STANDARD OF VALUE TO BE APPLIED IN REAL ESTATE VALUATION IN DIVORCE
By
Charles F. Vuotto, Jr., Esq. and Cheryl E. Connors, Esq.
As matrimonial practitioners we often fall into the trap of concentrating on valuation, tax and other issues only in the context of business valuation and fail to consider that the same issues exist with regard to many other assets that are addressed in divorce including but not limited to real estate. This article will address the appropriate standard of value to be utilized when valuing real estate incident to divorce and whether it is consistent with the standard used in valuing a business.
What “standard of value” should be applied when valuing real estate incident to divorce? Perhaps the more interesting question is whether there should be one “standard of value” for all assets being valued in the context of divorce. Unfortunately, no New Jersey matrimonial case specifically discusses the appropriate standard of value to be applied when valuing real estate incident to divorce. Therefore, we must evaluate standards applied to real estate valuation in other contexts.
The “standard of value” is that standard by which a property or asset is measured. Shannon Pratt, discussing standard of value, states the following:
The standard of value usually reflects an assumption as to who will be the buyer and who will be the seller in the hypothetical or actual sales transaction regarding the subject assets, properties or business interests. It defines or specifies the parties to the hypothetical transaction. In other words, the standard of value addresses the questions: “value to whom?” and “under what circumstances?” The standard of value, either directly by statute or (more often) as interpreted in case law, often addresses what valuation methods are appropriate and what factors should or should not be considered.
Shannon P. Pratt, Robert F. Reilly & Robert P Schweihs, Valuing a Business - The Analysis and Appraisal of Closely Held Companies 28 (4th ed. 2000). The standard of value sets the criteria upon which valuation analysts rely. Jay E. Fishman, Shannon P. Pratt & William J. Morrison, Standard of Value: Theory and Applications xvii (2007) [hereinafter “Fishman I”]. A standard of value is “a definition of the type of value being sought.” Pratt, supra, at 28. “Among many factors, it dictates whether you use a hypothetical buyer and seller, a market-participant buyer and seller, value to a single person, or a willing or unwilling buyer and seller.” Fishman I, supra, at xvii. Before we explore the standard of value applicable to real estate, we will briefly summarize the definitions of the more widely utilized standards. These are most often, but not always, in the context of business valuation.
The essence of our discussion in this section is an analysis of “value.” Black’s Law Dictionary defines value as “the significance, desirability, or utility of something” or “the monetary worth or price of something; the amount of goods, services, or money that something will command in exchange.” Black’s Law Dictionary 1586 (8th ed. 2004). Therefore, notwithstanding the numerous standards of value that exist, the standards are essentially divided into two camps (i.e., “value in use” and “value in exchange”).
There are certain conclusions we can reach from the foregoing analysis: (1) the Legislature has declared that “Article VIII, Section I, paragraph 1 of the Constitution of the State of New Jersey requires that all real property in this State be assessed for taxation under the same standard of value, which the Legislature has defined as “true” or “market” value.” The meaning of “true value” in the Constitution and the statutory scheme has been defined by case law as “Fair Market Value”; (2) “Fair Market Value” appears to be the most common “standard of value” referenced in reported matrimonial cases, which address the valuation of real estate including but not limited to Brown v. Brown; (3) “Fair Market Value” may not have any functional difference with “Fair Value” since there is a “ready market” for most real estate addressed in a divorce context and there are usually no minority owners – therefore there should be no need for a Marketability Discount or Minority Interest Discount; and (4) at least one court (i.e., Gemignani) used a different approach when dealing with income producing property that more accurately reflected the benefit to the holder when the facts required such an application and under certain circumstances leased fee value may the appropriate standard of value.
However, if the general conclusion is that “Fair Market Value” or “Market Value” is the “standard of value” to be applied when valuing real estate incident to divorce, the question is how does this jive with Brown’s mandate for “Fair Value” in valuing a business? This writer respectfully submits that it does not. Assuming Brown is correct, then shouldn’t all assets in a divorce be valued by the same “standard of value”? I respectfully answer this question in the affirmative. It is clear that the “standard of value” follows the area of the law (e.g., (1) estate and gift tax is “Fair Market Value”; (2) real estate valuations for taxation is “Fair Market Value”; (3) shareholder disputes is “Fair Value”, etc.). Our research has not disclosed varying standards of value within an area of law. This is logical since the “standard of value” is linked to the policy underlying the particular area of law. Remember the definition of “standard of value”: the standard of value addresses the questions: “value to whom?” and “under what circumstances?” The answers in the context of divorce are: husband and wives going through a divorce. The question does not ask, “what kind of property?” If the policy in divorce is to treat divorcing parties fairly and compensate them for the present value of the lost future benefit of the asset they will not retain (as Brown suggests), then this salutary policy should apply to all assets, not just businesses. If the value of a closely-held business interest may have more value in the hands of the owner than to a third party purchaser, the same may apply to the value to a custodial parent’s retention of the marital home versus selling it on the market. How such value may be quantified is problematic. Perhaps one calculates the present value of the future rental value of the home for the retaining party’s lifetime or fixed period before a contemplated sale. This writer understands that there are many potential problems with such an approach. However, that does not mean that one “standard of value” should not be used for all assets, but highlights why the use of “Fair Value” for a business interest is incorrect. As this writer has stated elsewhere, the correct “standard of value” is “Fair Market Value” and should be applied to all assets in a divorce.
Sunday, April 18, 2010
Graduate School
Why Matrimonial Practitioners Should Address Graduate School in Marital Agreements
By: Charles F. Vuotto, Jr., Esq. and Cheryl E. Connors, Esq.
As many practitioners are aware, New Jersey is among the minority of states to allow a court to order not only the payment of college expenses but also graduate school expenses. A review of the relevant case law in New Jersey suggests that marital agreements should specifically address the parties’ intentions with respect to the payment of graduate school expenses. In a recent Appellate Division decision, even an emancipation provision in a settlement agreement was not so clear and unambiguous to exclude a requirement for contribution to graduate school. Given the ability of New Jersey courts to require a contribution to graduate school, it is imperative when drafting Matrimonial Settlement Agreements (“MSA”) that practitioners make every effort to include language clearly expressing the parties’ common intention with respect to this issue. Clearly, this is a point of negotiation which may be unsuccessful. The attempt, however, should be made and if not successful, the client must confirm his or her willingness not to address the provisions for appropriate reasons.
By: Charles F. Vuotto, Jr., Esq. and Cheryl E. Connors, Esq.
As many practitioners are aware, New Jersey is among the minority of states to allow a court to order not only the payment of college expenses but also graduate school expenses. A review of the relevant case law in New Jersey suggests that marital agreements should specifically address the parties’ intentions with respect to the payment of graduate school expenses. In a recent Appellate Division decision, even an emancipation provision in a settlement agreement was not so clear and unambiguous to exclude a requirement for contribution to graduate school. Given the ability of New Jersey courts to require a contribution to graduate school, it is imperative when drafting Matrimonial Settlement Agreements (“MSA”) that practitioners make every effort to include language clearly expressing the parties’ common intention with respect to this issue. Clearly, this is a point of negotiation which may be unsuccessful. The attempt, however, should be made and if not successful, the client must confirm his or her willingness not to address the provisions for appropriate reasons.
An Attorney's Duty to the Children of Divorce
WHAT DUTY DO WE OWE TO THE CHILDREN?
By
Charles F. Vuotto, Jr., Esq.
Do attorneys owe a duty to the children of the parties they represent in family matters? When we strategize with a father to obtain the lowest child support figure or to avoid paying arrears, should we consider what is best for the children? When we meet with a mother who wants to limit a father’s contact with their offspring for no reason other than her anger at the break-up, should we consider what is best for the children? When we see a client attempting to use the children as bargaining chips in the divorce, should we consider what is best for the children? Obviously, these are only a few of many examples of situations in which a party’s interests or wishes may diverge from the best interests of the children of the relationship. Are we, as family law attorneys, required by Rule or case law to consider the best interests of the children and mold our advocacy of the parent accordingly?
Simply put, do we have a duty to the children? The authors of this article believe that the answer to this question should be a resounding “yes.” Unfortunately, the law as it exists in New Jersey provides a far less definite answer. Indeed, the problem is twofold: (1) neither the Rules of Professional Conduct (“RPCs”) nor the remaining Rules of Court directly address the issue of an attorney’s duty to a child; and (2) while both the RPCs and the Rules of Court contain their own implications concerning the issue, these implications are inconsistent and unclear.
A plain reading of the RPCs would seem to imply that an attorney representing a parent in matrimonial litigation has no affirmative obligation to a child. The RPCs contain numerous rules addressing an attorney’s duty to the client, with the most frequently cited duty of “reasonable diligence and promptness in representing a client.” RPC 1.3. There is no discussion of a duty owed to the client’s child. Still, the following question is raised: If an attorney owes a duty of “diligence and promptness in representing a client,” does the attorney have an obligation to diligently and promptly represent a client’s interest when those interests are adverse to the best interests of the parties’ child? (i.e., the client, an unfit parent, wants you to diligently and promptly argue for primary custody of his or her child). Such an obligation to the client, at the expense of the child, can certainly be implied from the RPCs .
While the RPCs appear to imply no duty between an attorney and a child, the Rules of Court appear to imply the opposite. This contrary implication is found in Rule 5:8A, titled, “Appointment of Counsel for Child,” which directs:
In all cases where custody or parenting time/visitation is an issue, the court may, on the application of either party or the child or children in a custody or parenting time/visitation dispute, or on its own motion, appoint counsel on behalf of the child or children. Counsel shall be an attorney licensed to practice in the courts of the State of New Jersey and shall serve as the child's lawyer. The appointment of counsel should occur when the trial court concludes that a child's best interest is not being sufficiently protected by the attorneys for the parties. (emphasis added).
The implication is clear: If a trial court is required to appoint counsel for a child when it perceives that the child’s best interest is not being sufficiently protected “by the attorneys for the parties,” then there must be some duty on the part of an attorney to protect that interest. The language of the Rule clearly implies that lawyers have that duty; otherwise, it would be necessary to appoint an attorney for a child in every custody litigation.
Based on this, it is evident that the law in New Jersey is unclear as to whether an attorney has an obligation to the child of the parent we represent. No law explicitly establishes such an obligation, and the vague laws that implicitly address the issue fail to be consistent in their meaning and intent.
Still, even without any clear law on the issue, does a moral and professional duty exist on the part of an attorney to protect the best interests of a child? The Academy of Matrimonial Lawyers believes it does. The Academy’s Bounds of Advocacy, 6.1 through 6.6, specifically address an attorney’s obligation to protect the welfare of the client’s child, including the requirement of 6.1 that “An attorney representing a parent should consider the welfare of, and seek to minimize the adverse impact of the divorce on, the minor children.” This author believes that to be a laudable goal.
In an adversarial system that sustains conflict and creates chaos in the lives of families in litigation, attorneys are uniquely positioned to have an impact. We know the most intimate details of our clients’ lives: they confide in us, they trust us, and they rely on us to advise them and help make decisions that will shape the rest of their lives and the lives of their children. This is not an obligation to be taken lightly, particularly when clients are in distress, and operating out of emotion rather than logic and reason. Whether we acknowledge it or not, we do, in fact, have an impact at virtually every stage of each case, from the initial consultation when we begin framing parenting issues with a client, continuing when we draft parenting plans, when we retain experts, and in every interaction we have with our clients about parenting issues. Our impact can be to fuel the battle, or it can be to quell it and provide sound, rational advice and representation. The fact that we have such an impact creates a responsibility that surely implicates the best interests of the children, even if this duty is not clearly set forth under the law.
Many attorneys agree we have an obligation, although we may not agree on what that is, or how to balance it with the duty to our clients. We argue for the children’s “best interests” in these cases. The experts we retain conduct a “best interests” evaluation. When making the case for why a client should have custody, or why a particular parenting plan is most appropriate, the attorney’s entire presentation is based on the “best interests” of the child. In arguing for those best interests, we have to have some understanding, and some belief, as to what is, in fact, best for our clients’ children. It is difficult to argue a position effectively if we don’t believe it, or if it flies in the face of facts that contradict it.
We routinely include language in settlement agreements about “non-disparagement” and “co-parenting” and “fostering a positive relationship between the children and the other parent.” Some attorneys even include a “Children’s Bill of Rights” in the body of their agreements. We do this as a matter of course, even when our clients do not specifically request it. Most clients do not even think of these kinds of provisions, but lawyers promote and include them.
Should we blindly fight for what our clients want “right or wrong?” Most would answer in the negative. We understand that advocacy has limits and we advise clients against bad decisions. We do not ignore when a client says he is willing to take a grossly imbalanced share of assets to his clear disadvantage. We do not ignore when a client waives support when it is otherwise a clear case for substantial alimony. Instead, we counsel these clients, attempt to educate them about their rights, and urge them to reconsider. We do that when it comes to money and to property and we urge clients to act in their own best interests. Surely, we have at least that same obligation when a parent takes a position with respect to custody or parenting that is likely to be damaging. The “wishes” of the client in the heat of a bitter divorce can be destructive, motivated by anger, revenge, fear, and misunderstanding. If a parent’s actions are damaging a child, in the end, that is not only bad for the child, but it is bad for the parent and society as a whole.
The impact we have is not just on the final outcome. For example, when clients complain that children are depressed, or are acting out, or are having difficulty after seeing the other parent, they often conclude that the reason is due to some inappropriate behavior on the part of the other parent. If we know anything about children and divorce, we should know that the simple act of making transitions between parents triggers reactions, such as regression, aggressive behavior, sadness or depression. Children have those reactions even when the other parent was the model of good parenting. In fact, the better the visit, the more difficult the transition might be. If we understand this, don’t we have a duty to explain it to our clients, or to even suggest that our clients seek therapeutic help or coaching so that they better understand the needs of their children in the divorce process?
In the course of a typical contested case, we receive many complaints that a parent is acting inappropriately with respect to the children. The problem might involve talking about the divorce in front of the children, difficulties with transitions between households, restricting parental access, disparaging a parent, or encouraging a child to disrespect a parent. We react to protect our client, but we are also exercising discretion and common sense, and relying on our experience to counsel or “coach” clients to do the right thing when it comes to the kids. Each time we receive complaints like these from our clients, we have a choice about how we respond. We can write accusatory letters, threatening motions and reprisals, or we can step back and ask the client questions to better understand the circumstances surrounding the issue. Maybe the other parent acted inappropriately, maybe not. Whatever the case, we can seek ways to constructively deal with the issue, or we can attack and seek to punish the offender. In that moment, we can choose whether to respond in way that is likely to sustain conflict and chaos (which we all agree is contrary to the best interests of the children), or to work with the client and opposing counsel to help the parent, the child and the family as a whole.
The author of this article does not believe that lawyers are simply hired guns, promoting our clients’ agendas, no matter what they are. We know that, despite the anger of the moment, parents need to find a way to deal with one another, and hopefully co-parent their children in the years after the litigation is over. We believe that lawyers have an affirmative responsibility to take the myriad of opportunities presented to actively encourage clients to be responsible parents and act in their children’s best interests. We may not always know what that is, but we certainly can spot conduct that is contrary to children’s best interests, and we can respond by informing and coaching our clients accordingly.
The duty of an attorney to a child that so many lawyers already recognize should be clarified and embodied within the law in New Jersey. This will undoubtedly involve discussion and debate, and hopefully result in reforming our laws to not only eliminate the apparent inconsistencies between the RPCs and the Rules of Court, but to specifically address an attorney’s duty to the child of a client in family litigation.
Special thanks is given to Lisa Steirman Harvey, Esq., Of Counsel with Tonneman, Vuotto & Enis, LLC, and Amy Wechsler, Esq. of Copeland, Shimalla, Wechsler & Lepp.
By
Charles F. Vuotto, Jr., Esq.
Do attorneys owe a duty to the children of the parties they represent in family matters? When we strategize with a father to obtain the lowest child support figure or to avoid paying arrears, should we consider what is best for the children? When we meet with a mother who wants to limit a father’s contact with their offspring for no reason other than her anger at the break-up, should we consider what is best for the children? When we see a client attempting to use the children as bargaining chips in the divorce, should we consider what is best for the children? Obviously, these are only a few of many examples of situations in which a party’s interests or wishes may diverge from the best interests of the children of the relationship. Are we, as family law attorneys, required by Rule or case law to consider the best interests of the children and mold our advocacy of the parent accordingly?
Simply put, do we have a duty to the children? The authors of this article believe that the answer to this question should be a resounding “yes.” Unfortunately, the law as it exists in New Jersey provides a far less definite answer. Indeed, the problem is twofold: (1) neither the Rules of Professional Conduct (“RPCs”) nor the remaining Rules of Court directly address the issue of an attorney’s duty to a child; and (2) while both the RPCs and the Rules of Court contain their own implications concerning the issue, these implications are inconsistent and unclear.
A plain reading of the RPCs would seem to imply that an attorney representing a parent in matrimonial litigation has no affirmative obligation to a child. The RPCs contain numerous rules addressing an attorney’s duty to the client, with the most frequently cited duty of “reasonable diligence and promptness in representing a client.” RPC 1.3. There is no discussion of a duty owed to the client’s child. Still, the following question is raised: If an attorney owes a duty of “diligence and promptness in representing a client,” does the attorney have an obligation to diligently and promptly represent a client’s interest when those interests are adverse to the best interests of the parties’ child? (i.e., the client, an unfit parent, wants you to diligently and promptly argue for primary custody of his or her child). Such an obligation to the client, at the expense of the child, can certainly be implied from the RPCs .
While the RPCs appear to imply no duty between an attorney and a child, the Rules of Court appear to imply the opposite. This contrary implication is found in Rule 5:8A, titled, “Appointment of Counsel for Child,” which directs:
In all cases where custody or parenting time/visitation is an issue, the court may, on the application of either party or the child or children in a custody or parenting time/visitation dispute, or on its own motion, appoint counsel on behalf of the child or children. Counsel shall be an attorney licensed to practice in the courts of the State of New Jersey and shall serve as the child's lawyer. The appointment of counsel should occur when the trial court concludes that a child's best interest is not being sufficiently protected by the attorneys for the parties. (emphasis added).
The implication is clear: If a trial court is required to appoint counsel for a child when it perceives that the child’s best interest is not being sufficiently protected “by the attorneys for the parties,” then there must be some duty on the part of an attorney to protect that interest. The language of the Rule clearly implies that lawyers have that duty; otherwise, it would be necessary to appoint an attorney for a child in every custody litigation.
Based on this, it is evident that the law in New Jersey is unclear as to whether an attorney has an obligation to the child of the parent we represent. No law explicitly establishes such an obligation, and the vague laws that implicitly address the issue fail to be consistent in their meaning and intent.
Still, even without any clear law on the issue, does a moral and professional duty exist on the part of an attorney to protect the best interests of a child? The Academy of Matrimonial Lawyers believes it does. The Academy’s Bounds of Advocacy, 6.1 through 6.6, specifically address an attorney’s obligation to protect the welfare of the client’s child, including the requirement of 6.1 that “An attorney representing a parent should consider the welfare of, and seek to minimize the adverse impact of the divorce on, the minor children.” This author believes that to be a laudable goal.
In an adversarial system that sustains conflict and creates chaos in the lives of families in litigation, attorneys are uniquely positioned to have an impact. We know the most intimate details of our clients’ lives: they confide in us, they trust us, and they rely on us to advise them and help make decisions that will shape the rest of their lives and the lives of their children. This is not an obligation to be taken lightly, particularly when clients are in distress, and operating out of emotion rather than logic and reason. Whether we acknowledge it or not, we do, in fact, have an impact at virtually every stage of each case, from the initial consultation when we begin framing parenting issues with a client, continuing when we draft parenting plans, when we retain experts, and in every interaction we have with our clients about parenting issues. Our impact can be to fuel the battle, or it can be to quell it and provide sound, rational advice and representation. The fact that we have such an impact creates a responsibility that surely implicates the best interests of the children, even if this duty is not clearly set forth under the law.
Many attorneys agree we have an obligation, although we may not agree on what that is, or how to balance it with the duty to our clients. We argue for the children’s “best interests” in these cases. The experts we retain conduct a “best interests” evaluation. When making the case for why a client should have custody, or why a particular parenting plan is most appropriate, the attorney’s entire presentation is based on the “best interests” of the child. In arguing for those best interests, we have to have some understanding, and some belief, as to what is, in fact, best for our clients’ children. It is difficult to argue a position effectively if we don’t believe it, or if it flies in the face of facts that contradict it.
We routinely include language in settlement agreements about “non-disparagement” and “co-parenting” and “fostering a positive relationship between the children and the other parent.” Some attorneys even include a “Children’s Bill of Rights” in the body of their agreements. We do this as a matter of course, even when our clients do not specifically request it. Most clients do not even think of these kinds of provisions, but lawyers promote and include them.
Should we blindly fight for what our clients want “right or wrong?” Most would answer in the negative. We understand that advocacy has limits and we advise clients against bad decisions. We do not ignore when a client says he is willing to take a grossly imbalanced share of assets to his clear disadvantage. We do not ignore when a client waives support when it is otherwise a clear case for substantial alimony. Instead, we counsel these clients, attempt to educate them about their rights, and urge them to reconsider. We do that when it comes to money and to property and we urge clients to act in their own best interests. Surely, we have at least that same obligation when a parent takes a position with respect to custody or parenting that is likely to be damaging. The “wishes” of the client in the heat of a bitter divorce can be destructive, motivated by anger, revenge, fear, and misunderstanding. If a parent’s actions are damaging a child, in the end, that is not only bad for the child, but it is bad for the parent and society as a whole.
The impact we have is not just on the final outcome. For example, when clients complain that children are depressed, or are acting out, or are having difficulty after seeing the other parent, they often conclude that the reason is due to some inappropriate behavior on the part of the other parent. If we know anything about children and divorce, we should know that the simple act of making transitions between parents triggers reactions, such as regression, aggressive behavior, sadness or depression. Children have those reactions even when the other parent was the model of good parenting. In fact, the better the visit, the more difficult the transition might be. If we understand this, don’t we have a duty to explain it to our clients, or to even suggest that our clients seek therapeutic help or coaching so that they better understand the needs of their children in the divorce process?
In the course of a typical contested case, we receive many complaints that a parent is acting inappropriately with respect to the children. The problem might involve talking about the divorce in front of the children, difficulties with transitions between households, restricting parental access, disparaging a parent, or encouraging a child to disrespect a parent. We react to protect our client, but we are also exercising discretion and common sense, and relying on our experience to counsel or “coach” clients to do the right thing when it comes to the kids. Each time we receive complaints like these from our clients, we have a choice about how we respond. We can write accusatory letters, threatening motions and reprisals, or we can step back and ask the client questions to better understand the circumstances surrounding the issue. Maybe the other parent acted inappropriately, maybe not. Whatever the case, we can seek ways to constructively deal with the issue, or we can attack and seek to punish the offender. In that moment, we can choose whether to respond in way that is likely to sustain conflict and chaos (which we all agree is contrary to the best interests of the children), or to work with the client and opposing counsel to help the parent, the child and the family as a whole.
The author of this article does not believe that lawyers are simply hired guns, promoting our clients’ agendas, no matter what they are. We know that, despite the anger of the moment, parents need to find a way to deal with one another, and hopefully co-parent their children in the years after the litigation is over. We believe that lawyers have an affirmative responsibility to take the myriad of opportunities presented to actively encourage clients to be responsible parents and act in their children’s best interests. We may not always know what that is, but we certainly can spot conduct that is contrary to children’s best interests, and we can respond by informing and coaching our clients accordingly.
The duty of an attorney to a child that so many lawyers already recognize should be clarified and embodied within the law in New Jersey. This will undoubtedly involve discussion and debate, and hopefully result in reforming our laws to not only eliminate the apparent inconsistencies between the RPCs and the Rules of Court, but to specifically address an attorney’s duty to the child of a client in family litigation.
Special thanks is given to Lisa Steirman Harvey, Esq., Of Counsel with Tonneman, Vuotto & Enis, LLC, and Amy Wechsler, Esq. of Copeland, Shimalla, Wechsler & Lepp.
A friendlier family bar
How To Make The Family Bar More Family Oriented
By: Charles F. Vuotto, Jr., Esq.
The following comments were made by a highly respected group of judges and lawyers at the New Jersey State Bar Association’s Mid-Year Meeting in San Francisco, which took place in November of 2009. The seminar was entitled “How to Make the Family Bar More Family Oriented”. The speakers were the Honorable Bernadette DeCastro, J.S.C., Honorable Kenneth J. Grispin, J.S.C., Michael J. Stanton, Esq., Stephanie Frangos Hagan, Esq., Jeralyn L. Lawrence, Esq. and Michelle Crupi, Esq. This seminar was moderated by Patrick Judge, Jr., Esq. I wish to congratulate the aforementioned judges and lawyers on the laudable messages contained in their presentation. The following professional guidelines are very important and should be considered by every practitioner on a daily basis. It is for this reason that I have written this column to summarize their sound advice, which is enumerated below.
1. Judges do not like to be surprised on the day of trial or the day of a motion. As soon as you know there may be a problem with witnesses, scheduling, or even your child’s school play, advise the judge of the potential problem. It is easier to reschedule or deal with the issue if enough advance notice is given.
2. Most judges will not deny a reasonable request for an adjournment. Do not be afraid to approach the judge. Be candid about why you are requesting the adjournment. (Taking your children out for trick or treating may be a legitimate reason. After all, we should be in the business of trying to make family life easier for all of us not just our clients.)
3. Always be courteous to your adversary. Judges do not like to have to be referees between adversaries whose professional relationship has deteriorated to the same level as their clients’ relationships.
4. Be especially courteous to pro se litigants. Do not appear to bully them or intimidate them with legalese that they simply do not understand.
5. Patience with all participants in the process is essential.
6. Do not caption every motion with the words “emergent.”
7. Anticipate that your client may want additional parenting time around the holidays, so the judge is not faced with numerous emergent motions the week before a holiday.
8. Engage in mediation whenever possible.
9. Speak to your adversary to try to resolve problems before you file a motion.
10. Not every problem warrants a motion. You may consider exploring contacting the judge with your adversary to address an issue.
11. Call the Court in advance if an attorney is going to be late. Judges often see attorneys and/or litigants waiting patiently in the hall because they have been sitting around since 8:30 a.m. while an adversary is stuck on the Turnpike due to an accident.
12. Do not ever, ever bargain with children. Never permit your client to use visitation as a chip in negotiations.
13. Someone needs to be in charge of the asylum. In the courthouse, it is the judge; outside the courthouse, it is the lawyers.
14. Do not make faces or sigh at counsel table. It empowers the client to do the same…or worse.
15. Do not interrupt. You can be an effective adversary without being the wrong end of the horse!
16. Be a problem solver, not a problem maker. This means avoid taking on the emotional persona of your client. Abandon the drama, and think like the professional you were trained to be.
17. Maintain good communication with the court, your client and your adversary from the inception of your matter. It is easier to put out small fires as they arise vs. the bonfires.
18. Elicit and encourage the help of mediators and experts.
19. Be organized. Use calendars, to do lists, and computer programs to manage your tasks and appointments.
20. Control your schedule. For example, do not schedule depositions, meetings, etc. on Monday morning; instead leave Monday for your day to organize and review your week or catch up on loose ends from the prior week.
21. Do not let your clients control you.
22. Balance! Your hard work must be met with personal enjoyment.
23. Always remember your family comes first. As working parents, it is easy to get caught up in our cases and forget that our families depend upon us not only for financial support but emotional and mental support.
24. Get Organized. One of the biggest problems working parents have is that they are not organized at home or at work. This leads to unnecessary stress and anxiety at home and at the office as you are constantly worried you are forgetting something (filing a motion, reply papers, etc. or forgetting the school play, the book fair, etc.)
25. Make Friends. Be cordial to your adversary in every case as you will never know when you might need a favor. I live by the motto that cases come and go and you never know when you will have the adversary on another case in the future. While you may be on the “winning side” of one case, you could be on the “losing side” of another and need your adversary’s help in the future. Also make friends with the parents of the children your children are friends with, especially when they are younger. I built a network of friends with the parents of my children’s friends and never had a problem finding a car pool or help in a pinch. I also had a network of people who would “fill me in” on anything I was missing in school as well as on or off the playground.
26. Communication Is Key. Always, always, always talk to your adversary, the judge or your boss whenever you have a family issue, emergency or activity you must attend. Don’t be afraid to let the judge or your adversary know you need to leave.
27. Mix Business with Pleasure. I try my best to bring my wife and son on bar conferences and retreats. The November Mid-Year Meeting is a great opportunity to attend a bar retreat and spend time with your family since it is the same week as teachers’ convention week in public schools and children are off on Thursday and Friday. The Family Law Section’s Annual Retreat in March is always a blast. The children who regularly attend these retreats have grown up around and, to some degree, because of their association with judges, lawyers and their families.
28. Surround yourself with top notch and loyal co-workers, assistants and staff. There is no substitute for teamwork or the feeling of genuine respect and admiration for those with whom you work every working day.
29. With regard to caregivers/babysitters, be sure to have a small list of those you can trust to help care for your child when you are in a bind. If your child/children wake up in the middle of the night with a fever and you know you have to argue a motion in just a few hours, make sure you have a list of your “go to” people.
30. Prioritize monthly, weekly and daily tasks. Sometimes you will need to do this hourly or even by minute. Keep maintaining and shuffling your “to do list.”
31. Vacation. We all have a lot of work to do and a ton of personal commitments, but there is no prize to those who do not vacation. I always have a vacation on my calendar. It is what gets me through the pang of guilt that haunts me when I am in evening meetings during the week. To know that I will have catch-up time and a quality block of time with my family is priceless.
32. Say no. Really. It is okay. If there is something asked of you and you cannot do it 100%, just say no.
33. Say yes to lunch meetings. I love lunch meetings. They are generally an hour or less and do not take away from your own family time. When you are in charge of a meeting consider planning lunch meetings.
34. As for ready-holds. Often times, the court requires us to appear at 9:00 a.m., and we all know that it really means that we will not be reached until 9:30 a.m., 10:00 a.m., or beyond. Call and ask for a ready-hold so your mornings are not so hairy and frantic and all you did was stress. . . just to get to the court to sit around and wait and wait and wait.
35. Do work at bedtime hours. Take work home every night. Throughout the day, make a pile of what you can work on while at home.
36. Not all meetings need to last an hour. Say what you need to say. If that happens in 30 minutes, it is okay to end the meeting so everyone can go about his or her day.
37. Combine work and play. Bring your family along with you to work retreats or outings. I It is a wonderful way to combine your two worlds.
38. Webster’s defines civility as politeness and courtesy. It costs nothing to be polite and courteous. There is no tactical advantage to being rude.
39. Remain Objective. Speak in your client’s voice but with the dispassionate mind of an attorney.
40. Never engage in ad hominem arguments against your adversary or the adverse party.
41. Always address your argument to the Judge, not to your adversary.
42. Cultivate an appropriate sense of humor about the practice. Your client’s life may be disintegrating, but hopefully yours is not.
43. Modulate your voice. Avoid raising your voice or becoming piercingly shrill.
44. Consent to adjournment requests (of course except in extreme situations). Do not ask your client for his or her authorization to consent. It is your prerogative as an attorney to exercise professional courtesy and consent to an adjournment without asking your client’s permission.
45. Always be punctual. Dare to be early. Being late is not only wasteful of the time of the Judge, your adversary and the parties, it also demonstrates disrespect for the dignity of the law and the judicial process.
46. Be prepared and organized. In other words, be a professional, and have pride in what you are doing.
47. Treat everyone courteously: the Judge (certainly), the adverse attorney, your client, the adverse party, witnesses, the court staff and your adversary’s office staff.
Some may say that the above comments are common sense and do not warrant inclusion in this scholarly publication. I disagree. This is a tough and demanding practice, but one that I love. We work very hard, so it is necessary to play hard in order to maintain our sanity. We must remind ourselves daily to stop and smell the roses and to enjoy life and our families and friends while managing the pressures of this practice. It is a very difficult balance but certainly one that it is worthwhile and manageable. Sometime, however, we need to be reminded of the methods necessary to achieve this goal.
I respectfully submit that it is worthwhile for every practitioner to periodically review this column as a check on his or her own behavior. We all get caught up in our clients’ emotionalism. Sometimes it is in the name of advocacy and sometimes it is simply human nature when arguing on behalf of another person to take on the mantle of their problems. Sometimes, and very infrequently I am sure, it is a tactic used by some to gain an unfair advantage in a case. However, whatever the reason may be, it is worthwhile for all of us to be more introspective and look at our own behavior to improve the practice not only for the benefit of ourselves, but also for the people and children involved in the divorce process.
By: Charles F. Vuotto, Jr., Esq.
The following comments were made by a highly respected group of judges and lawyers at the New Jersey State Bar Association’s Mid-Year Meeting in San Francisco, which took place in November of 2009. The seminar was entitled “How to Make the Family Bar More Family Oriented”. The speakers were the Honorable Bernadette DeCastro, J.S.C., Honorable Kenneth J. Grispin, J.S.C., Michael J. Stanton, Esq., Stephanie Frangos Hagan, Esq., Jeralyn L. Lawrence, Esq. and Michelle Crupi, Esq. This seminar was moderated by Patrick Judge, Jr., Esq. I wish to congratulate the aforementioned judges and lawyers on the laudable messages contained in their presentation. The following professional guidelines are very important and should be considered by every practitioner on a daily basis. It is for this reason that I have written this column to summarize their sound advice, which is enumerated below.
1. Judges do not like to be surprised on the day of trial or the day of a motion. As soon as you know there may be a problem with witnesses, scheduling, or even your child’s school play, advise the judge of the potential problem. It is easier to reschedule or deal with the issue if enough advance notice is given.
2. Most judges will not deny a reasonable request for an adjournment. Do not be afraid to approach the judge. Be candid about why you are requesting the adjournment. (Taking your children out for trick or treating may be a legitimate reason. After all, we should be in the business of trying to make family life easier for all of us not just our clients.)
3. Always be courteous to your adversary. Judges do not like to have to be referees between adversaries whose professional relationship has deteriorated to the same level as their clients’ relationships.
4. Be especially courteous to pro se litigants. Do not appear to bully them or intimidate them with legalese that they simply do not understand.
5. Patience with all participants in the process is essential.
6. Do not caption every motion with the words “emergent.”
7. Anticipate that your client may want additional parenting time around the holidays, so the judge is not faced with numerous emergent motions the week before a holiday.
8. Engage in mediation whenever possible.
9. Speak to your adversary to try to resolve problems before you file a motion.
10. Not every problem warrants a motion. You may consider exploring contacting the judge with your adversary to address an issue.
11. Call the Court in advance if an attorney is going to be late. Judges often see attorneys and/or litigants waiting patiently in the hall because they have been sitting around since 8:30 a.m. while an adversary is stuck on the Turnpike due to an accident.
12. Do not ever, ever bargain with children. Never permit your client to use visitation as a chip in negotiations.
13. Someone needs to be in charge of the asylum. In the courthouse, it is the judge; outside the courthouse, it is the lawyers.
14. Do not make faces or sigh at counsel table. It empowers the client to do the same…or worse.
15. Do not interrupt. You can be an effective adversary without being the wrong end of the horse!
16. Be a problem solver, not a problem maker. This means avoid taking on the emotional persona of your client. Abandon the drama, and think like the professional you were trained to be.
17. Maintain good communication with the court, your client and your adversary from the inception of your matter. It is easier to put out small fires as they arise vs. the bonfires.
18. Elicit and encourage the help of mediators and experts.
19. Be organized. Use calendars, to do lists, and computer programs to manage your tasks and appointments.
20. Control your schedule. For example, do not schedule depositions, meetings, etc. on Monday morning; instead leave Monday for your day to organize and review your week or catch up on loose ends from the prior week.
21. Do not let your clients control you.
22. Balance! Your hard work must be met with personal enjoyment.
23. Always remember your family comes first. As working parents, it is easy to get caught up in our cases and forget that our families depend upon us not only for financial support but emotional and mental support.
24. Get Organized. One of the biggest problems working parents have is that they are not organized at home or at work. This leads to unnecessary stress and anxiety at home and at the office as you are constantly worried you are forgetting something (filing a motion, reply papers, etc. or forgetting the school play, the book fair, etc.)
25. Make Friends. Be cordial to your adversary in every case as you will never know when you might need a favor. I live by the motto that cases come and go and you never know when you will have the adversary on another case in the future. While you may be on the “winning side” of one case, you could be on the “losing side” of another and need your adversary’s help in the future. Also make friends with the parents of the children your children are friends with, especially when they are younger. I built a network of friends with the parents of my children’s friends and never had a problem finding a car pool or help in a pinch. I also had a network of people who would “fill me in” on anything I was missing in school as well as on or off the playground.
26. Communication Is Key. Always, always, always talk to your adversary, the judge or your boss whenever you have a family issue, emergency or activity you must attend. Don’t be afraid to let the judge or your adversary know you need to leave.
27. Mix Business with Pleasure. I try my best to bring my wife and son on bar conferences and retreats. The November Mid-Year Meeting is a great opportunity to attend a bar retreat and spend time with your family since it is the same week as teachers’ convention week in public schools and children are off on Thursday and Friday. The Family Law Section’s Annual Retreat in March is always a blast. The children who regularly attend these retreats have grown up around and, to some degree, because of their association with judges, lawyers and their families.
28. Surround yourself with top notch and loyal co-workers, assistants and staff. There is no substitute for teamwork or the feeling of genuine respect and admiration for those with whom you work every working day.
29. With regard to caregivers/babysitters, be sure to have a small list of those you can trust to help care for your child when you are in a bind. If your child/children wake up in the middle of the night with a fever and you know you have to argue a motion in just a few hours, make sure you have a list of your “go to” people.
30. Prioritize monthly, weekly and daily tasks. Sometimes you will need to do this hourly or even by minute. Keep maintaining and shuffling your “to do list.”
31. Vacation. We all have a lot of work to do and a ton of personal commitments, but there is no prize to those who do not vacation. I always have a vacation on my calendar. It is what gets me through the pang of guilt that haunts me when I am in evening meetings during the week. To know that I will have catch-up time and a quality block of time with my family is priceless.
32. Say no. Really. It is okay. If there is something asked of you and you cannot do it 100%, just say no.
33. Say yes to lunch meetings. I love lunch meetings. They are generally an hour or less and do not take away from your own family time. When you are in charge of a meeting consider planning lunch meetings.
34. As for ready-holds. Often times, the court requires us to appear at 9:00 a.m., and we all know that it really means that we will not be reached until 9:30 a.m., 10:00 a.m., or beyond. Call and ask for a ready-hold so your mornings are not so hairy and frantic and all you did was stress. . . just to get to the court to sit around and wait and wait and wait.
35. Do work at bedtime hours. Take work home every night. Throughout the day, make a pile of what you can work on while at home.
36. Not all meetings need to last an hour. Say what you need to say. If that happens in 30 minutes, it is okay to end the meeting so everyone can go about his or her day.
37. Combine work and play. Bring your family along with you to work retreats or outings. I It is a wonderful way to combine your two worlds.
38. Webster’s defines civility as politeness and courtesy. It costs nothing to be polite and courteous. There is no tactical advantage to being rude.
39. Remain Objective. Speak in your client’s voice but with the dispassionate mind of an attorney.
40. Never engage in ad hominem arguments against your adversary or the adverse party.
41. Always address your argument to the Judge, not to your adversary.
42. Cultivate an appropriate sense of humor about the practice. Your client’s life may be disintegrating, but hopefully yours is not.
43. Modulate your voice. Avoid raising your voice or becoming piercingly shrill.
44. Consent to adjournment requests (of course except in extreme situations). Do not ask your client for his or her authorization to consent. It is your prerogative as an attorney to exercise professional courtesy and consent to an adjournment without asking your client’s permission.
45. Always be punctual. Dare to be early. Being late is not only wasteful of the time of the Judge, your adversary and the parties, it also demonstrates disrespect for the dignity of the law and the judicial process.
46. Be prepared and organized. In other words, be a professional, and have pride in what you are doing.
47. Treat everyone courteously: the Judge (certainly), the adverse attorney, your client, the adverse party, witnesses, the court staff and your adversary’s office staff.
Some may say that the above comments are common sense and do not warrant inclusion in this scholarly publication. I disagree. This is a tough and demanding practice, but one that I love. We work very hard, so it is necessary to play hard in order to maintain our sanity. We must remind ourselves daily to stop and smell the roses and to enjoy life and our families and friends while managing the pressures of this practice. It is a very difficult balance but certainly one that it is worthwhile and manageable. Sometime, however, we need to be reminded of the methods necessary to achieve this goal.
I respectfully submit that it is worthwhile for every practitioner to periodically review this column as a check on his or her own behavior. We all get caught up in our clients’ emotionalism. Sometimes it is in the name of advocacy and sometimes it is simply human nature when arguing on behalf of another person to take on the mantle of their problems. Sometimes, and very infrequently I am sure, it is a tactic used by some to gain an unfair advantage in a case. However, whatever the reason may be, it is worthwhile for all of us to be more introspective and look at our own behavior to improve the practice not only for the benefit of ourselves, but also for the people and children involved in the divorce process.
Frequently Asked Question #4 (Reducing harm to children)
By
Charles F. Vuotto, Jr., Esq.
Question
“How can I reduce the amount of harm my divorce will cause my children?”
Answer
There are a multitude of things that divorcing parties can do to reduce the negative impact of divorce upon their children. Of course, every family is different and has particular issues that may call for additions or deletions to the following list. However, the following represents a general guide to reducing the negative impact of divorce on children:
1. Keep your emotions in check. Out of control emotions or irrational thoughts lead to imprudent decisions.
2. Litigants should not use their children as bargaining chips or pawns in the divorce litigation.
3. Litigants should not argue or discuss the litigation in the presence of their children.
4. Litigants should attempt to work cooperatively with regard to custody and time-sharing issues, even if it means that their individual goals or desires are not met.
5. Once the parties have decided to divorce, it is essential that they attempt to speak to their children together and show them a united front so that they can see that, although their parents cannot live together any longer, they still have a mother and a father who love and care for them and can work together to preserve their best interests.
6. Litigants should not view their children as spoils of their divorce litigation.
7. Litigants should not enlist their children as couriers or messengers.
8. Litigants should not bad mouth, alienate or undermine the other spouse to or in the presence of the children and should be charged with encouraging the relationship between the children and the other spouse.
9. Litigants should not discuss spousal disputes with or in the presence of the children.
10. Litigants should not interrogate the children about their other parent.
Although the negative impact upon children due to divorce cannot be eliminated, it can be greatly reduced if these basic guiding principles are followed. Children are resilient and can adapt to most situations that are not harmful to their physical, emotional, social, educational or spiritual wellbeing. If parents can put aside what they want and concentrate on what is best for the children, they can learn to work cooperatively and co-parent post-divorce in a civil and respectful manner. If this can be accomplished, it will certainly reduce the harm that children suffer due to divorce.
By
Charles F. Vuotto, Jr., Esq.
Question
“How can I reduce the amount of harm my divorce will cause my children?”
Answer
There are a multitude of things that divorcing parties can do to reduce the negative impact of divorce upon their children. Of course, every family is different and has particular issues that may call for additions or deletions to the following list. However, the following represents a general guide to reducing the negative impact of divorce on children:
1. Keep your emotions in check. Out of control emotions or irrational thoughts lead to imprudent decisions.
2. Litigants should not use their children as bargaining chips or pawns in the divorce litigation.
3. Litigants should not argue or discuss the litigation in the presence of their children.
4. Litigants should attempt to work cooperatively with regard to custody and time-sharing issues, even if it means that their individual goals or desires are not met.
5. Once the parties have decided to divorce, it is essential that they attempt to speak to their children together and show them a united front so that they can see that, although their parents cannot live together any longer, they still have a mother and a father who love and care for them and can work together to preserve their best interests.
6. Litigants should not view their children as spoils of their divorce litigation.
7. Litigants should not enlist their children as couriers or messengers.
8. Litigants should not bad mouth, alienate or undermine the other spouse to or in the presence of the children and should be charged with encouraging the relationship between the children and the other spouse.
9. Litigants should not discuss spousal disputes with or in the presence of the children.
10. Litigants should not interrogate the children about their other parent.
Although the negative impact upon children due to divorce cannot be eliminated, it can be greatly reduced if these basic guiding principles are followed. Children are resilient and can adapt to most situations that are not harmful to their physical, emotional, social, educational or spiritual wellbeing. If parents can put aside what they want and concentrate on what is best for the children, they can learn to work cooperatively and co-parent post-divorce in a civil and respectful manner. If this can be accomplished, it will certainly reduce the harm that children suffer due to divorce.
Frequently Asked Divorce Question # 3 (Removal)
By
Charles F. Vuotto, Jr., Esq.
“My ex-spouse exercises visitation with my kids, but I want to move with them to another state. Can I go?”
Answer
It depends. As with most issues in divorce, this is a fact sensitive question. The Supreme Court of our State has established that a custodial parent who seeks removal of a child outside of the state of New Jersey over the objection of the other parent must first demonstrate a prima facie case for removal before the court may further consider the removal application. Baures v. Lewis, 167 N.J. at 91, 118 (2001). The moving party has the burden "to produce evidence to establish prima facie that (1) there is a good faith reason for the move and (2) that the move will not be inimical to the child's interests." Id. at 118. The Supreme Court explained:
[the initial burden] will be met for example, by a custodial parent who shows that he is seeking to move closer to a large extended family that can help him raise his child; that the child will have educational, health, and leisure opportunities at least equal to that which is available here, and that he has thought out a visitation schedule that will allow the child to maintain his or her relationship with the noncustodial parent. If, for some reason, the custodial parent fails to produce evidence on the issues to which we have referred, the noncustodial parent will have no duty to go forward and a judgment denying removal should be entered.
Baures, 167 N.J. at 118.
In determining a party’s removal application pursuant to the Bauers standard, the court must examine the merits of that party’s request in the context of twelve factors. Specifically, the Bauers court set forth the factors as follows:
(1) the reasons given for the move;
(2) the reasons given for the opposition;
(3) the past history of dealings between the parties;
(4) whether the child will receive educational, health and leisure opportunities at least equal to what is available here;
(5) any special needs or talents of the child that require accommodation and whether such accommodation or its equivalent is available in the new location;
(6) whether a visitation and communication schedule can be developed that will allow the noncustodial parent to maintain a full and continuous relationship with the child;
(7) the likelihood that the custodial parent will continue to foster the child’s relationship with the noncustodial parent if the move is allowed;
(8) the effect of the move on extended family relationships here and in the new location;
(9) if the child is of age, his or her preference;
(10) whether the child is entering his or her senior year in high school at which point he or she should generally not be moved until graduation without his or her consent;
(11) whether the noncustodial parent has the ability to relocate;
(12) any other factor bearing on the child’s interest.
Id. at 116-17. (emphasis added); see also O'Conner v. O’Connor, 349 N.J.Super. 381, 397 (App. Div. 2002).
It should be remembered that notwithstanding any statutory or case law, the prevailing guiding principal of any court addressing issues concerning children is their best interests. All questions concerning children must be answered in the context of what is best for them, not necessarily the parents.
By
Charles F. Vuotto, Jr., Esq.
“My ex-spouse exercises visitation with my kids, but I want to move with them to another state. Can I go?”
Answer
It depends. As with most issues in divorce, this is a fact sensitive question. The Supreme Court of our State has established that a custodial parent who seeks removal of a child outside of the state of New Jersey over the objection of the other parent must first demonstrate a prima facie case for removal before the court may further consider the removal application. Baures v. Lewis, 167 N.J. at 91, 118 (2001). The moving party has the burden "to produce evidence to establish prima facie that (1) there is a good faith reason for the move and (2) that the move will not be inimical to the child's interests." Id. at 118. The Supreme Court explained:
[the initial burden] will be met for example, by a custodial parent who shows that he is seeking to move closer to a large extended family that can help him raise his child; that the child will have educational, health, and leisure opportunities at least equal to that which is available here, and that he has thought out a visitation schedule that will allow the child to maintain his or her relationship with the noncustodial parent. If, for some reason, the custodial parent fails to produce evidence on the issues to which we have referred, the noncustodial parent will have no duty to go forward and a judgment denying removal should be entered.
Baures, 167 N.J. at 118.
In determining a party’s removal application pursuant to the Bauers standard, the court must examine the merits of that party’s request in the context of twelve factors. Specifically, the Bauers court set forth the factors as follows:
(1) the reasons given for the move;
(2) the reasons given for the opposition;
(3) the past history of dealings between the parties;
(4) whether the child will receive educational, health and leisure opportunities at least equal to what is available here;
(5) any special needs or talents of the child that require accommodation and whether such accommodation or its equivalent is available in the new location;
(6) whether a visitation and communication schedule can be developed that will allow the noncustodial parent to maintain a full and continuous relationship with the child;
(7) the likelihood that the custodial parent will continue to foster the child’s relationship with the noncustodial parent if the move is allowed;
(8) the effect of the move on extended family relationships here and in the new location;
(9) if the child is of age, his or her preference;
(10) whether the child is entering his or her senior year in high school at which point he or she should generally not be moved until graduation without his or her consent;
(11) whether the noncustodial parent has the ability to relocate;
(12) any other factor bearing on the child’s interest.
Id. at 116-17. (emphasis added); see also O'Conner v. O’Connor, 349 N.J.Super. 381, 397 (App. Div. 2002).
It should be remembered that notwithstanding any statutory or case law, the prevailing guiding principal of any court addressing issues concerning children is their best interests. All questions concerning children must be answered in the context of what is best for them, not necessarily the parents.
Frequently Asked Divorce Question #2 (Stock Options)
By
Charles F. Vuotto, Jr., Esq.
“My spouse has stock options at his work, are those considered to be an asset to be divided during our divorce?”
Answer
Although the extent of company’s issuing employee stock options has declined from the levels that existed in the 1990’s, to the extent that a divorcing party has stock options, these are certainly assets subject to equitable distribution in New Jersey. Basically, a “stock option” is “the right to purchase a specified number of shares of stock for a specified price at specified times, usually granted to management and key employees.” The price at which the option is awarded is called the “grant” price; this is usually the market price at the time the options are granted. Black’s Law Dictionary (5th Ed. 1979). See also Treas. Reg. § 1.421-7 (a)(1) (1978); I.R.C. § 1234 (a) (1998). Generally, stock options are incentives to stimulate the efforts of key employees as well as attempts to retain such employees. Generally, there are two basic categories of stock options: (1) incentive stock options (commonly referred to as “ISO’s”) which are qualified or statutory options and (2) non-qualified stock options (which are commonly referred to as “NQSO’s”). Simply put, the difference between the two types of options results from tax compliance requirements at the time of the grant.
Stock Options can be valued using various methodologies, some of which are very complex and go far beyond the space requirements of this short article. One valuation approach is the intrinsic method (i.e., current trading price less strike price). Another valuation method is the Black-Scholes formula (a complex formula taking future risk and volatility into account). Suffice to say that options, like any other asset, can be valued with one party retaining the options and buying out the other divorcing party’s share. Another option is to divide them in kind by way of a Callahan Trust. This refers to the case of Callahan v. Callahan 142 N.J. Super 325 (Ch. Div. 1976).
New Jersey courts, when addressing stock options incident to divorce, emphasize the necessity to balance the “need for definitiveness embodied in the date of complaint rule with the need for flexibility inherent in equitable distribution.” This quote came from the Supreme Court case of Pascale v. Pascale 140 N.J. 583, 612 (1995), which is the seminal case in New Jersey concerning the distribution of stock options.
There is unquestionably a growing trend among the courts of this nation to subject unvested or non-exercisable stock options granted during the marriage to distribution. Further, options may be viewed as income under certain circumstances for purposes of fixing support obligations. As the trend continues, it is critical that litigants be aware of the ever changing case law and that matrimonial attorneys become familiar with these unique types of assets and tailor their discovery demands, negotiation and trial preparation accordingly.
By
Charles F. Vuotto, Jr., Esq.
“My spouse has stock options at his work, are those considered to be an asset to be divided during our divorce?”
Answer
Although the extent of company’s issuing employee stock options has declined from the levels that existed in the 1990’s, to the extent that a divorcing party has stock options, these are certainly assets subject to equitable distribution in New Jersey. Basically, a “stock option” is “the right to purchase a specified number of shares of stock for a specified price at specified times, usually granted to management and key employees.” The price at which the option is awarded is called the “grant” price; this is usually the market price at the time the options are granted. Black’s Law Dictionary (5th Ed. 1979). See also Treas. Reg. § 1.421-7 (a)(1) (1978); I.R.C. § 1234 (a) (1998). Generally, stock options are incentives to stimulate the efforts of key employees as well as attempts to retain such employees. Generally, there are two basic categories of stock options: (1) incentive stock options (commonly referred to as “ISO’s”) which are qualified or statutory options and (2) non-qualified stock options (which are commonly referred to as “NQSO’s”). Simply put, the difference between the two types of options results from tax compliance requirements at the time of the grant.
Stock Options can be valued using various methodologies, some of which are very complex and go far beyond the space requirements of this short article. One valuation approach is the intrinsic method (i.e., current trading price less strike price). Another valuation method is the Black-Scholes formula (a complex formula taking future risk and volatility into account). Suffice to say that options, like any other asset, can be valued with one party retaining the options and buying out the other divorcing party’s share. Another option is to divide them in kind by way of a Callahan Trust. This refers to the case of Callahan v. Callahan 142 N.J. Super 325 (Ch. Div. 1976).
New Jersey courts, when addressing stock options incident to divorce, emphasize the necessity to balance the “need for definitiveness embodied in the date of complaint rule with the need for flexibility inherent in equitable distribution.” This quote came from the Supreme Court case of Pascale v. Pascale 140 N.J. 583, 612 (1995), which is the seminal case in New Jersey concerning the distribution of stock options.
There is unquestionably a growing trend among the courts of this nation to subject unvested or non-exercisable stock options granted during the marriage to distribution. Further, options may be viewed as income under certain circumstances for purposes of fixing support obligations. As the trend continues, it is critical that litigants be aware of the ever changing case law and that matrimonial attorneys become familiar with these unique types of assets and tailor their discovery demands, negotiation and trial preparation accordingly.
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