By: Sheryl J. Seiden, Esq.[1]
Matrimonial matters primarily focus on determining custody and parenting time for the parties’ children as well as addressing how to equitably distribute the parties’ marital assets and debts and addressing the issue of support both for the supported spouse and the children. Often at some point in the case, the facts disclose that there may be third parties who have a vested interest in the matrimonial matter. Often those third parties are
the parents of one of the parties’ who have generously contributed money to the marriage and/or assisted in caring for the parties’ children.
Consider the parents who loan the parties’ money during their marriage that they may have been willing to forego if the parties remained an intact family but, now that the parties are getting a divorce, they insist that these monies were never intended to be a gift but rather a loan that should be paid back. Of course, the other party will claim that these monies were never intended to be paid back to the spouse’s parents and this claim is only initiated by the commencement of the divorce proceedings.
Perhaps these same parents generously helped fund the parties’ lifestyle by paying for their grandchildren’s summer camp, private school, and family vacations. When the parents learn that the parties are getting divorced, their generosity may quickly dry up. The spouse may then argue that these monies provided by the parties should be considered as income to their spouse for purposes of determining the parties’ child support obligations.
These generous grandparents may have even set up 529 Plans for their grandchildren which were intended to fund their grandchildren’s education. When they learn that these 529 Plans may be used to limit or eliminate the obligation of their daughter/son-in law to contribute to college for their grandchildren, they may change their position as to their willingness to continue to use these monies for those parties’ children.
These same grandparents who were helping care for their grandchildren during the parties’ marriage may quickly be shut out of their grandchildren’s lives in retaliation for their decision to no longer forgive their loan payments to their daughter/son-in-law, fund the parties’ lifestyle, and pay for their grandchildren’s summer camp, private school and college. The grandparents may then have a claim for grandparent visitation to ensure that their relationship with their grandchildren continues.
Moreover, the grandparents’ anger and hurt may now provide a reason for them to fund the legal fees that their child is incurring in the matrimonial case in order to make sure that their child’s rights are protected and that “justice is served.”
All of these issues will now involve the parents/grandparents, who may become third parties in the parties’ matrimonial matter. The question becomes when and how to address these issues effectively and ethically. At first, the party and the party’s parent may seek to consult with an attorney to address these issues. Further, the non-monied spouse may seek to involve their parents in the discussions with counsel because they are nervous and concerned that they may not fully understand all of the issues. The parents that infused money into the family may have a vested interest in being involved in the consultation with the party’s counsel. While counsel wants to be empathetic and involve the parties and third parties in the decision making process, counsel is cautioned not to cross ethical boundaries in these discussions. The party and the party’s parent’s interests may not always be aligned and for that reason, they may need to both consult with separate counsel to understand their rights and how best to pursue their claims in the parties’ matrimonial matter.
Rule of Professional Conduct Rule 1.7 addresses this conflict of interest as it provides as follows:
Conflict of Interest: General Rule (a:) Except as provided in paragraph (b), a lawyer shall not represent a client if the representation involves a concurrent conflict of interest. A concurrent conflict of interest exists if:
(1) the representation of one client will be directly adverse to another client; or
(2) there is a significant risk that the representation of one or more clients will be materially limited by the lawyer's responsibilities to another client, a former client, or a third person or by a personal interest of the lawyer.
(b) Notwithstanding the existence of a concurrent conflict of interest under paragraph (a), a lawyer may represent a client if:
(1) each affected client gives informed consent, confirmed in writing, after full disclosure and consultation, provided, however, that a public entity cannot consent to any such representation. When the lawyer represents multiple clients in a single matter, the consultation shall include an explanation of the common representation and the advantages and risks involved.
(2) the lawyer reasonably believes that the lawyer will be able to provide competent and diligent representation to each affected client;
(3) the representation is not prohibited by law; and
(4) the representation does not involve the assertion of a claim by one client against another client represented by the lawyer in the same litigation or other proceeding before a tribunal.
While it may appear that the party and the party’s parents are aligned, that might not always be the case. As detailed below, there are circumstances where these interests can conflict. In such cases, given that both the party and the third party’s interests pertain to the same proceeding, this is not a waivable conflict. For that reason, it is imperative that the party and the third party have separate counsel to address their interests in the matrimonial matter.
Was Money Provided by a Party’s Parents a Gift or a Loan
and How will this Impact the Financials in Parties’ Divorce?
The generosity of a party’s parents may dry up when the parties are getting a divorce. A common issue that practitioners face is whether money infused into the parties’ marriage from a party’s parent was intended to be a gift or a loan. The best way for the parties’ parents to protect these monies is for the parents to have secured the loan with a mortgage and a promissory note, signed by both parties, detailing the amount of the loan, interest and repayment terms. When such documents exist, the parents can implead into the parties’ divorce case as third parties seeking repayment of their loan from the parties’ marital assets.
Absent a written agreement confirming the parties’ agreement to repay the parents, the parents will not be able to prove the existence of the agreement as the statute of frauds requires that such agreements be in writing. N.J.S.A. 25:1-5; Atlantic Plastic Hand & Surgery, P.A. v. Ralling, 474 N.J. Super. 185, 194 (2021) (mother’s alleged oral promise to guarantee payment of adult child’s medical expenses did not fall within the scope of “leading object” exception to the Statute of Frauds and accordingly, must be in writing to be enforceable).
If the parents plan to pursue collection of the loan against the parties or a party, the parents must have separate counsel as they would essentially be filing a complaint against their child and child-in law seeking payment on the legal instrument that the parties signed during their marriage.
Even if these legal documents do exist, there may be a claim that the parents waived repayment if the terms of the loan were not complied with. The statute of limitation for a lawsuit seeking to enforce the terms of a mortgage and/or promissory note is six (6) years. N.J.S.A. 2A:14-1. If the loan terms were not complied with and the statute of limitation expired, these two facts may evidence that there was never an intent for these monies to be a loan and be repaid despite the existence of a legal agreement.
Further, at times, if these monies were used to purchase a home and the parties secured a mortgage from a financial institution, often the mortgagor will require the parents to sign a gift letter acknowledging that these monies were intended to be a gift and not a loan. If a gift letter exists, it also can be used by the spouse to argue that despite the existence of the mortgage and note, the parents never intended for these monies to be repaid.
It is more common for parents to provide money to the parties without requiring their child and daughter/son-in-law to execute a mortgage and promissory note. By the time of the parties’ divorce, it is too late for the parents to request that the parties sign legal documents to secure repayment of monies that they provided to the parties. In these cases, it will be unlikely that the parents can recover these monies upon the parties’ divorce. That, however, does not mean that the spouse should receive the full benefit of these monies. In such circumstances, the party should claim that equitable distribution is what is equitable and that does not always mean an equal division of the assets. Painter v. Painter, 65 N.J. 196, 209 (1974) (marital assets should be apportioned in a manner that is just and equitable, which is not always equal); Van Horn v. Van Horn, 2008 N.J. Super. Unpub. Lexis 797 (App. Div. July 14, 2008) (trial court’s decision to award one party 100% of the marital estate due to the other party’s significant inheritance was upheld).
The spouse may then argue that during their marriage, they relied on the monies from the parents in making financial decisions in the marriage. For example, if the parents provided money for the downpayment of a house, the spouse may argue that they would not have purchased the house and agreed to the enhanced lifestyle without the funding from the parents.
Barring the existence of legal documents supporting a parent’s claim for repayment of a loan from the parties, depending on the amount of the contribution, timing of same, and circumstances of the case, the best resolution may be to agree to an unequal distribution of the asset that was purchased with these monies. If the parents are not asserting a separate claim in the litigation against the parties, and the recourse that the parents seek through their child is for an unequal division of the asset that was funded in part with the parent’s monies, then the parents do not need separate counsel and these arguments can be asserted by their child as a party in the litigation.
A Spouse’s Debt to the Other Party’s
Parents Can Affect Equitable Distribution.
A party’s parents may believe that they can circumvent impacting their child in the litigation if they seek collection of a debt only from the spouse and not from both parties. For example, consider a loan made only to the spouse and not to the parents’ child or the child-in-law who worked for the parents and has now been terminated and accused of theft.
Even if the parents’ claim is only against the spouse and not their child, this claim can affect the equitable distribution in the matrimonial matter as debt is a consideration in the division of assets. N.J.S.A. 2A:34-23.1. First, even if the debt is titled in the spouse’s name and not the child’s name, as title is not determinative in determining what is and what is not included in equitable distribution, the debt may be equally divided between the parties in the matrimonial matter. N.J.S.A. 2A:34-23; Pascarella v. Pascarella, 165 N.J. Super. 558, 563 (App. Div. 1979) (debt incurred by defendant-husband during his marriage to plaintiff-wife was a debt of the marriage and therefore, should have been deducted from the total value of the parties’ marital property when calculating the net value of the parties’ assets subject to equitable distribution). Second, even if a spouse’s debt is not deemed a marital debt, the Court has the ability to consider the debt that will be assumed by the spouse in dividing the marital assets as part of equitable distribution. N.J.S.A. 2A:34-23. Third, even if the debt is not divided between the parties, a spouse who needs to repay the debt may have less income from which to pay support and therefore this debt will be factored into an ability to pay analysis in determining alimony and/or child support. Innes v. Innes, 117 N.J. 496, 504, 569 (1990) (when a court reviews an alimony award the court must reference to a number of factors, including, without limitation, the party’s ability to pay, in determining whether the former marital standard of living can be maintained).
If the debt was not titled in one party’s name, that party may argue that they were unaware of this debt and seek to disclaim it as a marital debt. The party may argue that had they known that this debt was being incurred, other expenses or purchases may not have been incurred during the marriage. The parents may support this argument by confirming that their child was not aware of this debt, and it was their understanding that the debt would be assumed by the spouse and not their child or they never would have permitted the debt to be incurred.
The spouse that incurred the debt will no doubt argue that this debt was part of the marital estate and, without this debt, the parties would not have been able to acquire certain marital assets. The spouse may further argue that the parents are only seeking to recover this debt because of the parties’ divorce and that the parents fully intend to repay their child for the portion in which the child is responsible.
Given the foregoing, the parents will need separate counsel to set forth their position. The spouse may issue a subpoena requesting the deposition and documents from the parents. As the debt that the parents are seeking to be repaid could affect both parties, it is not appropriate for the parents and the party to have the same counsel to address these issues.
How Does a Party’s Parents’ Funding of the Parties’
Lifestyle Affect the Finances in a Divorce case?
It is not uncommon for the parties’ lifestyle to be supplemented by one party’s parents. Not only may the parents fund the downpayment for the purchase of a home, but they also may pay for their grandchildren’s private school, activities, summer camp, and even family vacations. The spouse may claim that this funding was in consideration for the parties’ agreement to reside in close proximity to the other party’s parents. As a result, the parents may help care for their grandchildren, developing a close bond with their grandchildren.
The parties’ divorce may now put a stop to the funding of the parties’ lifestyle. The parents can argue that they do not have an obligation to support the parties’ lifestyle or their grandchildren. The case law generally does not require parents to assume such an obligation. That, however, does not mean that the spouse will not seek to use these facts to argue that this lifestyle should continue.
Grandparents do not have an obligation to support their grandchildren. Only in the most extenuating of circumstances, like if a grandparent assumes an in loco relationship with their grandchild, would such an expectation exist and be enforceable. In the matter of A.N. ex rel. S.N. v. S.M., 333 N.J. Super. 566 (App. Div. 2000), maternal grandmother, on behalf of minor daughter, brought action against paternal grandfather, on behalf of his minor son, to obtain child support for the child born to the two minors. The Court held that there is no authority in law to grant maternal grandmother’s request to order paternal grandfather to pay support and stated that though it may be fair, courts decisions must be based in the law. A.N. ex rel. S.N. v. S.M., 333 N.J. Super. at 572), certif. denied, 166 N.J. 606 (2000). In addition, the Court “…[d]ecline[d] to find, in the absence of any legislative policy to support it, any obligation of a non-custodial grandparent to support a grandchild, and this is so even though the grandchild is the offspring of an unemancipated minor. Such an obligation could dramatically change the financial and other relationships within a family, and in our view such a policy change should come from the Legislature.” Id. at 574.
The spouse may claim that the parents’ infusion of money into their marriage should be considered a source of income for the other party or argue that the party who receives these monies has a better ability to pay than the spouse. Aronson v. Aronson, 245 N.J. Super 354, 364 (App. Div. 1991) (held that if a spouse has the ability to “tap the income source” that it is inconsequential as to whether they/she actually obtains the cash in hand).Therefore, while the Court cannot compel the parents to continue to support the parties or their grandchildren, the Court has the equitable power to require the party receiving these monies from their parents to continue to pay for all or most of these expenses that they funded during the marriage. Ibid.
In this case, the parents need not retain separate counsel unless they are subpoenaed to appear at a deposition or produce documentations detailing the contributions that they have made to the parties’ lifestyle.
Can there Be a Promise to Support
Made by the Parents to the Parties?
The spouse may also argue that the parents who funded their lifestyle made a promise to support the family and that this promise to support was based on consideration of the parties’ agreement to reside in close proximity to them or perhaps one party chose not to work given the reliance on this support from their in-laws. Can the spouse claim that there was a promise to support them during the marriage made by the other party’s parents and seek to enforce this promise? Can the parents-in-laws be impleaded into the matrimonial case to seek to enforce this alleged promise against them?
Promissory Estoppel:
Arguably, the spouse may seek to justify their claim for a promise to support based on the doctrine of promissory estoppel. The doctrine of promissory estoppel was created to ensure that promises are not broken, and injustices do not occur. Restatement Second of Contracts § 12. Promissory estoppel requires the movant party to prove the following elements:
1. There was a clear and definite promise;
2. The promise was made with the expectation that the promisee would rely on it;
3. The promisee reasonably relied on the promise; and
4. The promisee incurred a definite and substantial detriment by relying on said promise.
Segal v. Lynch, 211 N.J. 230, 253-54 (2012).
The question then becomes, did the parents make a clear and definite promise to their soon to be ex child in law. If so, was this a promise to support the individual? Was there a promise to support the family unit? And if there was such a promise, for how long? These are all questions that not only need to be asked but also proven. Even if these questions can be affirmatively proven, the Courts have yet to accept that such an alleged promise would be binding on the parents post divorce. There are many promises made during a parties’ marriage that change once the parties get divorced. For example, the parties may agree that the home that they purchase will be their forever home. Further, the parties may agree that one parent will be a stay at home parent to raise their children while the other parent works to financially support their family. Moreover, the parties may agree that they would never require their children to take college loans to fund their college education costs. All of these promises, while well intended, may no longer be feasible or reasonable when the parties are getting divorced. If parties cannot be held to these promises, then how can parents of the parties be required to abide by these same promises when the parties are getting divorced?
Arguably, examples of clear and definite promises include that the parents promised to provide a certain amount of money each month to support the child-in-law or made an agreement to pay for specific expenses like their grandchildren’s extracurricular activities and private school tuition. However, promises to contribute financially to a once in-tact family unit are neither clear nor definite and therefore, are not enforceable. Malaker Corp. Stockholders Protective Comm. v. First Jersey Nat. Bank, 163 N.J. Super 463 (App. Div. 1978), certif. denied, 79 N.J. 488, 401 (1979) (court determined that an implied promise to lend an unspecified amount of money was not “a clear and definite promise” justifying application of promissory estoppel doctrine).
In addition to proving that there was a clear and definite promise, the second prong of consideration also needs to be proven. Continuing with this scenario, if the parents simply contributed to the financial needs of the once in-tact family because they had the means to do so, then there is no consideration. Simply put, there was no bargained for exchange between the parents and the soon to be ex-child-in-law. Lastly, a definite and substantial detriment needs to be proven.
While a promise to support may be creatively pleaded to bring a party’s parents into a lawsuit, this claim has yet to succeed under New Jersey law. Ibid.
Moreover, while the soon to be ex-child-in-law may not be able to afford the lifestyle that they previously enjoyed while married, this is the unfortunate reality for majority of divorcees and frankly, for many married individuals as well. This does not provide a basis for the party’s parents to need to supplement a party’s lifestyle. After all, as parents do not have an obligation to support their emancipated children, how could they have an obligation to support their emancipated child in law?[2] Newburgh v. Arrigo, 88 N.J. 529, 542-43 (1982).
Moreover, New Jersey case law is clear that parties are not entitled to continue the marital lifestyle if there is simply not the financial means to permit such a lifestyle. This is the case in the vast majority of matrimonial matters. See Reid v. Reid, 310 N.J. Super. 12, 21-22, (App. Div. 1998), certif. denied, 154 N.J. 608 (1998); (purpose of alimony is to provide dependent spouse with sufficient funds to maintain previous standard of living, as long as supporting spouse has financial wherewithal to do so); Guglielmo v. Guglielmo, 253 N.J. Super. 531, 544 (App. Div. 1992); (supporting spouse is obligated to maintain dependent spouse according to former status, as long as economically able to do so); Weishaus v. Weishaus, 180 N.J. 131, 145-146 (2004)
[2] Extenuating circumstances may exist, such as a child being incapacitated, that would require a parent to support their child after emancipation.
Equitable Estoppel:
While the doctrine of promissory estoppel may not prevail in a case where a spouse argues that there was a promise to support them during the marriage, would this spouse have a claim under equitable estoppel against the party’s parents? In contrast to promissory estoppel, equitable estoppel is defined as “conduct, either express or implied, which reasonably misleads another to his prejudice so that a repudiation of such conduct would be unjust in the eyes of the law.” Dambro v. Union County Park Comm’n, 130 N.J. Super. 450, 457 (Law. Div. 1974) (in the interest of justice, municipality was estopped from insulating itself from possible tort liability to plaintiff).
In the matter of Maeker v. Ross, this State’s Supreme Court recognized that equity could be used to enforce past promises made to support. Maeker v. Ross, 219 N.J. 565 (2014). However, it is essential to note that the Court in Maeker cites the matter of Kozlowski v. Kozlowski, wherein the State observed that many couples choose to cohabit and live in marital-type relationships without marrying. Kozlowski v. Kozlowski, 80 N.J. 378 at 386-88, 403. Based on this marital-type relationship, the Court in Kozlowski held that if one party induces the other to enter or remain in the relationship by a promise to provide support that the agreement to support – commonly referred to as a palimony agreement – will be enforced. Ibid. Thus, the Court in Maeker simply provided a basis for couples in marital-like relationships to be entitled to equitable relief if the promise was made prior to the enactment of the palimony statute requiring such promises to be in writing similar to those of formally married couples who are entitled to alimony and equitable distribution pursuant to N.J.S.A. 2A:34-23 and did not set precedent for any person to seek equitable relief for financial promises that were allegedly made by a third party.
There are many cases where this state’s courts estopped a party from certain actions in the interest of justice. More specifically, in the matter of Miller v. Miller, 97 N.J. 154 (1984), the court precluded a child’s stepfather from claiming he did not have a duty to support his minor stepchildren where his conduct had cutoff the children’s relationship with their biological father, Moreover, in Huer v. Huer, 152 N.J. 226 (1998), where the court precluded defendant-husband from claiming that he did not have a financial obligation to support plaintiff-wife whose divorce from a prior husband was deemed to be invalid in support of her request for equitable relief from third party defendants. It is essential to note that these cases look to the specific facts presented to them, which deal with the support of minor children in a nuclear family and married parties.
In the recent unpublished Appellate Division case, T.M., v. W.C., A-0562-21, (App. Div. December 6, 2022) plaintiff, T.M., filed a complaint against defendant, W.C., seeking a judicial determination that he was the biological father of her son, M.M., child support, and counsel fees. Defendant filed opposition. Though defendant admitted that he had an extramarital affair with plaintiff, he argued that plaintiff’s ex-husband, Senior, was the child’s “psychological parent” and therefore, should be responsible for child support. The trial court, however, denied defendant’s motion to file a third-party complaint against Senior and upon paternity being established, ordered defendant to pay child support.
Defendant appealed the trial court’s decision and argued, among other things, that plaintiff should be estopped from seeking support from him due to the time that elapsed since M.M. was born and that Senior, who is M.M.’s “psychological parent”, should be ordered to pay child support. In its analysis, the Appellate Division discussed how equitable estoppel is “a safety net for the child whose stepfather has affirmatively interfered with his right to be supported by his natural father.” J.W.P. v. W.W., 255 N.J. Super. 1, 3 (App. Div. 1991). The Appellate Division also discussed how only when “the stepparent’s conduct actively interfered with the children’s support by the natural parent” may a support obligation be imposed. Miller, supra, at 169.
In light of the above, the Appellate Division held that there was no basis to apply equitable estoppel and excuse financial participation by defendant as Senior had not interfered with the relationship between defendant and M.M. As such, the Appellate Division affirmed the trial court’s ruling, most notably, quoting the trial court judge who stated that Senior “should not be punished for attempting to provide a loving atmosphere for M.M.” and defendant should not be permitted “to take advantage of the circumstances largess of Senior.” T.M., supra, at 5.
If an individual who had a close relationship with a child, akin to that of a parent, could not be brought into a matter, wherein the child’s mother sought child support as a third party, or be ordered to pay support under the doctrine of equitable estoppel, then there is simply no legal basis for third parties to be brought into the divorce proceedings. A natural parent cannot hold a stepparent, or an individual who has assumed the role of parent, financially responsible for a child(ren) under the doctrine of equitable estoppel unless that individual has interfered with the relationship between the natural parent and child. Based upon this legal reasoning, equitable remedies would only be available under the doctrine of equitable estoppel if third parties interfered with one of the spouse’s abilities to financially support the other spouse – which cannot and should not include providing additional financial support on a needs basis, paying for family vacations, and the like, which would result in setting a dangerous precedent to establish parent palimony and open the floodgates for such litigation going forward. If a parent is impleaded into their child’s matrimonial litigation or is threated to be impleaded into said litigation, then the parent will need separate counsel to address these claims on the parent’s behalf.
The Termination of the Spouse from
Employment With a Party’s Parents
In some families, there may be a family business that employs one or both of the parties. It is the income and perks from this employment that pay for the parties’ lifestyle. Upon a divorce, the parents may suddenly reduce the income and perks of the party employee, or the employment may be terminated. For the child-in-law that is terminated from their employment with the parents, will it be reasonable to impute income to that party at the income that the party was earning when employed by a family member? Will the perks that were available to that spouse still be offered by another employer? Will perks that the family benefited from, such as payment of health insurance premiums, car payments, gasoline, car maintenance, EZ-Pass, and credit card for restaurant expenses still be available to the parents’ child and grandchild?
The parents, through counsel, may have a good faith reason for terminating the employee, especially an employee at will. Perhaps the parents’ business is suffering financially, which justifies the reduction of staff or termination of income of an employee. The party that was employed by the parents may have an employment litigation that they can commence to claim wrongful termination or reduction in income. This matter should be handled by separate employment counsel for the party that was employed as an employee and the party’s parent who served as the employee’s employer.
The employment litigation will no doubt incur counsel fees that will need to be paid for from marital assets, and this may require the allocation marital assets to fund a litigation fund. If the party employee was terminated for cause, the spouse may claim that the debt incurred in the litigation should not be shared by the parties and shall be borne by the party employee. On the contrary, if the termination was not for cause and not warranted, the employee party may argue that the debt incurred in the litigation should not be shared by the parties and shall be borne by the spouse claiming that the termination was part of scheme by the parents and the party to harm the party employee.
Regardless of how the debt is allocated, this set of circumstances will involve a separate lawsuit against the business that is owned by a party’s parent that employed the spouse during the parties’ marriage. This lawsuit, the costs of litigation and any results obtained, must be considered in addressing the financial issues in the matrimonial matter. And both the party employee and the parent employer will need separate counsel to address their respective claims in the employment litigation.
How Should 529 Plan Funds from a Grandparent
Affect the Parties’ Obligation to Pay for College
Consistent with the generous nature of some grandparents, grandparents may establish 529 Plans for their grandchildren and these plans may be established as soon as a grandchild is born. The grandparents may proudly tell the parties about the existence of these funds during their marriage. Now that the parties are getting divorced, the grandparents no longer want their generosity to benefit the spouse. The issue therefore arises whether the 529 Plan should be used to supplement all of the grandchild’s college costs or just the party whose family funded these monies share of the cost.
It is important to recognize that grandparents cannot be compelled to support their grandchildren. They therefore cannot be required to create or maintain 529 Plans for their grandchildren or pay for their education. The 529 Plan is an asset of the titled party. The beneficiary of such funds can be changed at any time. 26 U.S. Code 529(c)(3)(C)(i); 26 U.S. Code 529(e)(B). The grandparents can therefore choose to change the beneficiary of these monies to other grandchildren. They could even choose to liquidate the funds, pay the taxes and add these monies to their own assets. So, the question of whether 529 Plan funds will be available to fund college for a child at the time that the child commences college is often unknown at the time of the parties’ divorce when their child is not yet college age.
In cases where grandparents have 529 Plans, a party will request a copy of the statements for the 529 Plan in discovery. When a party does not produce these statements claiming that they are not in his possession, custody or control as the party is not the owner of the account, the grandparents may then be subpoenaed and requested to produce these statements. R.4:14-7(c). Does a party have the right to seek disclosure of the financial details regarding a third party’s assets when this third party is not a party to the litigation, and given that these assets may not be available to fund college for the parties’ children? In re Estate of Calcaterra, 2005 N.J. Super Unpub. WL 1384311 (Ch. Div. June 10, 2005) (The court granted a motion to quash filed by the trustee, who was also a beneficiary, of an estate that sought his personal financial information holding that the trustee’s personal financial information was not a conflict of interest and outside the scope of discoverable information). Upon receipt of the subpoena, it is at this juncture that the grandparents will need separate counsel to represent them.
The first question is whether there are grounds to quash the subpoena. If so, the grandparent’s counsel, not the party’s counsel, needs to file a motion to quash the subpoena. R. 1:9-2. In addressing this issue, the Court needs to weigh the third party’s right to privacy regarding their assets versus the party’s need to know the monies available to fund the party’s child’s college costs. If this information is not provided, then how can a party know how much they need to save in the future toward college costs?
In arguing that these assets should be used to fund both parties’ share of college, the spouse can argue that the parents had always promised these monies to them to fund college expenses and as a result, the parties did not include college savings as part of their lifestyle.
In arguing against using these assets to fund both parties’ share of college, the party can argue that these are not assets that belong to the parties and that they may not even be available to the children unless it is agreed that they will be used only toward the party’s share of college expenses.
Recognizing that a party may have a source of assets to be used toward their share of college expenses, a court can consider the existence of these 529 Plan at the time that the child is ready to attend college. If these 529 Plan assets are no longer available, can a court consider their prior existence in requiring that a party whose family had a 529 Plan for the Child pay a greater share of the college costs?
In determining the allocation of college costs, Newburgh v. Arrigo provides that the following factors should be considered:
(1) whether the parent, if still living with the child, would have contributed toward the costs of the requested higher education; (2) the effect of the background, values and goals of the parent on the reasonableness of the expectation of the child for higher education; (3) the amount of the contribution sought by the child for the cost of higher education; (4) the ability of the parent to pay that cost; (5) the relationship of the requested contribution to the kind of school or course of study sought by the child; (6) the financial resources of both parents; (7) the commitment to and aptitude of the child for the requested education; (8) the financial resources of the child, including assets owned individually or held in custodianship or trust; (9) the ability of the child to earn income during the school year or on vacation; (10) the availability of financial aid in the form of college grants and loans; (11) the child's relationship to the paying parent, including mutual affection and shared goals as well as responsiveness to parental advice and guidance; and (12) the relationship of the education requested to any prior training and to the overall long-range goals of the child.
Id. at 545. (emphasis supplied)
The case law supports consideration of the 529 plan in allocating college costs provided that said funds continue to exist at the time that the child is ready to attend college. If they do not exist, the question is whether the fact that they previously existed will support an argument that the party’s whose family established these funds for the child will be provided a source of money to that party to contribute to the college costs. Without proof that 529 funds exist for the child, it will be hard to prevail on an argument whereby the Court considers such monies in allocating college. At such time that the parents are subpoenaed, they will need separate counsel to guide them through the discovery process and perhaps file a motion to quash that subpoena.
Can An Anticipated Inheritance Affect Equitable Distribution?
At some point, the generous parents will pass away and, at that time, they may leave assets to their child. Provided that the assets are bequeathed to the child and not the child in law, the child in law will not have any right to seek a portion of those assets as an inheritance is exempt from equitable distribution. N.J.S.A. 2A:34-23(h). The investment experience, however, earned on the inheritance can be considered in addressing support issues in matrimonial matters or post judgment. Aronson v. Aronson, 245 N.J. Super. at 364 (App. Div. 1991) (the court held that “[t]o the extent that income is generated by a dependent spouse’s inheritance or by any other asset, that income is crucial to the issue of that spouse’s ability to contribute”). A spouse that receives an inheritance after the parties’ divorce therefore may be subject to a post judgment motion seeking to modify alimony or child support based on the income that can be earned on the inheritance. Until the inheritance is received or should be received by the party, the inheritance is not relevant to the financial issues in a matrimonial action as the existence of the inheritance has not been received.
However, if a party chooses not to receive the inheritance or the income from the inheritance, if the party has access to these monies, then they can and should be considered in assessing that party’s income. Specifically, the issue is not actual receipt of funds but access to them. “So long as the spouse has the ability to tap the income source,… whether he or she actually obtains the cash in hand is inconsequential.” Aronson v. Aronson, 245 N.J. Super. at 364-65 (emphasis added). See also Mey v. Mey, 79 N.J. 121, 125 (1979) (holding that husband’s interest in trust principle was ‘legally and beneficially acquired’ only when he acquired unimpaired control and totally free use and enjoyment).
To the contrary, however, if the inheritance is set up in a trust in which the party beneficiary does not have control over the trust, if income is not distributed from the trust, it cannot be considered in determining support. Tannen v. Tannen, 416 N.J. Super. 248 (App. Div. 2010). In Tannen, the Appellate Division held that the trial court could not infer an imputation of income from trusts that the wife was a beneficiary of where the wife did not exercise control over the trust. The Court recognized that the wife had monies available to her from the trust but because those monies were only distributed to her based on the discretion of a trustee, they could not be considered as her income and therefore used to reduce the husband’s support obligations to the wife. The Tannen Court discussed how this State’s courts have “[r]epeatedly recognized the broad discretion accorded trustees of a discretionary trust, and thereby, implicitly the limits upon a beneficiary’s ability to compel a specific exercise of the trustee’s discretion.” Id. at 265-267. As a result, the Tannen Court held that since the trial judge lacked any authority to compel the Trusts to make disbursements to defendant, that the Trusts should not be parties to the litigation. Id. at 270.
Although the parent may have been generous to the parties during their lifetime, that parent does not have an obligation to include the child, let alone the child-in-law, in their will. Accordingly, despite any expectation that may have existed during the marriage as to the parent’s estate upon death, the spouse in a matrimonial matter has no grounds to pursue a claim against the estate of their parent in law after the parent in law dies. In such case, unless the estate is subpoenaed or impleaded into the parties’ litigation, the estate need not obtain separate counsel in the matrimonial matter.
The issue of whether any portion of the income from the inheritance will even be considered as income to the party receiving it will depend upon whether the party receiving it has any control over how and when these monies are paid to them. This will be an issue in the parties’ matrimonial matter that can be addressed by the parties’ counsel.
How Can Grandparents Continue to Have a Relationship
With Their Grandchildren After the Parties’ Divorce?
Custody and parenting time issues are issues addressed in the matrimonial matter and allocated between the parties. Parenting time is time for a parent and a child to spend together. Grandparents do not have the right to parenting time. However, there are cases where the grandparents can implead into the litigation to request to spend time with the child.
The issue of grandparent visitation is most often seen in cases where one party dies or the party’s parenting time is suspended, and the parents of that party want to continue to have parenting time with the parties’ children. In these cases, N.J.S.A. 9:2-7.1 governs whether the grandparents have a right to visitation with the children. This statute provides:
[A] grandparent or any sibling of a child residing in this State may make an application before the Superior Court, in accordance with the Rules of Court, for an order for visitation. It shall be the burden of the applicant to prove by a preponderance of the evidence that the granting of visitation is in the best interests of the child. [When] making a determination on an application filed pursuant to this section, the court shall consider the following factors: (1) the relationship between the child and the applicant; … (6) the good faith of the applicant in filing the application; … [and] (8) any other factor relevant to the best interest of the child. [Moreover, pursuant to subsection c], …it shall be prima facie evidence that visitation is in the child’s best interest if the applicant had, in the past, been a full- time caretaker for the child. Ibid. (emphasis supplied)
In order to prevail with a claim for grandparent visitation, the grandparents have the burden to prove that by a preponderance of the evidence that (1) visitation is necessary to avoid harm to the child, and (2) that the denial of visitation between the grandparents and children would result to harm to children. Moriarty v. Bradt, 177 N.J. 84 (2003). In Moriarty, plaintiff-husband and defendant-wife were married on April 26, 1987 and had two children, Brian and Tara. The parties eventually separated, and husband instituted a divorce proceeding, during which time, the wife was hospitalized for drug abuse and the children remained in the care of their father. As a result, the wife’s parents intervened in the parties’ divorce action in an effort to secure visitation with their grandchildren. Pursuant to the parties’ dual final judgment of divorce, the husband was granted sole custody of the children, and the wife was granted supervised visitation with the children, to occur in the presence of the maternal grandparents. Id. at 89-90.
The husband soon alleged that he feared for the children’s safety while in the care of the maternal grandparents due to a series of events, including, but not limited to, one of the children dropping hot chocolate on himself that resulted in second and third degree burns. During this time, the wife died from an overdose of drugs. The husband blamed the maternal grandparents for the wife’s challenges and feared that their relationship with the children could negatively impact the children. Nevertheless, the maternal grandparents continued to seek visitation with their grandchildren. Id. at 91-101.
The New Jersey Supreme Court was faced with determining husband’s due process right when considering the maternal grandparent’s right to visitation with their grandchildren and sought guidance from the United State’s Supreme Court’s decision in Troxel v. Granville, 530 U.S. 57, 120 S. Ct. 2054, 147 L. Ed. 2d (2000). In Troxel, the Court held that Washington state’s Grandparent Visitation Statute was overbroad and infringed on parent’s constitutional rights to rear children. Id. at 69. Therefore, the New Jersey Supreme Court was tasked with determining the burden of proof that third parties seeking visitation must meet pursuant to N.J.S.A. 9:2-7.1. The Court ultimately held:
[That it is] unrealistic not to distinguish between an award of custody to a third party and grandparent visitation based on the level of intrusion into family life that each entails. The former is obviously a greater invasion of family autonomy and privacy than the latter. It is for that reason that we decline to adopt the position of our colleagues who would require grandparents to prove by clear and convincing evidence the necessity for visitation to avoid harm to the children. We instead approve the preponderance of evidence burden in this statute as fully protecting the fundamental rights of parents when coupled with the harm standard.
Moriarty at 116-7.
The Moriarty Court found that visitation with the maternal grandparents was in the best interests of their grandchildren and did not infringe upon husband’s constitutional rights. Id. at 122.
While grandparent visitation is not easy to obtain, in a case where the grandparents were very involved in the children’s lives and suddenly cut out of their lives, recognizing that the best interest of the children is to continue the relationship with the grandparents, the grandparents will have a viable claim.
If a party’s parents have a basis to request grandparent visitation, they will need separate counsel to address their rights in the parties’ litigation.
Conclusion:
The generosity of a party’s parents can and will have an impact on the parties’ divorce. If the parents are subpoenaed for documents or testimony or they have a claim against a party or if a party files a claim against the parents, then the parents will need separate counsel to address their rights in the case. In order to be equitable and fair to the party, the spouse and the parents, the parties need to be creative in resolving the case.
[1] Sheryl J. Seiden, Esq. is the founding Partner of Seiden Family Law, LLC in Cranford, New Jersey. She is a former chair of the Family Law Section of the NJSBA, a trustee of the NJSBA and the President-Elect of the American Academy of Matrimonial Lawyers. She is also a fellow of the International Academy of Family Lawyers, a member of the Matrimonial Lawyers Alliance. She thanks Shelby Arenson, Esq. for her assistance in researching for and preparing this article.