Real Estate Moguls and Divorce

Every estate planner is pushing developers to gift
real estate now while values and interest rates are low using GRATs, IDIT and
other fancy acronyms. But low property values and other economic issues
befalling some real estate investors and developers won’t necessarily support a
sufficient change in circumstances to modify alimony or child support
obligations, according to a recent New Jersey case. If you file an application
for a downward modification of support, the court’s analysis will focus on your
ability to pay. Miller, 160 N.J. 408 (1999). In conducting
this analysis, the court may consider your income as well as your

assets.
N.J.S.A. 2A:34-23(a)(3).  In Ferraro v.
Ferraro,
Docket No. A-1963-07T21963-07T2 the impetus for the husband’s motion was the
slow-down in the real estate market, which consequently impeded his ability to
develop the parcels he owned and thus, thwarted his ability to generate
sufficient income to meet his support obligations. He cited the change in the
economy, the large tax debts he owed the IRS and the State of New Jersey,
increased expenses resulting from rising mortgage interest rates, property
taxes and utility costs, and decreased cash flow because income producing
assets were liquidated. The Court held that Husband bears the burden of
showing: (1) The financial changes he experienced; (2) That those changes are
permanent; and (3) His inability to pay the level of ordered support.  Lepis V. Lepis, 83 N.J. 139
(1980).  The Court found that Husband’s
certification did not elucidate the details of his employment efforts and
current business enterprises or attach documentation to support his inability
to further liquidate assets. Further, the Court noted that the identified
shortfalls were only after consideration of “paper deductions,” such
as depreciation.