Do I Have To Divide the Inheritance I Received During My Marriage?

An issues that frequently arises is the treatment of an inheritance received by a spouse during the marriage.  The basic rule is that any property received via gift or inheritance during the marriage is exempt from equitable distribution.  When advising people, to the end of that sentence, I usually add something like, “provided that it is kept separate from marital assets.”  Put another way, when an inheritance or any other exempt asset (like a premarital asset) is “commingled” (a legal term) with marital assets, it can lose it’s exempt status.

That is the basic rule, however, it is not absolute.  There is a reported (precedential) decision that held that an inheritance was exempt, even though it was briefly parked in a joint account.  In fact, I had a case, more than a dozen years ago, that I tried, where one of the major issues was the proceeds of a life insurance policy that my client received as a result of his brother’s untimely death.  Because he was too distraught to deal with it when the check was received, his wife took the check and opened a joint bank or investment account with the money.  The money was never touched thereafter but it didn’t stop the wife from seeking 50% of it when the parties divorced a few years later.  In that case, the judge found that the proceeds from the insurance policy were my client’s separate property.

A similar issue arose in the case of Davis v. Davis, an unreported (non-precedential) Appellate Division decision released on October 23, 2019.  In that case, the wife received $162,000 in life insurance proceeds and some other assets after her daughter from a prior marriage, died in January 2010.  The money was initially deposited into a joint checking account and later, the wife opened a CD in the amount of  $154,995.95 in her name alone.  At the time of the divorce, the husband sought distribution of the account.  The trial judge disagreed and awarded it solely to the wife and the Appellate Division agreed.  Specifically, they held that:

Assets exempt from equitable distribution may become subject to equitable distribution if the recipient intends them to become marital assets. See Weiss v. Weiss, 226 N.J. Super. 281, 287 (App. Div. 1988). The comingling of such assets with marital assets, however, is not necessarily dispositive of the issue. The assets remain the recipient spouse’s property absent evidence the
parties intended them to become marital property. See Wadlow v. Wadlow, 200 N.J. Super. 372, 380 (App. Div. 1985).

Here, the trial court found that the wife was credible that there was no intent to make the inheritance a marital asset.  The concept is one of “donative intent.”  Put another way, did she have the intent to gift the inheritance to the marriage, making it a marital asset.  In this case, the trial court found that there was no such intent and the Appellate Division could not disrupt that credibility finding.

Even in cases when an inheritance is commingled and the court finds and/or the evidence is clear that there was donative intent, that does not mean that the asset should be divided 50-50.  There are a lot of factors at play, including, proximity in time between the inheritance and the divorce.  For instance, if a party deposited an inheritance into a joint account a year or two before the divorce, they could certainly make a claim for a disproportionate distribution of that asset if their argument that they should get back 100% of it doesn’t fly.  The longer you go between the inheritance and the divorce, the harder that argument gets.

Moreover, some people argue that payment of income taxes on an inherited asset represents commingling.  There really is no legal precedent for that.  That said, their may be a claim to recoup some of the marital assets used to pay the taxes on an exempt asset.

Similarly, some people argue that the use of exempt assets during the marriage represents a commingling of the assets themselves.  That too is a difficult argument.  However, the use of the assets may represent marital lifestyle in an alimony analysis.

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Eric Solotoff is the editor of the New Jersey Family Legal Blog and the Co-Chair of the Family Law Practice Group of Fox Rothschild LLP. Certified by the Supreme Court of New Jersey as a Matrimonial Lawyer and a Fellow of the American Academy of Matrimonial Attorneys, Eric is resident in Fox Rothschild’s Morristown, New Jersey office though he practices throughout New Jersey. You can reach Eric at (973) 994-7501, or esolotoff@foxrothschild.com.

 

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Destination Maternity Files for Chapter 11 Bankruptcy

Destination Maternity Corporation filed for Chapter 11 bankruptcy on Monday in Delaware under docket number 19-12256.

The large maternity-wear retailer owns approximately 458 U.S. stores comprised of 362 Motherhood Maternity Stores, 26 Pea in the Pod stores, and 70 Destination Maternity stores.

The Debtor’s prime demographic is diminishing as generational shifts are effecting the industry. Specifically, the U.S. birthrate has dropped to a 32-year low, according to the U.S. Department of Health and Human Services. This generational shift reflects that Millennials are having children later, or not at all.

CNBC reports that other baby-related retailers are also feeling the pinch of this generational shift, including Huggies diaper-maker Kimberly-Clark and baby oil and bubble bath maker Johnson & Johnson.

The Debtor is working with Kirkland & Ellis to either find a buyer or proceed with a liquidation.

If you have a Motherhood Maternity, Pea in the Pod, or Destination Maternity lease in your center, Stark & Stark’s Shopping Center & Retail Development Group can help.

Our bankruptcy attorneys regularly represent landlords throughout the country, including recently in the Eastern District of Missouri, District of New Jersey, Southern District of New York, District of Delaware, District of Minnesota, and the Western and Eastern Districts of Pennsylvania regarding a variety of issues.

Our Group has been counsel to landlords and trade creditors in the Mattress Firm, Toys “R” Us, Payless, Eastern Outfitters (EMS Part 2), EMS, Golfsmith, RadioShack, General Wireless (RadioShack 2), Gander Mountain, A&P, Joyce Leslie, rue21, Central Grocers, and Sports Authority chapter 11 bankruptcy cases.

For more information on how Stark & Stark can assist you, please contact Thomas Onder, Shareholder, at (609) 219-7458 or tonder@stark-stark.com or Joseph Lemkin at (609) 791-7022 or jlemkin@stark-stark.com.

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Valid Execution of a Will

The general conception by most people is that a Last Will and Testament must be signed by the Decedent in the presence of two witnesses. While this is undoubtedly the preferred method for a Last Will and Testament to be executed, it is not the only way that a Will may be deemed validly executed by a Decedent.

In fact, the statute which governs the valid execution of a Will provides a great deal of leeway to ensure that a Decedent’s Last Will and Testament is admitted to Probate. Aside from the preferred method discussed above, there are two other ways that a Decedent’s Last Will and Testament can be deemed validly executed.

The first way that the execution can be deemed valid is if after signing his or her Last Will and Testament the Decedent acknowledges to the witness that in it was his or her signature. The witness would then be able to witness the Will provided the Decedent makes that representation that it is his/her signature on the Will. This can occur when a witness to the Will is not at the same location as the notary who may eventually notarize the Will. The Will may be signed before the notary, and thereafter, the other witness can witness the Will after the Decedent has acknowledged his/her signature.

The next way that a Last Will and Testament can be deemed validly executed is if the Decedent simply acknowledges to a witness that the document which the witness is going to sign is the Decedent’s Last Will and Testament. In other words, the Will does not have to contain the Decedent’s signature for it to be witnessed by a witness, provided the Decedent makes it clear to the witness that the document is his or her Last Will and Testament. This situation can occur if the Decedent wants a witness to witness the Will, and thereafter, wants to take it to a notary who will notarize the signature. Once again, this is very different from the common conception concerning witnessing a Last Will and Testament.

As discussed above, the statute governing the valid execution of the Last Will and Testament is broader than most of the public would anticipate. Problems can still arise in this process if the relevant statute is not met. For the reasons, it is suggested that if there arises an issue concerning witnessing a Last Will and Testament, that a party consult with an attorney in this regard.

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I’m Moving With the Kids To Burlington County – Not So Fast

For decades, when a custodial parent wanted to move out of state, it would not be unusual to hear that if the court or other party won’t let me leave New Jersey, she will just move to Cape May, or some other point far away from North or Central Jersey.  When someone wanted to move just across the river to New York or Pennsylvania, you might hear an exasperated utterance about being able to move to Cherry Hill but not 10 miles away to New York City.

And by and large, that was the law.  That is, while a court could restrict a custodial parent from removing children from the State of New Jersey, there was little stopping them from intrastate moves.  While there was case law that said that that might be a change of circumstances if it impacts the non-custodial parent’s parenting time, by and large people were free to move about the state.  In fact, about a dozen years ago, I had a case where the ex-husband file a motion seeking to prevent my client from moving from Hudson County to Monmouth County.  After getting our brief wherein we presented the law, his story changed from the mother being the parent of primary residence (as set forth in the parties’ Agreement, to him being the “de facto Parent of Primary Residence.”  The trial did not go well for him and my client moved as was her right.

Just as the Bisbing case that we previously blogged on made it much more difficult for the custodial parent to move out of state, the paradigm of the custodial parent being permitted to move, without restriction, was seemingly ended on October 7, 2019, when the Appellate Division rendered the reported (precedential) opinion in A.J. v. R.J. 

In A.J., the parties were divorced in 2013.  They had two children who were 10 and 8.  The mother was the parent of primary residence and the father had alternate weekend (Friday to Sunday)  and Wednesday overnight parenting time – 4 out of 14 overnights which my what is often seen these days, is not much.  The mother remarried and had a third child, with whom she lived with her husband and two other children in a two bedroom apartment in Elizabeth.  She moved in March 2018, because her landlord increased the rent and would not give her additional time to search for another residence before doing so. She searched without success for a suitable residence in Elizabeth,Somerset, and Florence. Prior to the move, the parties only had one text conversation in July 2017, in which the mother stated that she wished to move and was searching locally and as far as Mount Laurel and the father asked her to remain local because it  he claimed would be unfair to him and the children to move far away.

After the move, the father filed an Order to Show Cause seeking to block the move and change custody. The Judge entered an order giving him 3 weekends a month, ordered mediation and scheduled a plenary hearing to determine whether the mother would be permitted to remain in Mount Holly and also ordered that the children remain in school in Elizabeth.  Mediation was unsuccessful and after a plenary hearing, the trial judge ordered the mother had to return with the children and live within 15 miles of Union.   As noted by the Appellate Division:

Significantly, although the judge’s decision recognized “Baures . . . has since been overruled by Bisbing,” his reasoning relied upon our decision in Schulze v. Morris, 361 N.J. Super. 419 (App. Div. 2003), which applied the Baures factors to determine whether a parent could relocate intra-state. Applying a preponderance of the Baures factors, the trial judge explained “[p]laintiff’s decision may not have been solely driven by a desire to alienate the children from their father, but was certainly done in wanton disregard of his rights, with the result being that his relationship with them will clearly suffer.” The judge concluded the distance between the parties’ residences increased the travel time from “minutes away” to “slightly over an hour[.]” The judge noted if the children resided in Mount Holly defendant could no longer leave work early to tend to a sick child, enjoy additional parenting time, or attend extracurricular activities as he had in the past. The judge found the surreptitious nature of the move belied plaintiff’s explanation that she did not inform defendant because she did not have time.

The mother failed to move back, claiming it was impossible for her to break her lease and she could not afford two homes.  The father filed an Order to Show Cause seeking a transfer of custody which was granted and the mother appealed.

As to the mother’s argument that changing custody as a sanction was inappropriate, the Appellate Division disagreed.  However, in this case, additional proceedings and findings were necessary in order to do so.  Specifically, the Court held:

However, we hold Rule 5:3-7(a)(6) requires a separate adjudication, which considers the children’s best interests and findings pursuant to N.J.S.A. 9:2-4, before the sanction is ordered. Additionally, because the relief granted under Rule 5:3-7(a) is coercive in nature and derived from Rule 1:10-3, the sanctioned parent may seek termination of the sanction when the parent complies with the court’s order. The court should be solicitous of such applications.

This is because custody matters directly impact the welfare of children. The designation of a parent of primary residence is a consequential decision because “the primary caretaker has the greater physical and emotional role” in a child’s life. Pascale v. Pascale, 140 N.J. 583, 598 (1995). Where there is already a judgment or an agreement affecting custody in place, it is presumed
it “embodies a best interests determination” and should be modified only where there is a “showing [of] changed circumstances which would affect the welfare of the children.” Todd v. Sheridan, 268 N.J. Super. 387, 398 (App. Div. 1993). In the context of a transfer of child custody as a sanction, affording both parents the ability to address whether a transfer of custody is i n
the best interests of the children and requiring the court to make the necessary statutory findings provides the necessary process and a reviewable record. Therefore, a best-interest hearing and findings pursuant to N.J.S.A. 9:2-4 is required where a court transfers custody as a sanction

Here, because the trial court did not consider the best interest facts before changing custody, that part of the Order was reversed and remanded.

The Appellate Division also reversed the relocation decision because the court used the prior standard (Baures) instead of Bisping.  The Appellate Division note: “Because the science and anticipated outcomes undergirding the Baures factors have not borne out as the Court anticipated and no longer apply to interstate removals, they should not apply to the intra-state relocations discussed in Schulze.”

The Appellate Division then set forth the new standard to be followed for intra-state relocations, as follows:

We further hold where a parent of primary residence seeks an intrastate relocation and the parent of alternate residence opposes it, the parent of alternate residence must convince the court the move constitutes a change in circumstance affecting the best interests of the children. If a prima facie case is established, the trial court must assess custody and parenting time, by applying the N.J.S.A. 9:2-4 factors to determine whether the best interests of the children requires a modification of one or both.

It is interesting that the parent of alternate residence bears the burden of showing that the move is not in the children’s best interests even though they aren’t the one seeking the change.  On the other hand, the custodial parent’s ability to move, which may have certain constitutional implications, is being hampered and in fact, a 15 mile radius clause is being imposed on her when the non-custodial parent can move anywhere he wants.   In this case, the non-custodial parent had only minimal parenting time.  The move really only implicated the mid week overnight.  Why wasn’t the interim relief of an extra weekend  per month, or some extra time during the summer, enough to address the issue?  Given that only one day per week was implicated, why wasn’t the radius clause larger given the mother’s clear financial distress?  It is one thing where 50-50 or substantial parenting time (5 or 6 out of 14 overnights every two weeks), but when it is 4 out of 14  – which is the minimum to have technical “shared parenting” as defined by the child support guidelines, or less, should a custodial parent really need court approval?

My guess is that one or both parties will see Certification to the Supreme Court. Stay tuned.

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Eric Solotoff is the editor of the New Jersey Family Legal Blog and the Co-Chair of the Family Law Practice Group of Fox Rothschild LLP. Certified by the Supreme Court of New Jersey as a Matrimonial Lawyer and a Fellow of the American Academy of Matrimonial Attorneys, Eric is resident in Fox Rothschild’s Morristown, New Jersey office though he practices throughout New Jersey. You can reach Eric at (973) 994-7501, or esolotoff@foxrothschild.com.

 

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New Jersey Lien Law vs. Pennsylvania Lien Law: The Writing Requirement

This is the second blog in a series of blogs examining the differences between New Jersey Lien Law and Pennsylvania Lien Law. Read part one discussing notice and timing differences here.

Since these states share a border, and many contractors operate in both states, they should be aware of the differences in the corresponding Lien Law Statutes. One key difference between the two states concerning the ability to file construction liens by a contractor is the writing requirement. Pennsylvania and New Jersey are on the polar opposites of the spectrum when it comes to the necessary writings to file a lien claim on a property.

In the state of New Jersey, a lien claim cannot be filed by either a general contractor or subcontractor in the absence of a written and signed agreement between the owner and the general contractor, or a subcontractor and the general contractor. There is no exception to this writing requirement and any lien claim which is filed without a written and signed agreement is deemed invalid. The writing requirement also applies to any change orders which may increase the contract price. In the absence of a signed change order, a lien claim cannot contain a claim for change orders above the original contract amount. In fact, New Jersey Law is so stringent as to the writing requirement that if a lien claim is filed without a written contract, the property owner may be entitled to counsel fees, costs, and sanctions incurred in having the invalid lien claim removed.

In Pennsylvania, a written and signed contract is not necessary. While it is always beneficial to have a written construction agreement so that the there is no confusion, the state of Pennsylvania provides that a contractor or subcontractor can file a lien claim on a project if they have a contract with the owner, either express or implied. Express means a written contract, whereas implied means all other contracts which are not in writing. This is a stark difference from the New Jersey Law, and thus, a contractor who routinely conducts business in Pennsylvania should be well aware of the formal requirements within the state of New Jersey. Nonetheless, it is always preferred that there is a writing signed by all parties so that this issue can be dispensed with. A written contact also better protects the contractor with regard to the materials and services that were provided.

Should you as a contractor have any questions with regard to the requirements to file a lien within the state of New Jersey or Pennsylvania, the attorneys at Stark & Stark can assist you in this regard.

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