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Our CFL course outlines the strategies you should follow to divide executive compensation properly. These and other financial issues of divorce aren’t usually about who you know, they’re often more about what you know.

In the New York appeals case of Hofmann v. Hofmann, the division of shares took the spotlight. The appeals court also decided whether the ex-wife was entitled to maintenance, retroactive child support, and repayment of counsel fees.

 

Case Details

Philip and Dina Hofmann were married for 16 ½ years and divorced in July 2018. The final judgment awarded Dina 25 percent of Philip’s interest in shares and investments from his former employer, Oaktree Assets. The court also ordered Dina to pay 50 percent of the taxes from the 2018 income received from Oaktree Assets. It denied Dina’s request for retroactive pendente lite support and reallocation of certain marital funds spent while the divorce was pending. The court also declined to award her post-divorce maintenance, yet it granted her repayment of 41 percent of her counsel fees.

The ex-spouses appealed for different reasons. Philip argued that Dina wasn’t entitled to half of the investment assets because she didn’t make significant contributions to the marriage. Dina asserted that the trial court erred in requiring her to pay 50 percent of the tax liability for those assets when she was awarded only 25 percent of their value. She also petitioned for post-divorce maintenance and retroactive child support and a larger award of counsel fees because of Philip’s unreasonable conduct.

 

Supreme Court of New York, Appellate Division, First Department Verdict

The appeals court upheld the ruling that granted Dina 50 percent of Philip’s interest in the shares and investments. The court also found that despite Philip’s claims, Dina’s major contributions to the marriage were serving as a parent and homemaker while Philip pursued his career and amassed significant wealth. 

Further, the court determined that Philip was still an “at-will” employee during the marriage. As such, his investments in Oaktree Assets, which he paid with marital funds, were a financial incentive for continued employment and compensation for his performance.

“As the Oaktree Assets constituted compensation, their marital value should be distributed in the same manner as the parties’ other marital assets, rather than treated as a ‘closely held’ business interest (see Lijun Feng v Jansche, 170 AD3d 409 [1st Dept 2019]) .”

Regarding Dina’s tax liability for those assets, the appeals court found the argument “moot” and “in any event, unavailing,” because the trial court had divided the tax liability fairly between the parties before equitable distribution. At the time of the distribution, the tax liability would “shift in accordance with their distributive shares.” And, before the distribution, both parties used the income from those assets equally to pay for marital expenses.

Also, the court agreed that Dina’s distributive award of the assets, “now substantially increased,” would generate enough cash flow to make her self-supporting.

The court reversed the ruling to award Dina credit for Philip’s use of marital funds and part of the investment proceeds to pay for housing and car expenses. 

As for Dina’s maintenance and child support requests, the appeals court found they weren’t warranted because the parties stipulated they would withdraw about $2.2 million against the equitable distribution to pay expenses. There was no evidence to support the need.

The court upheld the 41 percent repayment of Dina’s her counsel fees “in view of her substantial distributive award and the evidence that payment of her remaining counsel fees will not affect her ability to meet her living expenses (see e.g. Wyser-Pratte v Wyser-Pratte, 68 AD3d 624, 626 [1st Dept 2009]).” It discovered no evidence to support her contention that she should receive more.

Learn about executive compensation strategies in our CFL course. Find out why the successful resolution of these financial matters is less about who you know, and more about what you know in our free information packet today.