than income formerly received. In such circumstances, courts have the ability to attribute or “impute” income to an obligor parent for purposes of determining that parent’s child support obligation. In other words, when plugging the obligor parent’s income into the mathematical child support formula referenced above, courts may utilize an income figure for the obligor parent that reflects the amount of income that parent could potentially be earning (commonly referred to as “earning capacity”) rather than the amount the parent is actually earning.

In determining a party’s earning capacity for purposes of imputing income to that party, there is not a precise methodology that Courts employ. Rather, in any given case, the determining Court will examine the unique set of facts in that particular matter in order to make a determination. However, factors that Courts typically would consider in this context would include the relevant party’s historical earnings, employment history, vocational skills, employability, age and health. It is not uncommon in earning capacity cases for either or both parties to hire vocational experts for the purpose of proving (or disproving) the other parent’s earning capacity. A vocational expert will generally testify about what a person with similar experience and expertise should make.

Cases involving earning capacity claims are complex and, in order to be handled properly, require a great deal of attention and expertise.  At Broder & Orland LLC, we have extensive experience with earning capacity issues  and have a well-established track record of achieving favorable results for our clients in such matters.

Sarah E. Murray Published in Fairfield County Bar Association Quarterly, November 2017

The Winter 2017-18 edition of The FCBA Quarterly featured an article penned by Attorney Sarah E. Murray. Her article, “Modification of Alimony in Connecticut Based on Cohabitation,” discusses Connecticut law pertaining to alimony and the modification thereof, as well as answers commonly asked questions regarding cohabitation.

Click here for access to the most recent edition of The FCBA Quarterly, and look for Attorney Murray’s  article on page ten!

Am I Entitled to be Compensated for Assets Dissipated by my Spouse?

This Week’s Blog by Christopher J. DeMattie

When a divorce action is instituted in Connecticut, whether you reside in Greenwich, Westport, or any other municipality in this State, the Automatic Orders go into effect, which provide certain protections to your family’s assets. But what happens to the assets prior to the Automatic Orders going into effect?  Generally, you and your spouse are vested with the authority to spend marital funds for your own enjoyment, however there are exceptions which may entitle you to be compensated for your spouse’s spending during the marriage.

The controlling Connecticut law on “dissipation” is based on the rulings in the 2008 Supreme Court cases Gershman v. Gershman, 286 Conn. 341, (2008), and Finan v. Finan, 287 Conn. 491, (2008).

In Gershman our Supreme Court concluded that, at a minimum, dissipation in the marital dissolution context requires the alleging party to prove financial misconduct involving marital assets, such as intentional waste or a selfish financial impropriety, coupled with a purpose unrelated to the marriage.

In, Finan, our Supreme Court expanded the elements provided in Gershman, to include that, in order for a transaction to constitute dissipation of marital assets for purposes of equitable distribution under § 46b–81, it must occur either: (1) in contemplation of divorce or separation; or (2) while the marriage is in serious jeopardy or is undergoing an irretrievable breakdown.

Thus, in order for you to make a dissipation claim you have the burden of proving ALL of the following elements: (A) the dissipation occurred either: (i) in contemplation of divorce or separation; or (ii) while the marriage is in serious jeopardy or is undergoing an irretrievable breakdown; (B) the financial misconduct involved intentional waste or a selfish financial impropriety; and (C) such financial misconduct was for a purpose unrelated to the marriage.

The element of “temporal restriction” established under Gershman and Finan create a potential cause of action to seek compensation for marital funds spent or transferred by your spouse prior to the Automatic Orders going into effect.  Proving this element often requires evidence about the state of your marriage at the time the financial transaction(s) occurred.

The elements of “intentional waste” and “selfish financial impropriety” as well as “purpose unrelated to the marriage” depend on the nature of the financial transaction(s). Courts have generally found that financial transactions related to gambling, drugs, alcohol, affairs, and extraordinary non-regular gifts to “friends” are unrelated to the marriage. Conversely, regularly reoccurring gifts to family members, funds spent on children, paying court ordered obligations, and even bad business decisions may not rise to the level of “intentional waste,” “selfish financial impropriety,” or “a purpose unrelated to the marriage.” These issues depend on the specific facts and circumstances of your marriage.

Therefore, even a sharp disagreement between your and your spouse over the wisdom of an expenditure, without more, does not necessarily render that expenditure a dissipation of martial assets.  The test is whether the asset was actually wasted or misused. Furthermore, the temporal restrictions better assist courts in determining the impropriety of a your spouse’s actions, namely, whether the actions were carried out, at least in part, to deprive you of assets that would otherwise be available for equitable division by the court.

If a Court determines that your spouse dissipated assets, the Court has the authority to issue remedial orders to make you whole or to fashion other orders such as awarding you additional assets or increasing or decreasing the alimony award, depending on whether you are receiving or paying alimony.

The attorneys at Broder & Orland LLC are experienced with dissipation claims in the marital dissolution context. We are adept at advising our clients on the strategies and the multitude of factors considered by a Court in fashioning orders related to a dissipation claim.

Prenuptial Agreements in Connecticut: Financial Disclosure

This Week’s Blog by Sarah E. Murray

At Broder & Orland LLC, we tell any person who seeks our advice in connection with the drafting and negotiation of a Prenuptial Agreement that the financial disclosures accompanying the Prenuptial Agreement are one of the most important aspects of the agreement. The reason that the financial disclosures are so important is because General Statutes Section 46b-36g(a)(3), which is applicable to all Prenuptial Agreements entered into after October 1, 1995, states that a Prenuptial Agreement will not be enforceable against a party opposing its enforcement if that party proves that, before the agreement was executed, he or she was not provided with “fair and reasonable disclosure of the amount, character and value of property, financial obligations and income of the other party.” In other words, a party to a Prenuptial Agreement can seek to have the Prenuptial Agreement set aside in the event of divorce if he or she can prove that the other party (typically the moneyed spouse) did not adequately disclose his or her assets or income.

Lack of adequate financial disclosure is one of the most common reasons that Fairfield County divorce litigants cite in favor of a claim that a Prenuptial Agreement should not be enforced. It is for this reason that parties to a Prenuptial Agreement need to take care in preparing their financial disclosures, which are typically attached to the Prenuptial Agreement. The question that clients ask is: What constitutes adequate financial disclosure for a Connecticut Prenuptial Agreement to be enforced? While there is no one answer, a review of Connecticut case law on this issue provides some guidance.

One of the more instructive cases on the issue of financial disclosure is Friezo v. Friezo, 281 Conn. 166 (2007). In that case, the trial court had found that the parties’ Prenuptial Agreement was unenforceable based on inadequate financial disclosure and the Wife not having reasonable opportunity to consult with counsel. The Husband appealed. The Supreme Court reversed the trial court’s orders, finding that the Prenuptial Agreement was enforceable. At the time of the divorce, the estate was worth approximately $23 million, including over $6.5 million of the Husband’s premarital assets. The Wife had claimed that her attorney did not show her the Husband’s financial disclosure at the time they met regarding the Prenuptial Agreement, though it was in his possession at that time. His financial disclosure showed his assets, one liability, and also reflected his income. The draft originally provided to the Wife’s attorney was the one attached to and incorporated into the parties’ Prenuptial Agreement. At trial, the Wife did testify that she had acquired substantial knowledge regarding the Husband’s finances prior to the parties’ marriage. The Wife claimed that the signing of the Prenuptial Agreement, which was 24 hours before the wedding, was the first time that she had seen the Husband’s financial disclosure.

The Supreme Court examined for the first time the meaning of “fair and reasonable” financial disclosure, as referenced in the statute, stating: “’[F]air and reasonable’ disclosure refers to the nature, extent and accuracy of the information to be disclosed, and not to extraneous factors such as the timing of the disclosure.” Id. at 183. The Court noted that the statute does not require that the financial disclosures be appended to the agreement. Id. The Supreme Court also looked to McHugh v. McHugh, 181 Conn. 482 (1980), the case governing the enforcement of Prenuptial Agreements entered into prior to October 1, 1995, in its analysis. In McHugh, the Supreme Court had pointed out that a party cannot knowingly waive his or her rights with respect to another party’s income or assets without sufficient knowledge as to the other party’s financial circumstances. “[F]inancial disclosure in Connecticut must be understood as a burden to inform borne solely by the disclosing party.” Id. Therefore, the focus is on the actions of the disclosing party, rather than on the party to whom disclosure is being made. The Supreme Court further stated:

The overwhelming majority of jurisdictions that apply this standard do not require financial disclosure to be exact or precise….We agree with the majority of jurisdictions that a fair and reasonable financial disclosure requires each contracting party to provide the other with a general approximation of their income, assets and liabilities, and that a written schedule appended to the agreement itself, although not absolutely necessary, is the most effective method of satisfying the statutory obligation in most circumstances.

Id. at 189-91 (Citations omitted; emphasis added)

In Friezo, the Supreme Court ultimately determined that, under the McHugh analysis discussed herein, the Husband’s financial disclosure was “more than adequate” to allow the Wife to waive her statutory rights, as it provided her with his gross income from all sources for the year prior and listed his assets (most of which were valued individually) and liabilities. The trial court had not found that the financial disclosure was inaccurate or incomplete, but rather that the Wife did not have the expertise to understand it.  The Supreme Court responded “[w]hen the burden is on each party to inform, as established in McHugh, the test for adequate disclosure need not take into account or depend on the capacity of the receiving party to understand or digest the information received.”  Friezo, 281 Conn. at 192.  Furthermore, whether the Wife had sufficient time to review the disclosure does not go to the issue of whether it was fair and reasonable.  Id. at 194.  Justice Norcott dissented, stating that he would have found the financial disclosure to be inadequate for failing to fully explain the assets listed (particularly certain partnership interests).

In Oldani v. Oldani, 132 Conn. App. 609, 624 (2012), the trial court determined that the parties’ Prenuptial Agreement was enforceable. At the time of the signing, financial disclosures were attached to the Prenuptial Agreement. The Husband’s net worth at that time was over $5 million. His disclosure listed assets and liabilities itemized by category, along with schedules that provided additional details regarding bank accounts, notes, loans. He also included a schedule listing 11 commercial real estate properties in which he had an interest, including his percentage ownership, the replacement value, the mortgage debt, annual mortgage payments, and the net equity. The disclosure also included the gross rents received, as well as the annual operating expenses and “NOI” (net operating income). The disclosure did not specifically set forth his income, but the trial court found that there was sufficient information from which to extrapolate it. The Appellate Court found that the Husband had failed to provide a fair and reasonable disclosure of his income prior to the Prenuptial Agreement being signed. The word “income” did not even appear on the disclosure.

In contrast, in Beyor v. Beyor, 158 Conn. App. 752 (2015), the trial court enforced the parties’ Prenuptial Agreement and the Wife appealed, claiming that the Husband had failed to disclose his Schedule E income on his financial disclosure. The Appellate Court compared this case to Oldani, and noted that what is fair and reasonable financial disclosure may depend on the circumstances of the case.  Id. at 764. The Appellate Court found that there was fair and reasonable financial disclosure. Although the Husband had not disclosed his Schedule E income, he had disclosed the business interests that were the source of that income and gave a value to those interests.

The above cases are just a sampling of cases regarding the sufficiency of financial disclosures in connection with Connecticut Prenuptial Agreements. As the case law discussed in this article demonstrates, each case is fact specific, but, generally speaking, the more comprehensive the financial disclosure, the better.

Should I Waive My Right to Alimony?

This Week’s Blog by Lauren M. Healy

When you are divorced in Connecticut, the Court may make an award of alimony–the payment of money from one spouse to the other (sometimes also referred to as “spousal support” or “maintenance”). Alimony is based on the presumption that spouses have a continuing duty to support each other financially while a divorce is pending and/or after the divorce is granted.

If your spouse has historically been the primary wage earner or primary source of financial support for the family, it is typical for that arrangement to continue after the divorce with an award of alimony to you, as the non-working or lesser earning spouse.  However, what happens when you and your spouse have similar levels of income, or if neither of you work? In that case, there may be an alimony waiver, or an award of “one dollar a year” of alimony.

An alimony waiver means that you and/or your spouse agree that no award of support, maintenance or alimony will be made by the Court at the time of the divorce. If you waive alimony at the time of your divorce, you are also waiving any claim for past or future alimony. There are different reasons why you may consider waiving alimony:

  • You are the primary wage earner in your family
  • You have not historically relied on your spouse for financial support
  • You and your spouse were married for a very short period of time
  • You and your spouse have similar levels of income
  • You are confident in your ability to support yourself in the future

There is no requirement that an alimony waiver be mutual. Alimony can be waived by one party and not by the other.  If you decide to waive alimony, at your divorce the Judge will ask you questions specifically about that alimony waiver, in order to determine that you understand what it means to waive your right to support and to verify that you can care for yourself financially.

What happens if you are comfortable waiving alimony at the time of your divorce, but do not want to preclude your right to ask for an award of alimony in the future? The answer may be that your spouse pays you “one dollar a year” in alimony for a certain period of time (the alimony term). The $1 is symbolic. It really means that no alimony will be paid to you for the time being, but it leaves the door open for you to ask for a modification of the alimony amount in the future. Leaving alimony open with an award of “one dollar a year” may be appropriate if:

  • You are currently working but your future employment is uncertain
  • There is a possibility that your spouse will return to the workforce or make significantly more money in the future
  • There are health concerns that prevent you from knowing if you will be able to support yourself in the future
  • You have been married for many years and you and/or your spouse are of advanced age

Experienced divorce counsel in Westport and Greenwich can help you determine if the circumstances of your case make an alimony waiver realistic or preferable to “one dollar a year” in alimony. At Broder & Orland LLC we are adept at advising our clients on the strategies and the multitude of factors considered by a Court in establishing an alimony award.