We Practice Law for Your Peace of Mind

Retirement Plan Divison in Divorce

Author: Steven Wiseman

November 23rd, 2014

In many divorces, the most significant assets – even more so than the parties’ residence – are their pension and retirement accounts.  It is not unusual in longer marriages that the parties may have 401K or similar plans totaling hundreds of thousands of dollars or a pension plan that will pay a significant monthly benefit upon retirement.

It’s been said that a little knowledge is a dangerous thing.  Many attorneys who represent clients in divorces have a passing familiarity with how retirement plans and pensions are divided, but the laws in this area – a combination of federal and state laws – are complex and require a depth of knowledge and experience to make certain your rights are protected.

There are two main types of retirement plans and accounts.  One is where the employee (and usually the employer as well) make regular contributions to an account that with sound investment decisions over time can grow to a significant amount which, upon retirement, is paid to the employee.  A 401K is such a plan.  The other type of plan is the traditional pension plan where a monthly benefit is paid upon retirement based upon a formula that takes into consideration how long the employee worked for the company or union sponsoring the pension plan.

There is a significant difference in how each of these two types of plans are treated in a divorce.  A factor to be considered in the first type is how much money was contributed to the retirement account while the parties were married, whereas in the second type the important factor is how much of the time the employee worked for the company he or she was married.

Here’s an example based upon a recently decided case in New York.  John began employment with Acme Inc. when he was 28 years old and not yet married.  By the time he married Alice, when he was 36 years old, he and his employer had made contributions to a 401K account which, together with earnings, had a value of $20,000.00.  John had the good fortune to work for a company that also had a pension plan in which he participated for the 8 years he worked there before he married Alice, then while he was married, and then after he and Alice were divorce after 20 years of marriage.  Assuming he retires at age 60, he will have worked at Acme for 32 years, of which he was married 20 years.  His monthly benefit from the pension plan at age 60 will be $1,800.00.

The established formula for deciding how much Alice should receive of this amount is based on a ratio of John’s years of employment while married (20) divided by his total years of employment at Acme (32) times a factor, usually but not always 50%, times the monthly benefit.  So Mary will receive $562.50 per month (20/32 x 50% x $1,800.00) and John will receive $1,237.50 per month.

John continued contributing to his 401K, and Acme matched the contributions, while he was married.  When he and Alice were divorced the account was worth $85,000.00.   Remember that he already had $25,000.00 in it when he married Alice, which over the 20 years of marriage he is able to prove would have grown to $35,000.00 even if no additional contributions had actually been made by him and Acme to the account.  The established formula for deciding how much Alice should receive from John’s 401K plan would first subtract $35,000.00 from $85,000.00, leaving $50,000.00 x 50%.  Thus she would get $25,000.00 and John would keep $60,000.00.

But John’s lawyer made the mistake of agreeing to the division of John’s 401K plan using the formula for the other type of plan.  Thus, at the time of the divorce John and Acme had been contributing to the plan for 28 years of which he was married 20 years.  So:  20/28 x 50% x $85,000.00 equals = $33, 393.00 (rounded), so Mary received $8,393.00 more, and John was left with $51,607.00, which is $8,393.00 less than he would have kept if his attorney had known what he was doing!

The scary part is that the difference between the two main types of plans and how they are divided in a divorce is about as basic at it gets.  There are numerous other issues – qualified joint and survivor annuities, qualified preretirement survivor annuities, plan loans, and disability retirements to name a few – that are more complicated.  If your attorney is not knowledgeable and experienced in this area your rights may not be adequately protected.

Residency and Jurisdictional Requirements for Filing in New York

November 21st, 2014

In order to maintain an action for divorce in New York, the plaintiff must meet New York’s residency requirements for filing. And if the plaintiff is seeking any “ancillary relief” (i.e. support, division of marital property, etc.), the court must also have personal jurisdiction over the defendant spouse.

Residency is satisfied where one of the following conditions is met:

  • One of the parties has resided in New York for a continuous period of at least two years;
  • One of the parties has resided in New York for a continuous period of at least one year and: (i) the ground for divorce arose in New York; (ii) the parties were married in New York; or (iii) the parties previously resided in New York as husband and wife; or
  • Both parties reside in New York and the ground for divorce arose in New York.

Assuming New York’s residency requirements are met, the plaintiff is entitled to file for divorce in New York against the defendant spouse. If the only relief the plaintiff is seeking is the dissolution of the marriage, it is not necessary that the court have personal jurisdiction over the defendant spouse. However, if the plaintiff is seeking any ancillary relief (support, division of marital property, etc.), personal jurisdiction over the defendant is required.

Personal jurisdiction over the defendant is acquired where the defendant either resides in New York or is personally served with notice of the divorce action while physically present in the state. Personal jurisdiction is also acquired over the defendant where New York was the “matrimonial domicile” of the parties before their separation (i.e. the parties previously resided as husband and wife in the state), or the defendant abandoned the plaintiff in this state, or the claim for ancillary relief accrued under the laws of this state or under an agreement executed in this state.

Regardless of whether or not the plaintiff is seeking ancillary relief, the defendant must also be properly served with notice of the divorce action in the form of a “summons.” New York State law requires that the divorce summons be personally delivered to the defendant by someone over the age of 18 who is not a party to the action within 120 days of the date of filing.

In the event it is not possible to personally deliver the summons to the defendant, either because the defendant is avoiding service, or because his or her exact whereabouts are unknown, the plaintiff can request permission from the court to serve the defendant in some other manner.  Common examples of “substitute service” include service by mail to the defendant’s last known address, employer or post office box; personal service upon a known relative, acquaintance or associate of the defendant; or service by publication in a newspaper.

In order to obtain an order for substitute service, the plaintiff and/or his or her attorney must submit a sworn affidavit to the court detailing the reasons why personal delivery is not possible and proposing an alternative means of service that is reasonably calculated, under all the circumstances, to apprise the defendant of the pendency of the divorce action and afford him or her an opportunity to appear and be heard.  Where the court grants the plaintiff’s application, completion of service in the manner prescribed by the order is deemed the equivalent of personal delivery and will entitle the plaintiff to proceed against the defendant by default where he or she fails to respond to the summons.

If you are a resident of New York seeking a divorce against a spouse who lives in another state, or foreign jurisdiction, whose exact whereabouts are unknown, the experienced matrimonial attorneys at HoganWillig may be able to assist you in commencing an action for divorce in New York and taking whatever steps may be necessary to locate and/or serve the absent spouse.

Getting From Point A to Point B in a Divorce

Author: Kevin Mahoney

November 19th, 2014

Having a lot of options can be both a blessing and a curse.  Often people who are at a difficult stage in their life due to an unhealthy or broken relationship prefer not to have many choices in order to try to simplify things.  On the other hand, due to individual circumstances and needs, having flexibility can many times be an important factor as well.

It is important at the outset to consider how the lawyer can assist and what role he/she will play in the process.  From the attorney perspective, there are three basic paths that people can choose to get from point A (considering a divorce) to point B (being divorced).  In no particular order, a brief description of each follows:

  1. Mediation. A mediator is a neutral third party who assists couples in constructively discussing issues that need to be resolved and then preparing a written agreement to give legal effect to those terms.  As a result of this last component, it is highly recommended that the mediator be a family law attorney so that there is knowledge as to what issues should be addressed but also so the written agreement is drafted properly and can be legally enforceable and accepted by a court.  Although it is very common for mediating  parties together to meet with the mediator to work through these issues, it is also possible for each party to have the involvement of his/her own independent attorney either for consultations along the way or less commonly to assist during the mediation sessions.  The reason for this is because the mediator is neutral and cannot give legal advice to one party to the detriment of the other party. As a result, the attorney mediator is technically not representing either party in the context of the mediation.   Most mediators will highly recommend, if not require, that the parties consult with an independent attorney prior to the mediated agreement being signed in order to make sure that the parties have had the opportunity to receive independent legal advice.  The mediator is permitted to give legal information but cannot offer independent advice.  For many people, mediation represents the most cost-efficient manner in which to move from point A to point B.  However, it is ultimately agreement-based and, to the extent that the parties are not able to reach an agreement, that process will not be successful.
  2. Traditional Approach. The more traditional approach of a client hiring an attorney to represent him/her who then will deal with the other spouse who may or may not then be represented by his/her own lawyer allows the parties a great deal of flexibility as they can work cooperatively toward an agreement or they can utilize the court system to help them move their case forward in a litigated posture. Our courts first attempt to assist people in reaching an agreement (or partial agreement) to the maximum extent possible; however, ultimately, that system is set up so that the court will ultimately make decisions for the parties to resolve outstanding issues.  As a result, this process does not require the parties to come to an agreement as mediation does but it is also sometimes faulted for being time consuming, increasing animosity between the parties and potentially removing the parties from making important decisions that impact their lives as the potential exists for those decisions to be made by a third party who does not know their situation as well.
  3. Collaborative Law has been gaining increasing popularity over recent years. This is an agreement-based process; however, both parties are represented by their own respective attorneys from beginning to end.  The lawyers need to be trained in the collaborative process which is overtly non-confrontational and instead specifically geared towards cooperative problem solving.  At the outset, the parties agree with their lawyers that, to the extent that either party withdraws from the collaborative process, the collaborative counsel will not be able to continue to represent them in any traditional litigation, thus providing an incentive for all the parties to work through difficult times within that process.  Very often there is not the use of a neutral mediator because the training that the collaborative attorneys have is geared toward facilitating communication in a manner similar to a mediator and, in fact, many collaboratively trained lawyers are also trained mediators as well.  It has become increasingly common for people to involve a “coach” in the process which is someone trained in the counseling profession that  works with the parties to assist in the emotional aspects of the process which can be very beneficial for the success of that process when things become difficult.  This is especially so when the parties are dealing with custodial aspects of their parenting relationship with their children.  As a result, the collaborative process gives the parties the benefit of having their own respective attorney who can offer independent advice but also has many of the features that mediation does.  Ultimately, it is agreement based and specifically prohibits the use of the court system and litigation, although, by agreement, the parties can be creative in terms of how they come to a resolution of disputed issues.

Only a court can change the legal status in New York from “married” to “divorced”.   However, parties are not limited to the traditional role of the lawyer to obtain a Judgment of Divorce.  To the extent that the mediation or collaborative process results in a signed agreement, it is very common for one of the lawyers that were involved in that process to assist in the necessary paperwork for obtaining a divorce where the terms of the divorce are the terms of the agreement.   To the extent that a legal separation is the desired result, any process discussed above will work.

If you or someone you know is considering a divorce or separation, hopefully this information is helpful.  HoganWillig’s Family and Matrimonial Department consists of a number of lawyers trained and experienced with assisting clients navigate whichever path their clients ultimately decide is best for them.  If you are considering one of these routes and have further questions, we would be glad to assist you.

Divorce and the Family Business

Author: Kenneth Olena

November 17th, 2014

One question that often arises in matrimonial proceedings is how do the courts address one spouse’s interest in a family business?  In the absence of a pre-marital agreement (always recommended if there is a family business), the parties, by their lawyers, have to determine what interest, if any, a spouse may have  in the family business that is owned in whole or in part by his/her spouse.  By “family business” we are referring to an entity that was not begun by one spouse during the marriage.  Many small or medium size businesses are begun by a parent, grandparent or other member of an older generation and employ and are eventually owned by a member of a subsequent generation who is now involved in a divorce proceeding.

The first question that must be addressed is the form of the business.  Is it a proprietorship, a partnership or a corporation of some type?  The next question is the amount of ownership. The third and perhaps the most important question is the origin question.  How did the spouse acquire the ownership interest?  Whether the involved spouse is an owner, a partner or shareholder, it must be determined how that interest was acquired.  There are three usual ways the interest can be acquired; gift, inheritance or purchase.  If gift or inheritance, there may be an non-marital property component and a marital property component based on any appreciation or growth in the business.  If the interest was purchased (for fair market value or at a reduced cost due to family considerations), the asset is much more likely to be marital property, subject to valuation and division.

As can be seen from the above, this is a complicated area of the law.  An attorney experienced in these issues and a forensic accountant are necessary parts of the team that will lead to the best possible result for either party.

Can you keep the house after a divorce?

Author: Krystal Chapin

November 14th, 2014

In the exhaustive division of assets that occurs in most divorces, the issue of the family home inevitably comes up. What should be done with it? Who should keep it? Can that individual afford to keep it? Answers to these questions and more should be considered before making any decisions. In many cases, one spouse wants to keep the house after a divorce and buy out the other spouse’s share. This is usually desired due to stability, the best interest of the children, and/or an inability to afford comparable housing. However, many spouses fail to consider the long-term financial costs associated with keeping a home post-divorce, such as property taxes, cost of maintenance, potential decrease in the home’s value, and how paying for a home with just one income may impact retirement funds. Here are some common tips for divorcing couples who want one party to keep the marital residence.

A common solution is to refinance the loan. However, issues can arise if one spouse is attempting to secure a loan post-divorce. Since the family income has gone from two to one, funds are less. The matters get further complicated when alimony and child support are involved. Many divorcees don’t realize that the amount of alimony and child support received is not viewed by lenders as a reliable form of income until it is received for 12 months. This can greatly affect the refinance in terms of payment amounts and interest rates. If the breadwinning spouse decides to refinance, they may also be negatively affected by the divorce agreements. The amount of money paid in alimony or child support is often times subtracted from their reported total income, thus potentially resulting in less-favorable loan terms.

It is important to consider and anticipate certain challenges that may arise during the process of a spouse needing to refinance. Be sure to check title transfers. In order to remove one spouse from the home’s title, a quitclaim deed should be executed. If not properly done, the refinancing process could be significantly delayed. Before signing a divorce settlement in which one spouse must refinance, have a lender run a credit check. This will give the individuals time to negotiate changes that may increase the chances of being approved for the mortgage. The last and most crucial advice that can be given is to not go into this situation alone. In order to have a fair and doable outcome for both parties, it is important to employ a team. An attorney and a financial advisor are two people who will make sure the process runs smoothly, as well as ensure it is done correctly. These individuals can offer a reasonable view of what finances might look like post-divorce.

To make an informed decision, it is important to talk with an attorney trained to handle these kinds of complex situations. At HoganWillig, our matrimonial and real estate departments work TOGETHER under ONE ROOF to provide a full service to our clients. Letting us handle multiple aspects of your legal needs takes the stress and confusion out of the process. Call us for help today at (716) 636-7600.

Bankruptcy and Your Credit Score

Author: Robin Friedman

November 11th, 2014

For many people considering bankruptcy, the process can appear foreign and overwhelming. While it offers the ability for consumers to discharge debts and obtain a financial fresh start, it does affect consumers in other ways. One of the most common concerns we hear from clients exploring their bankruptcy options is how it will affect their credit.

There are a lot of myths surrounding bankruptcy, especially in regard to how it affects credit. Contrary to what you may have heard, filing bankruptcy does not permanently ruin credit. Although a bankruptcy filing will be visible on credit reports, the effects are temporary and in no way ruinous. Typically, Chapter 7 bankruptcy will remain on your credit for up to 10 years and Chapter 13 bankruptcy for up to 7 years.

Unlike some myths may lead you to believe, filing bankruptcy does not mean consumers will be blacklisted or barred from making purchases or obtaining loans in the future. Still, taking proactive and educated steps to rebuild one’s credit after bankruptcy is crucial.

For many consumers, bankruptcy allows them to gain control of their finances and prepare for the future. By practicing responsible credit behavior and exercising one’s financial freedom, consumers can effectively rebuild their credit score. This can be achieved by using low-limit credit cards, practicing responsible spending, and making it a priority to always make payments. In many cases, consumers are able to restore their credit to much higher scores than they had before filing bankruptcy.

At HoganWillig, our bankruptcy attorneys are passionate about guiding clients through the bankruptcy process, addressing their concerns, and helping them achieve future success. Helping clients understand how bankruptcy affects their credit score is part of this process.

If you have questions about bankruptcy and your credit, or how our firm can help, call 636-7600 for a free consultation.

Winter Preparation

Author: Krystal Chapin

November 7th, 2014

As we dive into the month of November, we realize that winter is right around the corner. Make sure you are prepared before the winter weather hits with these tips!

  • Create an emergency kit to have in your home when a storm hits. Some ideas on supplies to add are rock salt, nonperishable foods, bottled water, shovels, firewood, candles, and blankets.
  • Make a family communication plan. Your family may all not be together when a storm hits so it is important to plan how you will contact each other, how you will get back together, and what to do in case of an emergency.
  • Winterize your vehicle. Have a mechanic check your anti-freeze levels, brakes, oil, and tires. Consider investing in snow tires to help your vehicle traverse the winter months with ease. Also make sure to keep a moderately full tank of gas during the winter months. If you get stranded in your car, the engine may be your only heat source.
  • Add an emergency kit to your car. Items such as an ice scrapper, a blanket, gloves, food, water, and jumper cables will come in handy if you ever get caught in a blizzard in your car.
  • Make sure to have your chimney inspected before use. The National Fire Prevention Association recommends that fireplaces be inspected and cleaned annually. This is important because creosote, which is deposited in the chimney each time a fire is lit, is a highly flammable substance that can start a hazardous chimney fire.
  • Pet owner’s habits should change as the seasons do! Remember to take extra precautions with pets as the temperatures begin to drop. Don’t leave animals outside for extended periods of time. They get cold too and can suffer from the same cold-weather hazards as humans, such as frostbite and hypothermia.
  • With extra people around during the holidays, caution others against feeding your animals “people food”. Turkey and chicken can have small bones that can cause serious choking hazards. Chocolate is poisonous to dogs, as well as acorns and oak leaves.

Don’t let winter sneak up on you! Be prepared with these tips from your friends at HoganWillig.


We Practice Law for Your Peace of Mind