Articles Posted in counsel fees

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I am frequently asked if It makes sense to buy out of an alimony obligation with a lump sum payment. The answer to the question is a bit complex but I will try to tackle it in the length of this post. Usually, when there is a discussion of the buy-out of alimony, the question that is most common to follow is what motivates the desire for a buyout? The recipient of alimony may want a lump of money to use to invest, buy a house, or start a business. The payor can be looking for a clean break and may find the process of paying alimony on a regular basis annoying or emotionally destabilizing or they can be in the process of seeking a final end to the interaction withpexels-karolina-grabowska-4386289-200x300 the payee and has a concern for what can feel like the never-ending revolving door of the courtroom. What motivates a recipient to want a lump sum is personal and that motivation should be discussed with your attorney. This post is to focus on the payor’s rational decision-making process, the emotional need to walk away with a clean break once again should be discussed with your attorney.

When a lump sum is discussed at the very least the payment of alimony overtime must be established. In a marriage of under 20 years the likely length of alimony and amount that needs to be established and then discounted to present value using the present value formula. In marriages, over 20 years alimony is usually assumed to end at the social security retirement age of the payor. Once the term and the amount of alimony is agreed upon there then needs to be an agreement as to the discount rate. The discount rate is the assumed interest rate that will prevail in the marketplace during the term of alimony. The assumption is that if a payee banked the money paid to them or annuitized it they would end up with their full alimony over a period of time.

To put it simply, if you compute the present value of the future payment of alimony and pay it out while assuming you have the economic ability to do so the payment makes very little economic sense for a multitude of reasons. One obvious consideration that is to be made is that you in theory could bank or set up your own annuity to pay the alimony which would hedge your obligation against the possibility that alimony might not be paid for the full term. For example, if your ex-spouse should die, alimony ends. If your spouse received a lump sum the beneficiaries of the remaining lump fund could be your children or could be a new spouse. The payor; could die and alimony would then also come to an end. In most circumstances, alimony is protected with some sort of insurance, however, the money you did not payout in lump sum would be part of your estate and would go to people you love. Your ex-spouse could remarry, alimony ends upon remarriage.

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I was recently asked by a high net worth client how they could save legal fees during their proceeding. I understood his concern as the matter is complicated and his wife had very little knowledge of family finances. Accordingly. it would be up to her lawyer to verify assets and advise the client. Half the cost of a divorce is the trial if the matter is not settled. One of the best ways to save money in a divorce proceeding is to avoid the trial and make a reasonable settlement. The other half of the cost of a divorce is pretrial preparation. Most of the pretrial action in a divorce deals with issues of child custody, interim support, and discovery. In this case, since the wife knew nothing about finances until discovery was exchanged, there could be no settlement. There were kids involved and my client was an active parent who wanted to stay involved. His wife opposed this may be out of anger or fear or desire to control the one thing that she did control during the marriage. My client liked bullet points and so I e-mailed him the following bullet points which have been sanitized to protect confidentiality:pexels-karolina-grabowska-4386373-1024x683

1) Put together a series of binders with all your bank and brokerage records over the last five years.

2) Do the same for the last five years of credit card statements.

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When a client retains an attorney to represent him or her in a divorce or other family law dispute, agreement2-300x200usually the goal is to try and settle the matter. Trying a case is viewed as a last resort when all efforts to reach an amicable resolution have failed. From the outset, the courts do everything they can to encourage parties to reach an agreement, and participation in various forms of alternate dispute resolution, including Early Settlement Panels and Custody/Economic Mediation, are mandated in hopes of accomplishing that goal. The parties reach an agreement. They enter into a “contract’ memorializing same. The court may even “approve” it and close the case as “settled”. That’s the end of it, i.e. a contract is a contract – right? Not so fast! When it comes to family law “contracts” it is clear that the court has the last word if it is enforceable or not. “Equitable considerations” often trump “contract principles”. However, what is “equitable” seems to turn on what result is the most fair and reasonable one given the circumstances of that given case.

The extent of family law contracts being enforceable as a matter of interpretation was highlighted in the recent Appellate Division case of Holtham v. Lucas, 460 NJ Super. 380 (App. Div. 2019). In Holtham, the parties entered into a marital settlement agreement in resolution of their divorce. The agreement provided for the enforcement of a previously entered Prenuptial Agreement, as well as for the husband making certain payments and property transfers to the wife, including the payoff of an auto loan and transfer of the car title by July of 2017. The Agreement also included a provision that if the husband defaulted in any of it’s obligations, the wife would not only be entitled to reasonable counsel fees incurred to enforce, but that the husband would be subject to a per diem penalty of $150.00 for every day he failed to comply. The husband did not pay off the car loan or transfer title by the required date; rather, he asserted various offsetting claims as his reason for not doing so. He finally paid off the car loan and transferred title (although wife had always enjoyed its use and possession) but not until 4-5 months later, and after receiving wife’s enforcement motion. The trial court not only ordered the husband to pay over $6,000.00 towards wife’s attorney fees, it enforced the per diem penalty provision by ordering husband to pay $18,450.00 (for each day of non – compliance between July 9 and November 8, 2017), noting that although the husband had the ability to comply, he had unjustifiably delayed by interposing offsetting claims he had already forfeited under the Agreement’s mutual release provision. The husband appealed arguing that the $150 daily charge constituted an unenforceable penalty.

Simply applying traditional contract principles, the Appellate Division actually agreed with the husband that a $150 per diem charge would constitute an unenforceable penalty. The court noted that according to well – settled contract law, a provision that stipulates an unreasonably large amount of damages for a future breach would be an unenforceable penalty. Also referred to as the “Penalty Rule”, it was intended to avoid oppression, excessive recovery (that is recovery that far exceeds the economic losses normally recoverable for breach of contract), and the deterrence of efficient breach. Such stipulated damage provisions must be scrutinized for reasonableness and their enforceability turning primarily on the extent the stipulated amount is within a plausible range of actual damages and the difficulty of calculating damages upon breach. Analyzing these principles, the court found that the husband had met his burden to demonstrate that the $150 per diem charge was a penalty, noting that the “harm” suffered by the wife for the 4-5 month delay fell short of $18,450, that she had been able to retain full use of the vehicle, and that the “damage” under this penalty provision would have been the same regardless of the number, nature or amount of the obligation husband was deemed to be in default of. However, this did not end the court’s analysis, concluding that this “Penalty Rule” would not apply with equal force to marital settlement agreements embodied in final divorce judgments.

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The legal fees incurred with regard to a divorce can be substantial. I have written several blog posts in the past cautioning litigants of how their decisions and actions during a divorce matter can dramatically impact the level of legal fees that can be generated, and the ways litigants can reduce or limit those fees. 1040-300x193The more legal fees incurred, the less money there is in the marital pot to be divided between the parties, to have available for future needs and expenses (college educations, retirement, etc.), and/or income to pay support or one’s own living expenses. Continue reading ›

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Despite the recent heat wave, Fall has arrived. Besides the presumably cooler weather, when the calendar hits September, we can always look forward to a number of things – school starts, rush hour traffic resumes, shorter days, etc. However, for us lawyers September brings with it the annual amendments that have been approved by our Supreme Court to the Rules Governing the Courts of the State of New Jersey. Unlike last year, a number of these recent Rule Amendments directly impact upon Family Part Practice. A number were in response to statutory changes that recently went into effect. In light of the number involved, I will summarize and discuss these Amendments over the course of several blog posts. Continue reading ›

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For attorneys and litigants alike, the legal fees attendant to the handling of a divorce matter are an important consideration. When it comes to legal fees, time is money. Because our Rules of Court prohibit the handling of divorce cases on a contingent fee basis, legal services are billed based upon the actual time spent working on the case at an hourly rate and charged against an initial retainer amount to be paid by the client. When prospective client asks how much in legal fees the divorce will cost, I explain that there are too many variables to give a precise estimate, including the number and complexity of the issues involved, the level to which those issues are contested, the reasonableness of the other spouse and/or attorney in regards to their positions, cooperation and/or course of conduct during the process, and the extent litigation or court involvement is needed to resolve those issues. Continue reading ›

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There is a saying among realtors that the first offer is usually the best offer. Why is that?  Because the first offer is made when the property is freshly on the market. When real estate sits buyers6a3146dbdf81597192112ac03d77c7e4-300x200 become suspicious. There is also the cost of holding the property to factor in.  The first offer likely saves the seller from incurring more tax, mortgage, utility and upkeep costs. There is a lot to be said about the psychological benefits of a fast deal as well. No worry, no uncertainty, no sleepless nights. Continue reading ›

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Pursuant to New Jersey statutes, and a common term in lawyers’ retainer agreements, is often a provision for the attorney to retain what is referred to as a charging lien in the assets of the marital estate to allow an attorney to be paid for legal services. Usually the existence of attorney’s right to a charging lien is merely academic as matters glide through the system. Occasionally, however, issues arise regarding an attorney’s fee which require court intervention. Pursuant to N.J.S.A. 2A:13-15, an attorney is entitled to a lien against a marital assets in controversy for the purpose of the payment of legal fees. The attorney’s lien is an inchoate right that attaches to the assets of the marital estate upon the completion of the ttorney’s involvement in the matter. Continue reading ›

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One consideration that comes up in almost every divorce action is the question of whether a spouse can request that the other spouse pay their counsel fees. Awards of counsel fees in New Jersey matrimonial cases are completely up to the discretion of the judges, and the Appellate Division generally will not reverse such decisions unless the judge abused his/her discretion. Eaton v. Grau, 368 N.J. Super. 443, 454 (App. Div. 2006). Judges’ discretion is not entirely unfettered, however, because judges still must address the standards set forth in the statutes, rules and case law. Continue reading ›