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"Enhanced Earning Capacity" No Longer a Marital Asset in New York State

Kahn and Richardson - Tuesday, March 01, 2016

In 1985, the New York State Court of Appeals decided the case of O'Brien vs. O'Brien, 66 NY2nd 576 (1985). The Court held than an interest in a profession or in professional career potential, such as a degree or license to practice a profession, is marital property which the Court may distribute equitably upon a Divorce. The case law that ensued over the next three decades applied that legal principle by permitting spouses to value, through expert testimony, the “enhanced earning capacity” attributable to one spouse as a result of having obtained a degree or professional license during the marriage.


In June 2015, both houses of the New York Legislature passed a new law, effective January 23, 2016, which states the following:


“The Court shall not consider as a marital property subject to distribution the value of a spouse's earning capacity arising from a license, degree, celebrity goodwill or career enhancement. 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.”


As cases commenced on or after January 23, 2016, travel through the Court system, we will learn whether the new law is interpreted to obviate the necessity for expert testimony of if the second sentence quoted above leaves that option open.


Domestic Relations Law Section 236 (the “Equitable Distribution Law”) has always required the Court to consider “any other factor which the Court shall expressly find to be just and proper” in determining an equitable distribution of marital assets and liabilities. The Courts have now been specifically directed to consider “the direct or indirect contributions to the development during the marriage of the enhanced earning capacity of the other spouse.” This may result in the continued obligation of parties to engage experts on this issue.


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Practice Areas
  • Divorce
  • Separation Agreements
  • Custody & Visitation
  • Property Division
  • Spousal Maintenance
  • Child Support
  • Prenuptial Agreements

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