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 AAML NJ Blog


  • 4 Aug 2021 12:06 PM | Anonymous

    By Ryan Magath, CPA, CFE, Financial Research Associates

    Over the last year and a half, a lot has changed in our post-pandemic world. Some changes have been positive, some changes have been negative; however, it is inevitable that many changes are here to stay as the “new normal”.  

    During the pandemic, many companies implemented changes to their executives’ compensation in order to address liquidity concerns, align company and executive incentives, and to better position companies for the unknown that lies ahead. Understanding the changes to a spouse’s compensation that may have occurred during the pandemic and how the changes will affect compensation going forward as well as the related assets is imperative for a matrimonial matter.  

    Discovery

    The first step to understanding any changes that may have occurred to a spouse’s compensation package starts with discovery. The following documents include examples of items that should be requested in order to analyze a spouse’s compensation and identify changes that may have occurred to a spouse’s compensation. It should be noted that the following list is not all inclusive and should be tailored based on the specific facts and circumstances of the case. 

    1. Employee’s annual compensation statements / summaries.
    2. Grant award letters.
    3. Settlement / vesting letters.
    4. W-2 statement.
    5. Annual earnings statement and paystubs.
    6. Personal tax returns.
    7. Schedule K-1’s.
    8. Employment agreement.
    9. Deferred compensation annual statements / summaries.
    10. Brokerage or other investment account statements.
    11. Employee handbook.
    12. Plan documents (retirement, deferred compensation, stock option, other).

    In addition to the documents listed above, it is best practice to request any personal financial statements and debt applications that may exist. These documents may help identify streams of income or other assets received as compensation (e.g. stock options, restricted stock units, stock appreciation awards, etc.). 

    A few examples of areas to look out for are discussed below.

    Pay Reductions and Compensation Deferrals 

    When Covid-19 first shut down the United States in March of 2020, many companies were panicking. The panic and fear of the unknown resulted in pay reductions for some individuals, including executives. The reductions to an individual’s pay may appear to be their “new normal”; however, such reductions may be temporary or otherwise subsidized. For example, many executives agreed to pay reductions when the pandemic first hit in exchange for additional deferred compensation. The restructuring of compensation packages from cash payments to deferred compensation allowed companies to maintain liquidity, while keeping their executives incentivized.  

    Deferred compensation can be awarded in various forms such as stock option plans, restricted stock units, stock appreciation awards, phantom stock plan awards, carried interest or other forms. Deferred compensation awards often have a vesting schedule; therefore, it is important to understand when the deferred compensation was earned. Just because some awards may be worth “zero” at the cut-off date or not yet vested as of the cut-off date, does not mean that they should be ignored.

    Stock Option Re-Pricing

    Further, companies that were negatively impacted during Covid-19 often have seen a large decrease in their stock price. Due to this large decrease in stock price, executives were holding equity awards (generally stock options) with no value because the price to exercise the equity award was greater than the current market value of the underlying stock. Consequently, these “underwater” equity awards may no longer incentivize the individual. To address this issue, some companies implemented stock option repricing, option for option exchanges, or grant refresh options in order to provide value to the equity award and incentivize their executives.  Therefore, these equity awards that previously had “zero” value may now hold significant value.

    Summary

    All of the various changes that have occurred and continue to occur to executives’ compensation packages need to be identified and evaluated.  Simply reviewing an individual’s year-end paystub or Form W-2 from 2020 likely will not identify the complete picture of an individual’s income. Some changes to executives’ compensation have been positive, some changes have been negative; however, it is inevitable that we need to analyze all of the necessary documents and be on the lookout for pandemic-related changes that might have occurred in order to determine what the “new normal” level of compensation for our clients looks like.  

    Ryan Magath is a senior financial analyst at Financial Research Associates. He is a licensed Certified Public Accountant in New Jersey and a holder of the Certified Fraud Examiner credential. He is also a member of the American Institute of Certified Public Accountants and the New Jersey Society of Certified Public Accountants. He provides forensic accounting services, valuation services, and other litigation-related services.

  • 28 Jul 2021 9:16 AM | Anonymous

    By Marc Demetriou, CLU, ChFC, CDLP, SVP of Mortgage Lending/Branch, Manager at Guaranteed Rate

    In the 1980s, the mainstream media shockingly reported that half of American marriages ended in divorce. Now forty years later, there’s some good news and bad news regarding divorce stats. The good news is divorce rates are down, from approximately 50 percent to 39 percent in 2020.1 The bad news is the divorce rate in America is still too darn high. Which means that there’s still a lot of heartache and a lot of broken homes, literally and figurately. So, how do divorcing families deal with a divided house while also trying to sell it?

    Each state makes its own rules

    As anyone who has ever been through a divorce knows: there are no “typical” divorces. For example, if you live in a “community property” state, assets that were accumulated during the marriage are split fifty-fifty. But as they say: “the devil’s in the details.” If your spouse moved into a home that you already owned and the spouse’s name was never added to the house’s title, things could get complicated in a divorce. Community property states include Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, Wisconsin, and sometimes Alaska.2 

    In the remaining 40 states, marital assets are distributed in a relatively fair manner. But sometimes “fair” is not the same as “equitable.” Judges are human, with human frailties and biases. And let’s not even talk about prenups. If a spouse signed a pre-nuptial before saying “I do”, most judges will treat that agreement as a legal document. Judges love documentation. It’s less work for them.

    The three main options for selling the marital home

    Many real estate and financial experts say that there are three main ways3 to divide property in a divorce:

    1. Sell the properties and split the equity – If a couple chooses to go their own way, it would make sense to hire an appraiser who can generate a document that can be taken to a real estate agent or attorney who can then prepare a preliminary closing statement that tells both parties what home assets are available to be divvied up and what outstanding costs (such as title insurance and HOA transfer fees) will have to be paid at closing time. As they say, “the best surprise is no surprise.” From a tax perspective4, when you sell the martial home could be very important. If you sell it jointly before the divorce is final (assuming that the family has lived in the house for over two years), both spouses qualify for tax exclusion of $250,000 per person and $500,000 per couple. However, if the home is sold after the divorce is finalized, there could be some capital gains tax issues to settle. A tax attorney can break down the tax obligations in each scenario in the state you are filing in. 

    2. One spouse buys out the other – If one spouse wants to keep the house, typically that spouse buys out the other and refinances the original mortgage loan under that buying spouse’s name.  The new loan will pay off the prior loan and give the other spouse a cash payout for half of the home’s value. Speaking with a mortgage lender or real estate agent can answer many questions regarding how to execute this option successfully.

    3. Both parties agree to defer selling to a later date – Sometimes certain factors come into play that make selling the marital home not feasible or too disruptive at the time of the actual divorce. If both parties agree to postpone – and sign an agreement to that effect – selling the family home for whatever reason (i.e. the children are still in school and moving might be a big disruption for the kids), this scenario happens occasionally. The obvious point to be made here is one that the mortgage payments still have to be paid on time – by somebody. Also, whichever spouse leaves the home, that spouse can no longer claim the home as their primary residence, thus possibly losing whatever capital gains tax exclusion that spouse qualified for when the house was finally sold. Consult a tax attorney with expertise in divorce cases to get more clarity on this issue.

    Other joint decisions are crucial as well

    There are other decisions5 that need to be resolved jointly that will directly affect the sale of the marital home as well, such as:

    • What home improvements should be made before the home goes on the market?
    • Which real estate agent does both parties mutually trust?
    • What price does both spouses agree the house should be listed for?
    • How will the mortgage payments by divvied up until the sale and for how much?
    • How will the profits from the home’s sale be divided up?

    Divorce can be a painfully emotional process for all concerned. But keeping a level head, being pragmatic, and maintaining reasonable expectations can help ensure that neither spouse loses their shirt when the martial home is finally sold. Again, consulting a tax attorney (especially one who has experience working with divorced couples) can help both parties move forward with open eyes.

    1. https://www.businessinsider.com/alarming-facts-about-divorce-in-the-us
    2. https://www.zillow.com/sellers-guide/divorce-selling-house/
    3. https://www.homelight.com/blog/dividing-real-estate-in-a-divorce/
    4. https://www.zillow.com/sellers-guide/divorce-selling-house/
    5. https://www.zillow.com/sellers-guide/divorce-selling-house/

    Marc Demetriou “The Divorce Lending Expert” is an SVP of Mortgage Lending & Branch Manager at Guaranteed Rate and is currently licensed in all 50 states successfully serving his clients in traditional and reverse mortgages. He consistently ranks in the top 1 percent of mortgage originators in the U.S., according to leading industry sources Origination News, Mortgage Executive and Scotsman Guide. In his home state of New Jersey, Marc has been featured in NJBIZ's "40 Under 40" and is called upon frequently by the real estate, finance, accounting and legal communities as a trusted expert and speaker.

    DISCLAIMER:

    All information provided in this publication is for informational and educational purposes only, and in no way is any of the content contained herein to be construed as financial, investment, or legal advice or instruction. Guaranteed Rate, Inc. does not guarantee the quality, accuracy, completeness or timelines of the information in this publication. While efforts are made to verify the information provided, the information should not be assumed to be error free. Some information in the publication may have been provided by third parties and has not necessarily been verified by Guaranteed Rate, Inc. Guaranteed Rate, Inc. its affiliates and subsidiaries do not assume any liability for the information contained herein, be it direct, indirect, consequential, special, or exemplary, or other damages whatsoever and howsoever caused, arising out of or in connection with the use of this publication or in reliance on the information, including any personal or pecuniary loss, whether the action is in contract, tort (including negligence) or other tortious action.

    Marc Demetriou NMLS ID: 111118; AK - AK111118, AL - Licensed, AR - 121177, AZ - 1017281, ND - NDMLO111118, NE - Licensed, NH - Licensed, NJ - 516426, NM - Licensed, NV - 70417, CA - CA-DBO111118, NY - Licensed, OH - MLO-OH.111118, OK - MLO23120, OR - Licensed, PA - 40719, CO - 100521136, CT - LO-111118, DC - MLO111118, DE - MLO-111118, RI - Licensed, SC - MLO - 111118, SD - MLO.11125, TN - 234385, FL - LO16461, GA - 59849, TX - Licensed, UT - 12139412, VA - MLO-44562VA, VT - VT111118, HI - HI-111118, IA - 42039, ID - MLO-2080111118, IL - 031.0064902, WA - MLO-111118, WI - 111118, WV - LO-111118, WY - 100952, IN - 48744, KS - LO.0043208, KY - MC737616, LA - Licensed, MA - MLO111118, MD - 26-47847, ME - Licensed, MI - 111118, MN - MN-MLO-111118, MO - MO-111118, MS - 111118, MT - 111118, NC - I-183413

    Guaranteed Rate, Inc.; NMLS #2611; For licensing information visit nmlsconsumeraccess.org. • AR: 3940 N Ravenswood, Chicago, IL 60613, (866)-934-7283 • AZ: 14811 N. Kierland Blvd., Ste. 100, Scottsdale, AZ, 85254, Mortgage Banker License #0907078 • CA: Licensed by the Department of Financial Protection and Innovation under the California Residential Mortgage Lending Act • CO: Regulated by the Division of Real Estate, (866)-934-7283 • MA: Mortgage Lender & Mortgage Broker License #MC2611 • ME: Supervised Lender License #SLM11302 • MS: 3940 N. Ravenswood Ave., Chicago, IL 60613 • NH: Licensed by the New Hampshire Banking Department, Lic #13931-MB • NJ: 3940 N Ravenswood, Chicago, IL 60613, (866)-934-7283, Licensed by the N.J. Department of Banking and Insurance • NY: Licensed Mortgage Banker - NYS Department of Financial Services • OH: MB 804160, 3940 N. Ravenswood Ave., Chicago, IL 60613 • OR: 3940 N. Ravenswood Ave., Chicago, IL 60613 • RI: Rhode Island Licensed Lender • TX: 3940 N Ravenswood, Chicago, IL 60613, (866)-934-7283 • WA: Consumer Loan Company License CL-2611.

  • 26 Jul 2021 10:41 AM | Anonymous

    By Smolin Lupin, AAML NJ Gold Sponsor

    An attorney advocates for their client. Part of that is choosing a trusted valuation partner who can give a fair valuation, uncovering all the details and information to create an accurate big picture analysis. Another part of that is knowing what the valuation process looks like. 

    Below, we delve into what matrimonial attorneys should know about valuations.

    Not all assets are obvious

    Each spouse’s income and cash flow may not be obvious from tax forms alone. An experienced forensic accountant knows to cast a wide net. While this may mean looking for a Form 3520-A to identify any offshore foreign trust accounts or review of the Report of Foreign Bank and Financial Accounts (FBAR) on Fincen Form #114, it may also mean a streamlined document request, such as reviewing the wills of relatives, like parents, grandparents, or other family members. 

    Expect thorough document requests

    Some clients may be surprised by extensive document requests, yet it’s a crucial part of the process. Forensic accountants are adept at looking for clues to discover hidden assets, such as whether or not reported income can support the family’s current standard of living.

    Expect document requests for income and assets, as well as everything where a client is either a fiduciary or beneficiary of any trust assets.

    Cash-intensive businesses will be scrutinized

    In any business that conducts a lot of cash transactions, owners are susceptible to underreporting income. Valuation accountants may examine the books with an eye toward whether or not the business’s numbers match up to other, similar businesses. 

    If they suspect not all the cash is being accounted for, they may use surveillance to monitor the level of business to see if it matches up with reported numbers.

    Valuations must be independent

    A client may sometimes assume that because you recommended someone, they can produce results favorable to the client. Since this isn’t the case, it can be helpful to emphasize their independence upfront.

    Stay tuned to professional standards, statutes, and case law

    When valuation accountants don’t follow the objective standards set out by their profession, they may be barred from testifying in court. Needless to say, this does your client more harm than good.

    If your client understands that having an impartial valuation is in their best interest, that recognition can make the process proceed more smoothly.

    Calculations aren’t valuations

    Your client may want to save money by paying for a calculation of value as opposed to a more costly valuation. While calculations typically cost less, they are limited in scope. They aren’t subject to the same complex process that attempts to determine, say, the market value of a business. Calculations are like trying to get a sense of a house by looking through the window. They gather information, but they aren’t the same as actually walking around inside. 

    Frequently, the valuation provider will even include a disclaimer in their final report which says that if a valuation had been done instead of a calculation, the results might have been different.

    In short, divorce can be a costly process, but clients trying to cut costs by getting a calculation will ultimately do themselves more harm than good. The same can hold true for using a joint service provider.

    Seek providers who understand simplicity

    If you’re recommending a list of service partners to clients, make sure those partners understand the value of simplicity when presenting in court. It will make your life much easier if they can use everyday language instead of accounting jargon or an overwhelming amount of data. Instead, encourage your client to seek someone who can succinctly convey information and use visual supports, such as pictures and graphs, to effectively communicate their point.

    Stay on top of tax changes

    While the Biden administration has not yet passed any tax changes through Congress, President Biden has repeatedly communicated his desire to do so, including by releasing the Green Book breakdown of what he would like to see happen. 

    If new tax laws are passed, valuation providers will need to move quickly to have their analysis processes reflect the new reality. Matrimonial attorneys should keep an eye on the news—and make sure the valuation providers they work with are doing the same.

    Have further questions about valuations? We’d love to help—contact our experienced CPAs at any time.

  • 23 Jul 2021 8:19 AM | Anonymous

    By Carolyn Daly, Esq., Founder and Managing Partner of Daly & Associates, LLC

    It happens all the time: a parent makes an accusation against the other parent and the court has to make a quick decision, based on limited information, on what to do with parenting time for the accused parent.  It should be unsurprising that courts faced with this situation will claim they lean toward protecting the child, even if it means a parent’s right to parent their child will be curtailed.  Most often, the court’s solution is to restrict parenting time with the accused by either suspending that parent’s parenting time, or instituting supervised parenting time pending a hearing.  But does this actually protect the child?  

    Our custody statute, N.J.S.A. 9:2-4, “declares that it is in the public policy of this State to assure minor children of frequent and continuing contact with both parents” and “it is in the public interest to encourage parents to share the rights and responsibilities of child rearing.”  So when is restricting a child’s contact with a parent actually in the best interests of that child?

    Our courts do not appear to have really addressed this issue head-on, as there are very few cases that address supervised parenting.  So what, exactly, is the basis to implement supervised parenting time?  Pursuant to N.J.S.A. 2A:12-7, “in the area of child visitation a court often orders supervised vitiation where there has been a history of child abuse, medical disabilities, psychiatric problems or other situations where the safety and welfare of the child may be jeopardized.”  If you think that’s pretty broad language…well, it is.  Thankfully, a recent case in the Appellate Division may have given lawyers and their clients better guidance for future cases.  In P.T. v. A.T., 2021 N.J. Super. Unpub. LEXIS 789 (App. Div. 2021), a father had his parenting time suspended after his child’s mother accused him of watching pornography in front of his daughter.  The father repeatedly did everything the court asked of him to get his parenting time back, including multiple evaluations, but the trial court kept ‘moving the goalposts,’ and as a result the father was not allowed to see his child for over four years.

    The Appellate Division reversed the trial court orders noting at the outset that the trial court never found that the father posed a danger to the child.  The appellate court reiterated that our laws protect against the thwarting of parenting time.  Thus, a court may exercise its authority to restrict parenting time “only when credible evidence clearly and convincingly establishes parental unfitness or harm to the child.”  The trial court “had not determined the child needed protection from [father]” and thus the suspension of his parenting time was unreasonable.  The Appellate Division thus sent the case back to the trial court to hold a hearing.  At that hearing, it was the mother’s burden to prove (1) that the father watched pornography in front of the child, and (2) if proven, that this rendered the father unfit or put the child in danger.  Only then could the court consider restricting father’s parenting time.

    Although P.T. dealt with a case of suspended parenting time, the standard enunciated by the Appellate Division can clearly apply to supervised parenting time as well.  No longer should courts simply err on the side of restricting parenting time, either through supervision or suspension, when an accusation is made.  Doing so has the effect of placing the burden on the accused to prove himself or herself innocent of the accusation.  The court was clear in P.T. that the burden is on the accuser to prove by clear and convincing evidence that the accusation is true and that the accusation, if proven, either renders the accused parent unfit to exercise normal parenting time, or would place the child in harm’s way.  It is only then that the court should act to restrict the accused’s parenting time.

    While placing the burden on the accuser is significant in itself, the amount of proof required is also significant.  In most family matters, the party who has the burden of proof simply needs to prove their position is “more likely than not;” they need only a scintilla more evidence to learn toward their side.  That is not the case here.  Now it is clear that accusers must prove by clear and convincing evidence, a high standard to meet, that the accusation is true and renders the other parent unfit.

    Unfortunately, P.T. is still not perfect.  As just one example: how long should the supervision be in place?  Most experts agree supervision should only be kept in place long enough to get past the harm and should not be used more permanently.  The hope remains that one day  the court can more clearly delineate standards for trial courts to follow, for example, period reviews every few months to determine whether supervision should continue or cease.  Until then, parents will simply have to stress to the courts that supervision should not be a long term solution.

    The safety and well-being of a child is arguably any parent’s primary duty.  If you have had your parenting time restricted, or if you believe you have evidence that the other parent of your child should have his or her time supervised, call Daly & Associates today to set up a consultation with one of our attorneys.  We’re working “Daly” for you and your children.

  • 19 Jul 2021 3:27 PM | Anonymous

    By Peter C. Paras, Esq.

    Children of all ages will be returning to school in the next few weeks. Many high school students will soon be taking the PSAT, SAT, or even submitting college applications. In New Jersey, divorced or separated parents can be required to contribute to their children’s post-high school educational expenses. That not only applies to four-year college programs, but to junior colleges, trade schools, and vocational schools.  

    Each case is fact specific, taking into account the unique circumstances of each family. Among them is the child’s aptitude. Is he a serious student? Are her grades and test scores high enough for admittance by the schools of her choice?  

    Also important are the family’s finances. Does the divorce, which usually spawns two households with the expenses that go along with each, have enough family income to contribute to college? And, in what proportions?  Are there savings that were earmarked for college? Are there savings that were not, but can be used for college?  

    Is financial aid available – scholarships, grants, and loans – and have the student and the parents cooperated in applying for it and submitting all required financial documents (e.g., income tax returns)? If loans are available, are they taken in the parents’ or the student’s name and who will repay those loans, regardless of whose name they’re in? 

    These are some of the factors to consider when the time comes to think about college. There are many more. This is one area divorced parents have in common with parents who aren’t divorced. 

    Post-high school education is expensive. It is almost always an extraordinary expense that goes well beyond the monthly family budget. Prudent parents plan for these expenditures well in advance. Often divorced parents are at odds. They have competing interests, each trying to safeguard as much of the available income for himself or herself as possible.  

    Cooperation is never more important than when a child’s future is at stake. College costs are high. There is no denying that. But what better to spend your money on than your child’s education? To give your child the tools to see the world with a wide lens and to begin a productive and prosperous life are among the best things parents can do for their children.  

    Think about (and talk about) these issues early. Don’t avoid them until the last minute. They won’t go away. By sharing information and ideas, and by being willing to sacrifice a little, you can ensure your child has the opportunities you want him or her to have for a bright future. 

    Peter C. Paras is a shareholder in the Family Law Firm of Paras, Apy & Reiss, P.C. For more information please see the firm’s website at www.par-law.com

    The information in this article is not intended as legal advice.  For legal advice you should consult your attorney.

  • 14 Jul 2021 1:08 PM | Anonymous

    By Randall M. Paulikens, CPA, ABV, CFF, CITP of Friedman LLP

    Do AAML fellows really need to hear another person talk about what has happened in the last 18 months?  All of us, as family members, business owners, employees and employers, buyers and sellers - know what has happened.

    What we need to think about is - what will happen.  Some ramifications of COVID may not be as obvious as we would like/hope them to be.

    Most professionals in the family law arena normally rely on the fact that the recent past is indicative of the near-term future. That is the family spending, income, etc. will largely continue into the future and the recent past allows us the opportunity to predict and advise clients, draft agreements, and settle cases that implicitly assume past is prolog.  

    For valuation purposes, in most cases, the privately owned business was/is expected to continue in a similar manner as historically occurred.  When the expectations are vastly different (positive or negative), additional thought, creativity, and investigation is necessary.  We have all heard the terms “passive vs active”, “marital momentum”, “Goldman vs Goldman”, “change of circumstances”, “earnouts”, etc. etc.

    Will the December 31, 2019 economy return? When will it return? How do you know? How can your clients make educated financial decisions post pandemic?

    The economic news reports discuss emerging issues that affect businesses and could affect your clients’ finances. Therefore, all of us should discuss these issues and discuss the potential of any potential, future, changes. These issues include industry, worker, and geography specific.

    Oversimplifying completely – business that were operating in 2015 to 2019 – now in 2021 basically fall into three categories. 

    • Businesses that have failed.
    • Businesses that have muddled through.
    • Businesses that have had banner years.

    The first is straight forward – or is it? Did the business fail only to be reopened in a new incarnation?  Is the demand for the service still there and did the business fail due to the lockdown itself?

    Businesses that had banner years – can the business and/or industry sustain their recent trend? Are the 2020/2021 levels of revenue, profit, backlog realistically expected to continue?  In 2020, when vacation travel was severely limited, people spent significant amounts of money on their homes. At some point, this will slow down or end, as competition for a family’s cash flow will increase as travel and leisure venues open.

    Here is the hard one – companies that have muddled through. What does their recovery look like – recovery of revenue, recovery of profit – or some other measure?

    Most will not argue that a restaurant that is/was limited to 25% or 50% capacity is not fully open.  Now that the capacity constraints imposed by various governments are lifted – does this mean that these restaurants are able to run at 100% capacity? With continual staffing problems, I am aware that some amusement parks are only open five days a week since they can’t staff entirely. I have seen many Starbucks close early for the same reason. From the valuation and income perspective, if these issues affect your case, how should you handle it? Is this a temporary issue, a permanent issue, or do we treat is as a hybrid?

    Continuing with the restaurant example – did they ever really run at 100% capacity? Can we define 100% - does that mean a line for tables every night - or seven of ten tables being occupied for dinner?

    Pre-pandemic, we might assume that the business was running at its effective capacity if its operations were consistent prior to marital discord. Don’t let the pandemic create an excuse to lower expectations and perhaps settle for less. Also don’t let the pent-up demand lead you to believe that the current situation is sustainable either.

    I suggest that you use all of you own life/finance experiences, to create flexibility where possible as the long-term ramifications and adjustments we all make resulting from the last 18 or so months are yet to be known and measurable.

  • 9 Jul 2021 10:46 AM | Anonymous

    By John P. Paone, Jr., Esq. and John P. Paone, III, Esq.*

    When attempting to settle issues in a divorce case, parties frequently employ the services of a mediator. In many cases, mediation works as a successful alternate dispute resolution tool allowing parties to settle their matters without the necessity and costs of a trial. However, often times parties attend mediation without having independent counsel. This is usually a mistake, as the mediator (even if he or she is an attorney) does not and cannot represent either party. Therefore, it is important that parties understand the consequences of their actions when going into mediation without an attorney.

    If the parties come to an understanding in mediation, the mediator will usually draft a document known as a “Memorandum of Understanding” or otherwise called a “MOU.”  While a MOU lacks the detail and specificity of a full-blown, formal settlement agreement, it is recognized as a binding agreement if and only if it is signed by the parties. If parties want the benefit of independent advice of counsel before entering a binding and enforceable agreement, they must be careful not to sign a MOU.

    Recently, the New Jersey Appellate Division weighed in on this very subject in the case of Glowzenski v. Glowzenski.  In Glowzenski, the parties attended mediation which resulted in the mediator preparing a MOU. The parties, with counsel present, signed the MOU. Although the Husband believed that the matter was resolved, the Wife did not. As a result, the Husband filed an application with the trial court to enforce the terms of the MOU.

    After a three-day plenary hearing regarding the enforceability of the terms of the MOU, the trial court ruled that the MOU was a binding and enforceable contract between the parties. The Wife appealed to the Appellate Division and argued that the term sheet's lack of a title and the absence of the parties' attorneys' signature on the term sheet evidenced that no agreement was reached between the parties. These arguments were rejected by the Appellate Division, which determined that “a contract does not need to be labeled a contract to be a contract” and that the fact that the attorneys did not sign the MOU was immaterial as “it is the client's assent that is relevant.” 

    The lesson to be learned from Glowzenski is that once a MOU is signed by the parties, the document becomes a binding agreement. An MOU is not enforceable, however, if only the mediator signs the MOU. 

    It goes without saying that negotiating a divorce settlement can be a difficult, stressful, and tedious process. Each party must make compromises and concessions on issues that may be extremely emotional and personal to them. There are also many relevant issues which arise in the course of divorce litigation which could be swept under the rug if spouses sign a hastily drafted agreement without taking the time to contemplate all potential issues. Or, as the adage goes, settle in haste – repent in leisure. If you are attempting to negotiate a settlement agreement at mediation as part of a divorce action, remember the age old adage: “don’t sign anything” without first consulting an experienced family law practitioner who can review your agreement to ensure that it is fair and complete.

    *John P. Paone, Jr., Esq. and John P. Paone, III, Esq. are divorce and family law attorneys with the Law Offices of Paone, Zaleski & Murphy, with offices in Red Bank and Woodbridge.

  • 7 Jul 2021 12:24 PM | Anonymous

    By Rachel Leberstien, Senior Wealth Relationship Manager and Sharon Klein, President, Family Wealth, Eastern U.S. Region and head of the National Divorce/Matrimonial Advisory Practice at Wilmington Trust

    Taxes may not be the top priority of your client when you are helping them through their divorce, but many decisions can be costly if you are not aware of the tax implications, significantly impacting your client’s tax situation, sometimes permanently. Listen as Rachael Leberstien discusses the Ten Tax Considerations in Divorce with Sharon Klein.

    For more information, reach out to Sharon Klein at 212-415-0531 or sklein@wilmingtontrust.com.
  • 1 Jul 2021 12:17 PM | Anonymous

    By Carolyn Daly, Esq., Founder and Managing Partner of Daly & Associates, LLC

    Since the pandemic began, the backlog on cases in the New Jersey court system have more than doubled. Judge Glenn A. Grant, the administrative director of the state’s court system, told the New Jersey Legislature in April of this year that a perfect storm was about to thrash New Jersey between the effects of the pandemic and the vacancies on the trial bench in New Jersey. Chief Justice Stuart Rabner recently described the “rate of vacancy on the trial bench in New Jersey as ‘unsustainable’ and the equivalent to losing 90 years of judge time,” in a state of the judiciary speech in May, as reported by State Bar President Domenick Carmagnola, Esq. By May of last year, the Administrative Office of the Courts, which monitors this data, reported that the backlog in non-dissolution family part cases grew by 531%, from 502 cases in May 2019 to 3,170 by May of 2020 and the backlog of domestic violence cases statewide increased from 231 in May of 2019 to 1,370 in May of 2020. In divorce cases, the backlogs grew 70%, from 1,185 cases in May of 2019 to 2,016 in May of 2020. So, how does a person looking to get divorced, or to resolve a post-judgment divorce case, custody, alimony, child support or other family law case get to a resolution?  How can you avoid being stuck in this backlog?

    The answer is simple: by mediating or arbitrating the dispute. This can be done by videoconferencing utilizing the Zoom platform which will continue to allow people to miss less work, or time with their children as things open up again.  

    You probably know what mediation and arbitration are, but if you don’t, visit https://dalyfamilylaw.net/mediation/ for an explanation of those two alternate dispute resolution options.

    Here is how most attorneys mediate and\or arbitrate by videoconferencing:

    1.  First we set a date for the mediation or arbitration that works for all parties, working around everyone’s schedule. Our office sends a Zoom invitation to appear on the date set.
    2.  Counsel and each of the parties accepts the invitation for the Zoom meeting.
    3.  On the date set, our office, as the host, starts the mediation and each counsel and each party join the videoconference from a desktop or laptop computer, an iPad or iPhone or even just by phone if that is all they have available. If you join by any method, other than just by phone, you should join with video and with audio so that everyone can be seen and heard
    4.  Following introductory remarks about the process we are engaging in that day, we will typically meet with the attorneys in a breakout room first and put the participants back in the waiting room.
    5.  After meeting with the attorneys to address preliminary issues, we will then bring everyone back into the conference again.
    6.  If we are mediating, we will break out each side into a breakout room and then we can go from room to room to mediate as we try to help the parties reach a resolution. For the most part, the parties will not work directly with each other, so if you don’t want to see the other side, you don’t have to. Instead, the mediator will go back and forth between breakout rooms.
    7.  If we are arbitrating, everyone stays in the main room and we can have a court reporter join in the process or the Zoom session can be recorded for transcription later. Any witnesses can be sent an invitation as well and be in the waiting room, ready to testify, as the arbitration proceeds. 
    8.  In either process, we can share documents by sharing the screen or by email. Documents can also be pre-marked and sent to everyone via courier or mail or even electronic delivery – drop box or otherwise. 
    9.  In mediation, the mediator can be working on the MOU (Memorandum of Understanding) or other document memorializing any resolution as the mediation proceeds.
    10.  In arbitration, the arbitrator can be keeping notes and has access to the recordings of sessions so as to review testimony when they are working on their decision which can then be emailed to the parties and\or counsel.

    At least in Morris County we are being told that even if you case is settled, it will be a few months until a hearing can be settled to enter your divorce and that trials are being scheduled out two years.  My goal at Daly & Associates is to resolve even the most complicated cases within a matter of months, not years through mediation and/or arbitration.

    View a list of AAML NJ Certified arbitrators.

  • 23 Jun 2021 3:30 PM | AAML NJ Admin

    By: Soberlink, AAML NJ Gold Sponsor 

    Family Law professionals know that going through a divorce is often an emotional time. With 10% of children living with a parent who abuses alcohol, it is common for substance abuse allegations to arise in court. For kids, this can mean unsafe parenting environments, and for concerned parties, this can result in increased anxiety around adhering to specific child custody parameters. No matter the case, as you help your clients navigate the details of their co-parenting agreement, it’s important to keep the child’s best interests at the center of each decision. 

    Fortunately for counsel and co-parents, various apps and tools are designed to help litigants and their representatives stay organized, streamline litigation, and minimize the friction between parties.

    Communication Tools

    Practitioners are aware that families tend to communicate in nuanced ways, whether that's by phone, text, or e-mail, but sometimes that isn't enough for parents to achieve peace of mind their child is with a sober parent. 

    "Hostility makes co-parents work against, rather than with, each other: sometimes, they use the kids as messengers, or they withhold support or visitation to punish the other parent. Rather than being a focused parent who acts for the kids’ sake, it’s really a way of excusing yourself from your co-parenting responsibilities," says Jeffrey Cottrill in an article for Divorce Magazine

    Many apps exist designed to help clients maintain their co-parenting relationship, allowing parents, and sometimes counsel, to sync up in a united digital space. As a litigator, you may already be familiar with:

    • OurFamilyWizard — a tone meter that allows co-parents to make sure you are communicating what you're feeling
    • 2Houses — an app that offers messaging and mediator access well as document storage
    • Coparently — an online directory offering contact storage and printable records for shared expenses

    Remote Alcohol Monitoring

    Suppose custody and alcohol are present in your case. In that case, incorporating technology like a remote alcohol monitoring system may be an excellent solution to streamline custody, support professionals, and offer concerned parties peace of mind.

    Soberlink ensures child safety by providing a reliable tool to document proof of sobriety in real-time. A favorite amongst Family Law professionals, the comprehensive system combines wireless technology with facial recognition, tamper detection, and Advanced Reporting to ensure the integrity of each test and allow swift intervention should a drinking event occur. With Soberlink, counsel can work in conjunction with the ex-spouses to determine custom testing times, receive text alerts, and set up automated reporting options to track an individual’s progress. Further, Soberlink can provide monitored clients with a sense of accomplishment while reassuring counsel and concerned parties the children are safe and with a sober parent.

    While Soberlink can help substantiate alcohol abuse claims in court, it can also help dispel false allegations. Using a universal color method, green for Compliant, yellow for Missed, and red for Non-Compliant, the system’s court-admissible reporting makes it easy for Family Law professionals to track client progress and present factual data to the court. Daily, weekly, or monthly client-detail reports provide a comprehensive snapshot of either the presence or absence of a parent’s alcohol abuse. 

    Scheduling Apps 

    There can be many details in a child's life, and scheduling apps help keep that all in one place. Various apps designed explicitly for co-parenting communication already offer these features. Still, additional scheduling apps exist if concerned parties or counsel find that a simple calendar works best. 

    Scheduling apps allow families to keep to-do lists, photos, and recipes on hand with minimal stress. As a bonus, co-parents can also share their schedule with a Family Law professional, babysitter, grandparent, or anyone else who may want to be kept a brief of childcare responsibilities. 

    Shared Documents 

    During litigation, both parties must have the documents they need to take care of their child's wellbeing. One way to help ensure this is to make sure that both co-parents have access to all of the child's essential records. 

    While there may be plenty of occasions where one parent or another may need a copy of the child's birth certificate, this can also be useful in communicating information about school projects or health care decisions, especially when a joint decision is required.

    Ensuring all the documents required by each co-parent are accessible may keep minor disputes from ending up in court. A variety of cloud systems are available through co-parenting apps and more traditional cloud-based storage such as Google Drive or Dropbox. 

    Video Chats 

    There may come a time when one of the co-parents can't physically be in the child's life. This could happen due to travel or an illness, and the COVID-19 pandemic has introduced more considerations to this list. 

    In New York and surrounding areas, shelter-in-place orders might make it harder for some families to adhere to their visitation schedules. Some homes may have unique characteristics that make it a more suitable environment for home confinement, such as a better internet connection for school, a private room, or less risk of exposure depending on the jobs both parents work during the pandemic. 

    However, the isolation caused by COVID-19 is not meant that the parent should be out of the loop completely. Video chat platforms help make it easy to schedule regular calls with the parent who can't physically be present until they can once again. 

    Incorporating these calls into a parenting plan is essential to maintaining the parent-child relationship, whether the cause of the separation is a pandemic or travel. 

    Conclusion

    Much like their litigating parents, practitioners, too, want what’s best for the child. Child custody litigation can be long and tedious, but spending some time thinking about communication expectations can help mitigate the significant discord that could further complicate matters in court. 

    In instances of alcohol abuse, remote alcohol monitoring systems like Soberlink can help rebuild trust, streamline custody, and help keep the best interests of the child front and center throughout litigation. Trust the Experts in Remote Alcohol Monitoring Technology in your next custody case and end the tireless he-said-she-said disputes.  

AAML New Jersey

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Ridgewood, NJ 07450

CONTACT US

Office: (201) 445-7007

Email: contact@aamlnj.org
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