On behalf of Phillip Jusino at Phillip J. Jusino & Associates, P.C.
In January 2016, changes took effect in the New York statute governing how professional licenses are handled in a property division in divorce.
In 2015, the New York legislature passed significant legislation that amended New York divorce laws. One important provision changed how professional licenses and degrees are considered in a divorce proceeding.
This amendment took effect on January 23, 2016, and will control all divorces commenced on or after that day.
Equitable Division of Marital Property
Unless the parties reach a negotiated settlement and enter into an agreement in which they lay out how marital property will be divided between them, the judge in the divorce will need to make an equitable division of marital property.
Marital property is defined as everything either of them acquired during marriage, alone or together. An equitable division does not necessarily mean everything is split down the middle. Rather, the division is based more on overall fairness considering the circumstances of the family.
The O’Brien Era
For several decades since the important 1985, New York Court of Appeals case of O’Brien v. O’Brien, New York case law required that a professional degree or license received during the marriage be classified as marital property subject to equitable division in divorce. This meant that evidence had to be introduced in a court of the economic value of the degree or license.
O’Brien held that a husband’s medical license was marital property to be part of the equitable division of property in a divorce. The court did not agree with the husband’s argument that the wife should only get the amount of money she contributed toward obtaining the license. Because a dollar amount needed to be determined as the value of the license, the wife was also granted reimbursement of the fees of her expert witness who provided the evaluation.
Licenses No Longer Marital Property
The new legislation essentially overrules O’Brien by stating that “the court shall not consider as marital property subject to distribution the value of a spouse’s enhanced earning capacity arising from a license, degree, celebrity goodwill, or career enhancement.”
The legislative language continues: “However, in arriving at an equitable division of marital property, the court shall consider the direct or indirect contributions to the development during the marriage of the enhanced earning capacity of the other spouse.” So, in making an equitable division, the court cannot consider the value of enhanced earning capacity, but the court must still look at spousal contributions to that enhanced earning capacity.
It will be interesting to see how New York courts interpret this new provision. Even the Supplementary Practice Commentary for this section by Alan D. Scheinkman in McKinney’s Consolidated Laws of New York Annotated notes that it must be determined by the courts whether establishing a value of enhanced earnings by an appraiser or other expert will be necessary to evaluate “direct or indirect contributions” by the other spouse.
Any New Yorker facing divorce, especially with questions about how professional degrees, licenses, practices, and other career-related assets will likely be handled, should speak with a family lawyer for advice and representation.
The lawyers at Phillip J. Jusino & Associates, P.C., in Smithtown, represent Long Island clients in divorce.