Robert A. Bonavito, CPA PC

Divorce Series Part 5: NJ Alimony Law Changes in 2014

My name's Robert Bonavito, New Jersey Forensic Accountant. This video is part of a series of videos where I discuss forensic accounting topics for educational purposes only. If this was a litigated matter, I would take a different approach, have different conclusions based on different facts...

Hi, welcome to our number five segment of divorce series. This one is going to deal with the alimony changes that occurred in 2014, where the state changed how we look at alimony. And what happened was, a lot of attorneys still refer to this as the new law, even though it's 5 years old. But what was happening was that you had a lot of moneyed spouse who were in their 70s or 80s and they were paying alimony. And what New Jersey said was, "You know, maybe we need to change this because obviously someone who's living on social security cannot afford to be paying alimony." So, what they did was, they said, "Well, why don't we make a new law and get rid of permanent alimony, because this way these people who are paying alimony in their 70s, 80s, even 90s, they wouldn't have to prove that they couldn't afford it. It would automatically, in most cases, alimony would end at those dates."

And again, here it was, it was basically to eliminate permanent alimony. And of course, this is of a concern because someone who wants long-term and is entitled to long-term alimony may be concerned, but this law does address that issue. And if you look at the actual amendment, it basically is, this is what it says. Okay. It talks about dissolution for civil union, divorce from bed and board, legal separation from a partner, civil union. And then it talks about the alimony, open duration, rehabilitation, alimony, limited duration, and reimbursement alimony. Okay. So, it lists the actual types of alimony you can now obtain.

But let's take a look at this. Okay. Because there are some questions here. One, what is bed and board? You know, this is a topic. I mean, we've been doing this for 30 years and we've had one or two bed and board. What this is, was this was in the '50s, when Catholic women wanted to get away from their husbands, but they didn't want to get divorced for religious reasons. They didn't want to live with them. And what they did was they put a lot of pressure on the state legislature. So, you know, the state legislated, they said, "Okay. You know, you'll be technically married and technically you'll be divorced." You know, and this creates a lot of issues. But, what it does, it allows the wife, and that's who really forced the issue, to keep a lot of the benefits, especially in the '50s. You know, insurance, half the house, all that type of stuff, survivor benefits. And it was a solution, but we still have it to this day and the law still references it. So, people are still getting divorced under bed and board for a lot of different reasons.

And then it talks about a civil union. What is a civil union? Okay. A civil union is when a same-sex couple, they got married, but they didn't call it a marriage because it wasn't legal in New Jersey. This was back before 2013. And so, we have some people who are together under civil union and, you know, divorce law applies to this civil union. You have, you know, a male and a male, a female and a female. But what happened in 2013? Okay. We had the Marriage Equality Act pass. In 2013, now there was just marriage, there's no civil union, but they still had the grandfather and those people who were joined together in a civil union. In fact, I remember when this passed, I was actually at a restaurant and it came on the TV that, you know, the Marriage Equality Act was passed by the Supreme Court. And I remember looking over and there was two guys in a far corner. They were going berserk. They were hugging each other, high-fiving each other. They were so happy. The whole place was looking at them. Finally, this woman got up and said, "Oh, I'm so glad. I'm so happy for you. Now you guys can get married and they'll recognize the marriage." And these two guys stopped and they looked at each other and they stared at each other, you know, perplexed. And all of a sudden, the guy said, "No, no, no, no, no. We don't want to get married. We're divorce attorneys." And it's true. I mean, we have, since 2013, more and more of our practice is, you know, same-sex marriages. And, you know, obviously, it was good for same-sex couples who wanted to get married, but it was just as good for lawyers and forensic accountants who work in this area. So, that's why that is referenced in the law.

Now, let's talk about the type of alimony, right. We have open duration, which means, it's not going to end. For example, if you were married over 20 years, you are entitled to get what's called open duration alimony, means, it doesn't end until you either move in with somebody, get married, or your spouse retires. He becomes, you know, at the age to collect social security. So, like I said, there are ways, you know, to go back and have a change of circumstances, that type of stuff. But generally, this open duration alimony replaces the old alimony. And the second type of alimony they talk about is rehabilitation alimony. This is something like, I had a client who just got divorced, and they just had a baby, they had five kids at home. They had a master's, and they were very smart, and they were going back, and they were gonna, you know, I guess, go back to work after they were able to. But the judge ordered rehabilitation alimony because they had to be rehabilitated. They had worked their way back into the job market. Even though they had these qualifications, they were out of the job market for, you know, 20 years in that case. But they wanted to go back to work. So, that's the type of alimony that was...part of the alimony was rehabilitation. To rehabilitate her so she could get back into the market.

Then you have limited duration. This is given in a lot of like, let's say, a five-year marriage or a six-year marriage. Where they say, "Okay, we'll give you alimony for three years or two years." I see that a lot. And last one is reimbursement alimony. Now, I had a husband who was putting his wife through med school and taking care of the kids. And the agreement was that when she got a job, he would then quit his job and take care of the kids, that's what they wanted. But she became a doctor and divorced him. So, you know, he got reimbursed for all that work he put in when she went to school and he worked. And, you know, basically he was taking care of the kids at the same time as paying her tuition, helping her pay for tuition. So, that's reimbursement alimony.

Now, let's talk about, because we're a court of equity, and what that means is that, when alimony is awarded, it's based on factors. Okay? And it's going be one of those four types of alimony we just discussed. And the way that it is awarded is it's based on, here's the list that a judge generally use. Abilities of the parties, duration of the marriage, age and physical and emotional health, standard of living, earnings capacity, length of absence from the job market, right? Parental responsibility, training, education, history of finances, and equitable distribution. And the reason equitable distribution is interesting is because, with equitable distribution, like, I had one client where they got a $10 million bond that paid $0.5 million of interest income every year. So, that would reduce the need for alimony obviously. And then income available to either party, tax treatment, and nature and amount of pendente lite. We do have a section on pente. One of these in this series just does talk about pendente lite.

Okay. So, listen, if you have any questions, just leave it below. One of my analysts will get back to you. I'll get back to you. You know, we covered this pretty quickly, but I just wanted to give you a quick overview of that 2014 tax law. So, if you have any questions, let me know. New Jersey Forensic Accountant, Robert Bonavito.

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