Is Business Income Factored into a New York Court’s Post-Divorce Maintenance Award?

When it comes to dividing up assets after a New York divorce, New York is an equitable distribution state. This means that, rather than dividing up a couple’s assets straight down the middle, if a court needs to resolve the issue, a court will consider a number of factors to ensure that the marital assets are divided fairly. However, only marital assets are subject t0 an equitable distribution analysis.Legal News Gavel

A spouse’s separate property — such as that which was owned prior to the marriage — will not generally be considered marital property. However, property acquired throughout the marriage, including a businesses started during the marriage, is usually considered to be a marital asset that will be subject to equitable distribution.

In addition to the distribution of marital assets, a court may also order that one spouse pay post-divorce maintenance to the other spouse. The determination of how much spousal maintenance is appropriate is governed to some extent by formula, but it is left largely up to the discretion of the judge overseeing the divorce.

While the determination of spousal maintenance can be closely related to the equitable distribution of marital assets, they are different determinations. For example, in the event that one spouse started a business during the marriage that will continue to generate profits after the divorce, the judge must determine not only who will have ownership of the business after the divorce but also how the future income generated by the business will affect the receiving spouse’s financials.

Generally speaking, in the situation described above, the court will award the business to the spouse who started the business. This is because it is not likely  feasible for a business to be run jointly by two former spouses who are going through a divorce. In order to fairly compensate the spouse who is not receiving the business, the court will order the spouse receiving the business to buy the other spouse out. This is usually through a cash buyout.

In addition, the court will then look at whether post-divorce maintenance is appropriate. In making this determination, the court will consider a number of factors, including the spouses’ relative income. This includes income generated by the business. Of course, since only the spouse who receives the business after the divorce will benefit from the income generated by the business, the court will attribute the business income to the spouse who will own it after the divorce.

For example, in one case, a New York appellate court considered a similar issue.  Please keep in mind that this linked case was decided before the current maintenance guidelines that determine a presumptive amount based on income and duration based on length of the marriage.  The case, however, is instructive of how a distributive award for a business and maintenance might be considered together. In that case, Husband  had started a business during the marriage. During the divorce proceedings, the court determined that Husband would receive the business and the wife a payout for the business. Initially, the trial judge awarded Wife $400/month for five years. However, after considering a number of other factors, including Wife’s level of education, her age, and her ability to secure employment after the divorce was final, an appellate court held that the income from the business should be considered among the spouses’ income when determining the amount of post-divorce maintenance, and that $400/month for five years was inadequate. Thus, the court ordered Husband to pay $400/month for 10 years.

Are You Involved in a New York Divorce?

If you are currently involved in a New York divorce, or are considering filing for divorce in New York, contact the Law and Mediation Office of Darren M. Shapiro. Attorney Shapiro has decades of experience handling all types of New York divorce cases, ranging from the amicable to the hotly contested. Attorney Shapiro understands the nuances that are present in this area of law, and he not only zealously fights on behalf of his clients but also takes care to listen to his clients and their individual needs. To learn more, call 516-333-6555 to schedule a free consultation today.

More Blog Posts:

When Is It Appropriate for a Judge to Order Spousal Maintenance for Longer than Suggested by the Guidelines?, Long Island Family Law and Mediation Blog, August 1, 2018

Can a New York Judge Order Spousal Support for Less Time than the Guidelines Call For?, Long Island Family Law and Mediation Blog, July 21, 2018