The complex issues surrounding marital and non-marital finances in divorce generate many questions. Below, we have compiled answers to some of the questions we most frequently receive from clients and prospective clients.
Taxes will be a crucial factor in your divorce. There are tax implications to virtually every asset at some point, from capital gains on the sale of financial assets including brokerage accounts, sale of restricted stock units and real estate. An experienced divorce attorney will work to structure your settlement to limit your exposure to taxes and ensure you receive your fair share of marital assets.
From Lisa’s interview for the Masters of Family Law series on reellawyers.com
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so taxes are such an important part of
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the divorce settlement and it’s such an
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important thing for the matrimonial
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attorney to be able to spot the tax
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issues so for example we’ve talked about
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in in some of our dialogue restrictive
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stock well restrictive stock units
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usually are taxed when they vest they
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are treated as income at that point and
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so if you are trading for example the
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idea of keeping your restricted stock
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and giving a payout for your restrictive
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stock units make sure that you’ve
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actually taxed them appropriately and
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make sure you do a true up later that
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that is in your agreement important so
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that if there’s a tax issue later you
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can true it up maybe you took too little
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in terms of taxes or pay too little
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that’s important it’s also important to
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make sure that you spot other tax issues
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such as capital gains taxes you may want
1:02
the family home for example but maybe
1:04
you bought that family home 25 years ago
1:06
with your spouse well there’s likely to
1:09
be capital gains when you sell the
1:10
family home so you need to think about
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that because you may not get credit for
1:15
those capital gains at the time of your
1:18
divorce if you’re keeping the family
1:20
home why not because nobody knows if
1:22
you’re going to sell it and you’re
1:23
actually going to incur those capital
1:25
gains taxes so it may be wise actually
1:28
to sell the family home during the
1:31
divorce or to actually figure out a way
1:35
that you can both hold on to the family
1:36
home and get the tax deduction the full
1:39
actual um deduction which is a
1:42
$500,000 deduction as opposed to a
1:45
$250,000 deduction that you can get so
1:47
that you’re not paying capital gains
1:49
taxes on the full amount of your gain
1:52
that’s another way to to think about
1:54
this there also may be Actual taxes on a
1:57
business if you were to sell your
2:00
business make sure that actually you’re
2:02
calculating those taxes if there’s other
2:04
real property you have to think about
2:06
capital gains for that you may need to
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think about your brokerage accounts your
2:10
brokerage accounts may have increased
2:12
you might have bought that stock 20
2:14
years ago well there’s going to likely
2:16
be capital gains on that stock so you
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need to think about that and how it’s
2:22
going to be calculated and so if you’re
2:24
keeping the stock and doing a payout you
2:27
you have to think about what are the tax
2:29
issues here if you’re trading it and or
2:32
or transferring it in kind meaning that
2:34
you’re each going to get a portion of
2:38
the stock units whether you bought the
2:40
AT&T stock for example at $10 or $20 or
2:44
$30 that on each tranch that you bought
2:46
it you’re going to split it equally so
2:49
that the tax cost basis is dealt with
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equally that’s something to think about
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as you go through this divorce process
From Lisa’s interview for the Masters of Family Law series on reellawyers.com
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so couple of ways to do that you can
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avoid paying alimony by signing a
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prenuptual agreement that’s first and
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foremost you can avoid alimony it’s so
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simple before you get married sign a
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prenuptual agreement where you are
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waving or your spouse is waving the
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right to receive alimony people don’t
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think about it but it’s really one of
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the most important parts of signing a
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prenup is so that you’re not in that
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situation of paying alimony later in the
0:32
event of a divorce if you haven’t done
0:35
that perhaps you’re now thinking well I
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should have signed that prenuptual
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agreement but I didn’t do it I didn’t
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have time for it I didn’t think about it
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I I was embarrassed to ask about it it
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could be another route to sign a
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postnuptial agreement and everybody can
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wave alimony in a postnuptial agreement
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and that would be during the marriage
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that’s two good sure bets on how to
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actually avoid paying pay alimony either
1:00
the prenup or the postnup here’s another
1:03
way to avoid paying alimony encourage
1:06
your spouse to have a career a full and
1:10
flourishing career because if you don’t
1:13
do that your spouse is likely to be more
1:15
dependent on you in the event of a
1:17
divorce look if you want a spouse who is
1:20
going to stay home and take care of the
1:22
children and take care of the household
1:24
and that is very you know that that is
1:27
supportive for you then you may actually
1:29
have have to pay alimony to that spouse
1:32
when this when there’s a divorce and
1:34
maybe that’s appropriate because that
1:36
spouse has not been in the workforce for
1:39
many years because they’ve been
1:40
supporting your career and so it’s
1:43
important if you don’t want to pay
1:44
alimony incourage your spouse to have a
1:48
career encourage your spouse to get
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training to develop that career and help
1:52
out help out with the children get the
1:55
support that your spouse needs to
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develop their career that will help you
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avoid alimony payments
From Lisa’s interview for the Masters of Family Law series on reellawyers.com
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so there’s two parts to determining a
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distribution of a business asset the
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first part is you have to figure out
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actually the value of the business and
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the second part is you need to figure
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out what is the
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percentage that your client will
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actually achieve or the other client
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will pay out in terms of that percentage
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so in New York it’s pretty rare to have
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a 50/50 split of a business business
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asset so we should be clear about that
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the range is anywhere from I would say
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20% to probably
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40% sometimes someone Works in a
0:40
business who is the non-titled spouse to
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the business so they may be actually a
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big factor in the business and then
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maybe they reach something like 45% and
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in that rare case 50% but you’re usually
0:52
not talking about a 50/50 split of a
0:54
business asset and you’re not talking
0:56
about getting the business asset usually
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you’re talking about a payout a lumpsum
1:02
payout whether it be over time perhaps
1:05
with interest or whether it be a lumpsum
1:08
payout that you will receive at the time
1:09
that you settle your case or after a
1:12
trial of the matter now it’s complicated
1:15
you may need a forensic accounting firm
1:17
or an accounting firm who can value the
1:20
business that’s something that needs to
1:22
happen and there will be various
1:24
documents that have to be produced
1:26
whether you own the business or the
1:28
other person is actually looking to get
1:29
get their share of the business there
1:32
will be a lot of production in terms of
1:34
documentation I mentioned earlier
1:36
General ledgers for example you will be
1:39
actually asked to produce the general
1:40
ledgers probably in Native format so
1:43
that it will be much easier for the
1:45
accounting firm to go through it and you
1:47
will be asked to produce loan documents
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financial statements credit card
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statements bank accounts um you may be
1:55
actually asked to have Partners come in
1:58
and have depositions these are all
2:00
things that could happen in order to
2:02
Value the business what the valuator is
2:05
trying to do is to figure out what the
2:08
value would be if two um willing parties
2:12
were actually buying buying and selling
2:15
the business and they’re looking at
2:18
normalizing certain things when they’re
2:20
doing this so they are normalizing for
2:22
example the expenses of the business you
2:25
may have a situation where people are
2:28
paying personal expenses at of the
2:30
business well that wouldn’t necessarily
2:32
be a normal expense of a business and so
2:35
they will be deducting those actual
2:37
expenses that are being paid out of the
2:39
business you may be paying rents to
2:41
someone who is a family member who may
2:43
own the property on which the business
2:45
is actually being conducted the rents
2:48
may be higher than what is normal and so
2:51
you may be looking at normalizing the
2:53
rents you may normalize the salaries and
2:56
the compensation of both the owner and
2:59
some of the other employees so there may
3:01
be a whole host of of things that are
3:04
done including discount rates that are
3:07
taken including figuring out what a cap
3:09
rate is so there is a whole host of
3:12
things that are done to Value the
3:13
business now you have the second part
3:16
what was the other spouses the
3:18
non-titled spouse to the business what
3:20
was their
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contribution it can be direct or
3:25
indirect so did they help raise the
3:27
family while someone was out building
3:29
the business that’s important did they
3:31
go to the dry cleaners cook the meals
3:33
you know pick up the kids do all of that
3:35
so that someone actually could be
3:37
working in their business and traveling
3:39
for business and taking out clients for
3:41
business did they socialize with people
3:44
in the business and clients that would
3:46
be important to the business these are
3:48
all things that we look at in terms of
3:51
contribution so did they actually work
3:54
in the business well that’s a direct
3:55
contribution and so the percentage that
3:58
you may be entitled to because of a
4:00
direct contribution will get higher than
4:02
for indirect contributions but they’re
4:05
all contributions and so you want to
4:07
figure out what was the assistance level
4:10
of the non-titled spouse in this
4:13
business and then come to some agreement
4:15
on percentage in New York it’s very rare
4:18
for the non-titled spouse to actually
4:20
have an ownership interest in the
4:22
business after the divorce it it’s very
4:25
rare because it’s really you want to
4:28
separate the party ities as much as you
4:30
can and having them be in the same
4:32
business particularly when it may be the
4:34
non-titled spouse who didn’t work in the
4:36
business and really doesn’t understand
4:38
how the business works and can’t add in
4:40
a meaningful way to the business it
4:42
would be best to separate out the
4:44
spouses therefore we have to figure out
4:46
what is the percentage of the value that
4:50
the non-titled spouse will receive at
4:53
the end of a divorce in New York it’s
4:55
usually not 50% I’m going to tell you
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that I know that’s disappointing to some
4:59
people
5:00
but unless you’re really involved in the
5:02
business per se on a day-to-day basis or
5:05
the marriage is very long or this some
5:08
other reason it’s likely not to be 50%
5:11
it could be anywhere from 20% to 40%
5:14
sometimes if you’ve been involved in the
5:16
business to some degree maybe it’s 45%
5:18
of the marriage is long but essentially
5:21
for the non-titled spouse there’s going
5:23
to be a payout and the other spouse the
5:26
spouse who owns the business is going to
5:28
receive the business so that they can
5:30
carry on
From Lisa’s interview for the Masters of Family Law series on reellawyers.com
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so this court is going to look at
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certainly the age the health of the
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parties how long again the marriage is
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the lifestyle of the parties now this is
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a tricky Factor here because lifestyle
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is an important factor but it also
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doesn’t mean that someone is going to
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have to be paying for your lifestyle
0:26
exactly the way it is so when people
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come in very often looking for spousal
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support they believe that their spouse
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is going to be able to dollar for dooll
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they’re going to match what their
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lifestyle is and sometimes that’s just
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not possible because it may have been
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possible while you were all living
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together as one unit but now you’ve got
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two homes and you’ve got two places that
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your children may be living and you’ve
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got other expenses and so lifestyle is
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definitely a factor but it is not the
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only Factor the income of both of the
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parties the ability to work was their
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domestic violence that is also something
1:02
that the court may look at was there
1:04
domestic violence and did that inhibit a
1:06
party from working that domestic
1:08
violence and sometimes it does actually
1:11
the other idea about maintenance or
1:14
alimony or spousal support is what is
1:17
the equitable distribution that you’re
1:19
receiving so if you’re receiving
1:20
millions of dollars well those millions
1:22
of dollars are going to give off income
1:25
that’s going to affect how much income
1:28
should be imputed to you and that will
1:31
affect your spousal support I’ll give an
1:33
example someone is going to receive $5
1:36
to10 million of of equitable
1:39
distribution well that might be anywhere
1:41
from $250,000 to $500,000 a year in
1:45
income yes it’ll be taxable in terms of
1:48
um because it’s now investment income
1:50
spousal support by the way is not
1:51
taxable and not tax deductible on the
1:53
federal level so we should remember that
1:55
but bottom line is that is income to you
1:58
and the court must factor that in and
2:01
then any other factors that the court
2:03
cares to decide is is appropriate to
2:06
factor in for this
From Lisa’s interview for the Masters of Family Law series on reellawyers.com
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it’s such an interesting area to talk
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about when you talk about restricted
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stock units because restricted stock is
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not always actually vested and sometimes
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you might be starting a divorce and you
0:17
might have UNR you might have restricted
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stock units that are not vested the way
0:22
to deal with this sometimes is to figure
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out is it an incentive in other words
0:27
are you incentiv getting this restricted
0:31
these restricted stock units to keep you
0:33
in
0:34
place and forward-looking essentially or
0:38
other these restricted stock units being
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given as a bonus for work already
0:42
performed during the marriage now we
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have in New York something called the
0:46
date of commencement of an action so you
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file your summons and at that point the
0:51
action commences as long as you serve
0:53
within 120 days from the filing it’s
0:56
really important to understand as of the
0:59
date of commencement what were the
1:02
vested units of the restricted stock and
1:04
what are the unvested units and then
1:07
whether the unvested units are a bonus
1:10
for the work already performed in the
1:12
past during the marriage before the date
1:14
of commencement or are they futur
1:16
looking so that essentially like golden
1:18
handcuffs that you’re keeping the person
1:21
there as an incentive if they’re an
1:24
incentive then we look at what’s called
1:26
the deusu formula which is a coverture
1:29
fraction formula so that you are getting
1:33
basically credit for working the person
1:36
who’s working is getting more credit for
1:38
actually working through the years and
1:39
the other person who is not the
1:41
nonworking spouse at that point who’s
1:44
not or the person who didn’t receive the
1:46
restricted stock units is not cut off
1:48
entirely but they are getting
1:50
considerably less as the years go on and
1:54
you’re working more years to get that
1:56
restricted stock unit to vest and so you
1:59
need to actually look at the award
2:01
documents and the grant documents in
2:04
order to actually determine what is the
2:06
formula here and whether it is past
2:08
performance or future performance
From Lisa’s interview for the Masters of Family Law series on reellawyers.com
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so equitable distribution which is how
0:06
are ass how assets are actually divided
0:09
in New York which means Equitable not
0:12
equal is very important because there
0:15
are several factors that are looked at
0:17
in order to divide the assets so we have
0:19
to remember yes usually if there are
0:22
children and it’s a longish marriage
0:25
it’s going to be 5050 for most of the
0:27
assets but the court will look at
0:30
various factors and when you’re
0:32
negotiating Your settlement you have to
0:33
be aware of those factors too because
0:35
they will influence how your settlement
0:37
is going to be actually um you know come
0:40
to fruition so it’s the length of the
0:42
marriage length of the marriage is very
0:44
important longer marriage you’re going
0:46
to probably get a higher percentage um
0:49
more likely that it’s going to be a 5050
0:51
split of most of the assets if not all
0:54
of the assets business assets as I’ve
0:56
said before are treated differently but
0:59
everything else basically 50/50 age of
1:01
the parties their health um those are
1:04
things that going to be looked at the
1:06
value of the assets and the value of the
1:10
assets when you came into marriage so
1:12
what did you come into the marriage with
1:15
and what is there now to divide that’s
1:17
something that’s going to be important
1:19
as well what alimony or spousal support
1:22
is being paid that’s going to be a
1:24
factor in this whether the spouse who is
1:27
actually receiving the equitable
1:29
distribution
1:30
um whether there’s a need for someone to
1:32
stay in the marital home that’s going to
1:35
be a factor whether somebody has
1:37
contributed what are their contributions
1:39
have they helped to raise um children
1:42
stepchildren um are their children with
1:44
disabilities all of those are going to
1:46
be factors and so the court looks at all
1:49
of these plus other factors in
1:51
determining equitable distribution
1:54
they’ll also look at separate property
1:56
is there someone who has come into the
1:57
marriage or has inherited separate
1:59
property
2:00
um meaning that is your property alone
2:03
you either came into the marriage with
2:05
it and you kept separate and apart and
2:08
you did not cingle it or you inherited
2:11
it during the marriage and you kept it
2:13
separate and apart and have traced it
2:14
and can identify it so these will all be
2:17
factors in equitable distribution
From Lisa’s interview for the Masters of Family Law series on reellawyers.com
0:04
so unfortunately people try to often
0:07
hide assets during a divorce we find
0:09
this very often you know I can’t tell
0:12
you how many times someone comes into my
0:14
office and they have a spreadsheet of
0:15
all the assets and they say you know my
0:17
spouse gave me the spreadsheet of all
0:19
the assets and we say that’s great but
0:22
we should still do the discovery and go
0:25
through the documents and exchange the
0:26
statements of net worth to make sure and
0:29
I can tell you we have found literally
0:31
millions of dollars that were left off
0:33
those those spreadsheets that were
0:35
so-called accurate spreadsheets you know
0:38
one way to hide assets and and I always
0:41
look at this on tax returns is on the
0:43
tax return you may actually decide that
0:47
you were going to overpay your taxes and
0:50
so if you overpay your taxes hoping that
0:53
your divorce will end and the refund
0:55
goes into your next year’s tax return
0:58
well you may have actually just hden an
1:00
asset and so it’s very important that
1:02
your attorney check those tax returns
1:05
where there is a line for refunds and
1:08
see if there is an overpayment of taxes
1:11
and if you were entitled to that another
1:14
way people actually um I would say hide
1:16
money is that they don’t reveal what
1:19
their bonus structure is or they defer
1:21
their bonus over years and they may
1:24
actually decide that they’re going to
1:26
defer their compensation in some ways
1:29
and work out some sort of a mechanism
1:31
with their employer who probably will be
1:33
all too happy to do this right to defer
1:36
the the compensation so that they’re not
1:39
actually getting their compensation at
1:40
the appropriate time by deferring that
1:43
compensation a the person who is not
1:47
person receiving the compensation is
1:49
going to have a more difficult time
1:50
figuring out what is the actual
1:52
compensation and of course then it also
1:55
could result in a different formula of
1:58
what the spouse actually
2:00
is entitled to and when I say that the
2:02
spouse who is not the working spouse who
2:04
is supposed to receive the bonus so I
2:07
would look at compensation that’s a
2:08
place that people hide assets um
2:11
restricted stock units people don’t
2:12
always reveal those restricted stock
2:14
units that they receive that’s real
2:16
compensation it is deferred usually over
2:19
a three or five year period unless it’s
2:22
some sort of a cliff vest where it all
2:24
vests at one time they may not reveal
2:26
that you may need to dig a little
2:28
further to get that information
2:30
information another place is if there’s
2:32
monies that are in trust they may not
2:35
reveal that they have those assets that
2:37
there are distributions coming to them
2:40
so you need to actually look at it and
2:42
you need to be very careful about going
2:44
through all of the discovery documents
2:46
it’s important to review the
2:48
documentation
The cutoff for “high asset” divorces has typically been a marital estate of at least $1,000,000. Real estate values in New York City and surrounding areas makes it more likely than not that your divorce requires the representation of an experienced high asset divorce attorney.
RSUs and non-qualified stock options have long been a feature of executive compensation packages, but they are not limited to executive-level positions. Companies such as Facebook, Amazon, Apple, Uber, IBM, Starbucks, Bank of America, Intel, Microsoft and Verizon, as well as lesser known startups, provide non-executive employees with RSUs and non-qualified stock options.
This depends on the nature of the business. Is it a jointly owned family business that is considered to be marital property? Is it separate property that your spouse owned before marriage? Have you or your spouse contributed to the business in an active manner during the marriage? The answers to these questions will go a long way toward determining your entitlement to the value of the business.
You don’t. If you are questioning whether your spouse is being honest, then you must take the steps to conduct financial discovery which includes a thorough review of all that is financial in the case. A divorce attorney can enlist the support of professional experts such as forensic accountants to uncover any assets that have been hidden or reported inaccurately.
Your financial wellbeing is too important to leave in the hands of an inexperienced attorney or someone who occasionally dabbles in divorce. Call 914-488-2402 to schedule a consultation with a proven divorce attorney Lisa Zeiderman. She has offices in New York City and Westchester County.
Westchester County Office:
140 Grand Street
White Plains, NY 10601
Tel: 914-455-1000
Manhattan Office:
150 East 52nd Street, Ste. 1002
New York, NY
Tel: 212-769-3500
Copyright 2024 Lisa Zeiderman, All Rights Reserved
The information on this website is for general information purposes only. Nothing on this site should be taken as legal advice for any individual case or situation. This information is not intended to create, and receipt or viewing does not constitute, an attorney-client relationship.
