Articles Posted in Division of Property

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Hiding AssetsHiding assets in a California divorce? Divorcing couples are required to divide their assets in order to go their separate ways. Since California is a community property state, anything accumulated during the marriage must be divided equally. Sounds simple, right? What if you suspect your soon-to-be ex is hiding assets to which you are legally entitled? It happens more than you might think, and that is precisely why effective legal representation is a must.

Dirty Tricks

The higher earning spouse may have a number of sneaky maneuvers planned in order to keep more than his or her fair share of your accumulated earnings:

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transmutationTransmutation of assets and debts in a California divorce. One of the most difficult aspects facing divorcing couples, aside from issues of child support and child visitation, is the issue of division of property. Some of the most contentious aspects of divorces stem from the identification of separate vs. community property. Since California is a community property law state, the identification of property as either separate or community is critical.

Separate property is defined as any property that a spouse owned prior to marriage, received by gift or inheritance during the marriage, or acquired after the date of separation. Community property is presumed to be any property that was acquired by the couple during the marriage that is not a separate property gift or inheritance. Because California is a community property state, if the parties go to trial with no agreement as to the division of the community property, the court only has the authority to divide the community property equally between the parties on a 50/50 basis. The parties can agree to divide the community property in an unequal division, but their agreement must be in writing, signed by both parties and filed with the court. The separate property of each spouse remains that party’s separate property and will not be divided. For this reason, whether the transmutation of a property is found to have occurred during the marriage is critical to the division of property.

In divorce proceedings, under California law, the transmutation of property occurs when the character of the personal or real property at issue has been “transmuted” or changed from either separate property to community property, or vise versa. See Family Code §850-853.

Why is This Important to Know?

The issue of transmutation of property is important to know for two very critical reasons. First, transmutation may occur unintentionally, without the parties knowing it; and second, it may not seem important to the parties unless they are facing divorce and then it may be too late to do anything about it.

An Example of the Transmutation of Real Property

Say the husband purchases a piece of income property prior to marriage. After marriage, wanting to take advantage of a lower interest rate, he decides to refinance the property. Both husband and wife sign the loan documents in order for the couple to qualify for the refinanced loan. At the end of the refinance transaction, husband signs a deed transferring title to the property from himself to both he and his wife. Husband has effectively transmuted his separate interest in the real property to the community. This is only one example of how separate property can be transmuted into community property.

Family Code §852 – Requirement of a Written Declaration

Before 1985, married couples could effectively transmute their separate property to community property by “words” alone. This led to major difficulties for the court in its efforts to determine who said what and when, or who was telling the truth about the transmutation and who was not.

After the enactment of Family Code §852, the law required that any attempts to transmute the character of any property during the course of a marriage must be evidenced by a writing and signed by the party to be charged.  For more information on this issue, please consult a family law attorney. Continue reading →

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Quasi-Community PropertyQuasi-community property, what is it and what effect does this classification have on the distribution of the marital estate during divorce proceedings?

Marital property, no matter what jurisdiction you live in, is any property that was acquired during the marriage. There are exceptions to this rule, however, but for purposes of determining what “quasi-community property” is, we will start with the premise that the property was acquired during the marriage and is not subject to any exception.

Community Property Law States vs. Equitable Distribution Jurisdictions

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Earlier this year, Jamie McCourt, the former CEO of the Los Angeles Dodgers and ex-wife of the Major League Baseball franchise’s former owner, Frank McCourt, filed a petition to overturn the couples’ divorce settlement. The divorce settlement was reached in 2011 when Frank McCourt still owned the Los Angeles Dodgers.

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In the couple’s 2011 divorce settlement, Jamie McCourt gave up her ownership claim to the Los Angeles Dodgers in exchange for $131 million.
The terms of the couple’s divorce settlement provided Jamie McCourt with $131 million in addition to a share of the couples residences. In exchange, Jamie McCourt gave up her ownership claim to the Major League Baseball franchise.
Jamie McCourt argues that Frank McCourt represented that the franchise was worth less than $300 million but sold the team for $2.15 billion just six months later.
In the petition filed earlier this year, Jamie McCourt argued that she agreed to the terms of the divorce settlement because her former husband misled her regarding the value of the Los Angeles Dodgers franchise. Jamie McCourt alleged that her ex-husband represented that the Major League Baseball franchise was valued at less than $300 million while under the penalty of perjury. However, just six months after the couple’s divorce settlement was finalized Frank McCourt sold the team for $2.15 billion through a bankruptcy court auction.
A Los Angeles Judge ruled this week that Jamie McCourt did not provide sufficient evident to support her allegations of fraud.
This week, Los Angeles County Superior Court Judge Scott M. Gordon issued a ruling denying Jamie McCourt’s petition. In his opinion, the Judge reasoned that Jamie McCourt failed to provide the Court with sufficient evidence to prove that she did not have a full and complete understanding of the value of the couple’s assets when she agreed to the divorce settlement. The Judge went on to reason that Jamie McCourt was a sophisticated individual who had familiarity with the business, having served as the franchise’s CEO.
Study reveals that couples routinely hide financial information from one another.

A Forbes magazine article published last year revealed that partners routinely hide assets from each other, both when their marriage is going well and during divorce proceedings. The article cited a study conducted by the National Endowment for Financial Education which found that 58 percent of spouses report hiding cash from their partners and 34 percent admitted to lying about their finances, debt, or earnings.
Misrepresenting information in a Financial Affidavit that is filed with the court in a divorce proceeding is illegal and can result in serious penalties. If you believe that your former spouse misrepresented financial information during your divorce proceeding and settlement process, you should contact an attorney immediately. An attorney will be able to review the circumstances of your case and determine your options for recourse.
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In most cases, when a couple decides to separate and file for divorce their ownership in real estate acquired during the marriage and the resulting mortgage debt is the largest investment which they must split up. The division of debt is a complex process and requires parties to consider various issues at the same time. This can be a difficult task at any given time and becomes even more taxing when individuals are dealing with the stress of a separation. As such, it is important for married couples that own real estate together and have mortgage debt to consult with an experienced divorce attorney who can guide them through this process. Mortgage Debt.jpg
A party is still liable for their joint mortgage obligation even when a court issues a divorce decree requiring their spouse to pay mortgage payments.
One of the most confusing aspects of a having a joint loan obligation with your spouse is the limitations of a divorce decree requiring your former spouse to maintain jointly owned properties or obligating your former spouse to pay mortgage payments. Unfortunately, a judicial decree of this type during your divorce proceeding does not absolve you from the loan obligation you share with your former spouse. This does not mean that you do not have other recourse against your former spouse if they fail to follow the court’s other. However, those measures will not protect your credit or change your legal obligation to lenders. Loan obligations are binding contacts, the terms of which must be satisfied even after a divorce.
It’s best to end a marriage with as little joint debt as possible.
For this reason, many divorce attorneys advise their clients who are considering filing for divorce to end their marriage with as little joint debt as possible. However, in recent years, the decline of the real estate market has made this a difficult or non-existent option for some.
If selling property is not an option, one spouse may be able to refinance or assume to mortgage debt.
However, this does not mean that you are without options if you are considering filing for divorce and hold a joint loan obligation with your spouse. You and your spouse may agree to refinance the loan in one of your names, removing the other’s liability for the debt. In some cases, your lender may allow you or your spouse to assume the mortgage debt independently. Both of these solutions require at least one spouse to possess the financial means to repay the mortgage debt in its entirety. In addition, refinancing often requires that the property have sufficient equity. However, if one of these options works for you and your spouse, interest in the property can be transferred to reflect the mortgage liability via a quitclaim deed or an interspousal transfer grant deed.

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One Million.jpgIn October of 2011, former Los Angeles Dodgers owner Frank McCourt and his wife, Jamie McCourt, who served as the Dodgers’ CEO reached a divorce settlement agreement. Pursuant to the terms of the agreement, Jamie McCourt received $131 million tax-free as well as, ownership of several properties.

However, Jamie McCourt recently filed claims alleging that her former spouse committed fraud by misrepresenting the Dodger’s assets. According to court documents, the misrepresentation resulted in her agreeing to a settlement that was nearly $770 million lower than what she was entitled too. She is back in court seeking a larger settlement.

Jamie McCourt states that Frank McCourt provided her with financial documents which indicated that the Dodger’s assets were valued at less than $300 million, when he knew that their true value was much higher. The information provided to Jamie McCourt did not include the value of a future regional sports network, projected to enhance the team’s value by $1 billion.

According to Franck McCourt’s attorney, Jamie McCourt was provided with details regarding plans to build a regional sports network, but that it wasn’t listed as an asset because it was not yet in existence. Frank McCourt’s attorney argues that Jamie McCourt was provided with the Dodger’s most up-to-date financial documents before settlement was reached and that she failed to do her due diligence prior to agreeing to settlement. During trial, Frank McCourt’s attorney stated that there was no evidence to support Jamie McCourt’s claims of fraud.

In late April, Jamie McCourt testified that she was under the impression that she and Frank McCourt were splitting their assets equally. Jamie McCourt stated that she was surprised to learn that the Dodgers were worth more than she was led to believe when the team sold for $2 billion after the couple’s divorce was finalized.

A ruling in this case is not expected until later this summer. However, if the presiding Judge tosses out the divorce settlement, the former couple will resume previous arguments regarding whether the Dodgers were community property under California law or if they solely belonged to Frank McCourt.

Financial Information Frequently Hidden in Divorce
An article published in Forbes magazine late last year revealed that partners routinely hide assets from each other, including during divorce proceedings. According to a study by the National Endowment for Financial Education, 58 percent of spouses report hiding case from their partners and 34 percent admitted to lying about their finances, debt, or earnings.

Misrepresenting information in a Financial Affidavit that is filed with the court in a divorce proceeding is illegal and can result in serious penalties.

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spy.jpgPrivate investigation firms have long offered divorce assistance as a primary service. However, these services can be very expensive and can even cost more than the legal fees associated with filing for a divorce. Because filing for a divorce often comes with financial strains, many individuals who would like to hire a private detective to spy on their spouse, simply cannot afford to do so.

SPYING ON YOUR SPOUSE IS EASIER THAN EVER

However, in recent years more and more information is communicated through email, smartphones, and social media. In fact, a recent survey by the American Academy of Matrimonial Lawyers found that 92 percent of lawyers had observed increases in evidence from smartphones over the past three years. The information gathered from smartphones included text messages, emails, call histories, and GPS location information.

In addition, according to a recent Wall Street Journal article, spyware that was once only accessible to governments and corporations are now cheap and readily available to the general public. According to the article, companies selling GPS trackers, nanny cams, and other spy gear reported significant increases in sales. For example, BrickHouse Security reported that sales of its GPS tracker have nearly doubled each year, for the past three years. Another company, SpygearGadgets.com, said sales of their GPS tracking devices had increased 80 percent in 2012 and their nanny cams and hidden camera sales rose 40 percent.

A CALIFORNIA DIVORCE ATTORNEY CAN HELP YOU MAKE THE RIGHT DECISION

An individual who is considering filing for a divorce may want to spy on their spouse in order to obtain various kinds of evidence. Spying may reveal evidence of:

  • Hidden assets
  • Infidelity
  • Neglectful or abusive treatment of children

However, just because it is easier than ever to obtain evidence for a divorce case by spying on a spouse, doesn’t mean it is the best approach in every circumstance. An attorney can help an individual who is considering filing for a divorce to determine what evidence will be helpful and the best way to go about obtaining the information.

For instance, an individual who is considering filing for divorce may want to know whether their spouse was unfaithful during the marriage. But, this information is typically irrelevant to a divorce proceeding in California. Under California law, all divorces are considered “no fault” divorces. The individual seeking a divorce does not have to prove that their spouse did something wrong. In addition, the court will not penalize a cheating spouse by awarding them less property or requiring them to pay more support.

In addition, the privacy laws surrounding spying on a spouse are currently in flux and not clearly defined. Overzealous spying can subject an individual to stalking, wiretap, cybercrime, and trespass laws, as well as civil suits. Therefore, it is important for anyone who is considering spying on their spouse to consult with an attorney who will be able to navigate this emerging area of law.

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Credit Card.jpgAccording to the American Bankruptcy Institute, in 2011, there were a total of 1,362,847 personal bankruptcy filings across America. Of these personal bankruptcy filings, 232,593 were filed within the State of California.

There are many factors that can lead to bankruptcy including: medical expenses, job loss, uncontrolled spending, unexpected disasters, and divorce. The divorce process comes with significant financial burdens. Typically, both partners will incur sizeable legal fees and will have to maintain separate households. In addition, the division of marital assets and child support and/or alimony obligations can impact an individual’s financial health when a marriage dissolves.

For example, last year one of the lead attorneys responsible for securing a $660 million settlement in a clergy abuse case in Los Angeles filed for bankruptcy. He cited legal bills associated with his divorce, totaling nearly $8 million, as the primary reason for filing bankruptcy. The five-year legal battle between the attorney and his former wife centered around her entitlement to half of his $13 million earnings from the settlement.

CALIFORNIA FAMILY LAW ATTORNEYS CAN HELP

You should consult with a Family Law Attorney immediately if you are seeking a divorce, and your former partner is considering or has filed for bankruptcy. You may have certain legal obligations or entitlements related to your former partner’s bankruptcy filing. An attorney can advise you on how your partner’s bankruptcy filing may impact you.

Given the mounting financial pressure that comes with the divorce process, it is not uncommon for one or both partners to file for bankruptcy to avoid payment of individual debts, community debts, and other financial obligations they may not be capable of meeting.

DOMESTIC SUPPORT OBLIGATIONS

In 2005, the Federal government enacted the Bankruptcy Abuse Prevention and Consumer Act. The purpose of this new law was to prevent former spouses from filing for bankruptcy in order to avoid paying child support and/or alimony obligations. Under the new law, domestic support obligations such as child support and alimony are considered priority claims that cannot be discharged during bankruptcy. Therefore, if your former partner has a child support or alimony obligation to you, it will either be paid in the bankruptcy or survive as a debt to you.

PROPERTY SETTLEMENT DEBTS

In addition, under the Bankruptcy Abuse Prevention and Consumer Act, property settlement debts are non-dischargeable in a Chapter 7 bankruptcy. However, this type of debt remains dischargeable if your former spouse files for a Chapter 13 bankruptcy.

CREDIT CARD DEBT

California is a community property state. In a community property state, property acquired during the marriage is owned by both partners, and debt acquired during the marriage is owned by both partners as well. This is true even if your name is not on the debt. Therefore, if your former partner files for bankruptcy and does not pay their credit card debt, the lender can seek payment from you. This is the case even when your former spouse agrees to pay the debt during divorce settlement negotiations, because lenders do not recognize divorce court orders.

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Dividing Retirement Accounts.jpgHow does a couple going through a divorce go about dividing retirement accounts in a community property state? California is a “community property” state which has critical implications on how all property is divided in the event of a divorce. Essentially, in states with general legal rules like ours, all property acquired during a marriage or earned while the partners were married is deemed owned by both–it is “marital property.”

This idea seems simple enough for major assets–like house or a car–but what about more unique items, like retirement accounts? As a general rule, in most situations, vested retirement account benefits (those that are already earned) are considered community property and shared during divorce. It is important to understand that this is different than other forms of payments which are not split this way. For example, many government benefits, like worker’s compensation or social security, are not divided up between couples in a divorce.

Retirement Plans

Understanding how retirement accounts might be divided up and used following a divorce requires first appreciating the difference between different plans. Most notably, a retirement plan either has “defined benefits” or “defined contributions.” As the name implies, the defined benefit plan comes with a guaranteed monthly payment (benefit). This is different than a defined contribution plan which does not have a specific payout but is instead based on the contributions that you (the employee) and/or your employer put into the account. In general, defined contribution plans are becoming more and more common, because they come with less locked-in obligations in the long-term and are cheaper for most involved.

Defined Benefit Plans
By far the most common defied benefit plan is the traditional pension. With a pension, in most cases, at retirement age a beneficiary receives a set monthly payout. These may prove complicated in the midst of divorce, because there is not necessarily a set value sitting in some account to split. Yet, in most cases a value of the pension will be ascertained and split to the best of the court’s ability.

Defined Contribution Plans
A 401(k) plan is one of the more common defined contribution plans. Many local residents may have one of these. In most cases this plan is administered by an employer and involves agreement for a certain amount of contributions from both employer and employee each pay period. Federal rules limit contributions to $15,000 per year. In divorce the total amount in the 401(k) can be divided between spouses. However, it is critical to understand how early withdrawal, prior to retirement, results in a tax bill and potential penalties.

A 403(b) plan is like a 401(k) plan but its use is limited to certain entities. Only various governments, nonprofits, ministers, and others can take advantage of this option. Perhaps the most unique feature of these accounts is that there are limits on what investments can be made and even how many investment changes can be made. Rules allow one to contribute slightly more than in a 401(k) for these–up to $17,000 per year.

Finally, a defined contribution plan that most are probably familiar with is an Individual Retirement Account (IRA). IRAs are usually opened with a traditional financial institution, like a bank. Compared to 401(k)s and 403(b) plans there may be more flexibility in accessing these retirement accounts (with a penalty). Like the above plans, during divorce, an IRA account can be drained and split between spouses.

In many cases, retirement benefits are significant, and there is no other option but to take them out and split them. But, there are alternatives. For example, if one wanted to maintain an account intact, it might be possible by offering the other spouse alternative assets to offset the value of the retirement account. It it important to speak with an experienced divorce lawyer for help with these issues.

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Dividing the Pie.jpgDivision of debt in divorces is all part of a division of assets. Throughout a marriage, many couples acquire so many possessions, many of which have significant emotional value, and spouses wish to ensure that they retain the items dearest to them. Unfortunately, marital debt is also marital property and must be equitably divided during the divorce process. Particularly since the economic downturn in 2008, more and more divorcing spouses have to deal with extensive debt issues.

Divorcing spouses have two different options when dealing with debt during a divorce: pay off all of their debt prior to filing for divorce or dividing the debt. In most cases, divorcing spouses are not able to pay off all of their debt prior to divorcing, or they likely would have already paid it off. As a result, most divorcing spouses must determine the best and most appropriate way to divide the marital debt.

A divorce court will typically look at who incurred the debt and who benefited from the debt, to help determine who should be responsible for paying off the debt. For example, if one spouse purchases an expensive set of golf clubs with a credit card and uses those golf clubs every weekend to play golf, then it makes sense for that spouse to be responsible for paying that debt. As a general rule, only marital debt, acquired during the marriage rather than before the marriage began, will be divided by the court. Additionally, since California is a community property state, spouses are equally responsible for debt acquired during the marriage, no matter whose name the debt is in.

In almost every case, it is recommended that you request a credit report before you file for divorce or, at the very least, immediately after filing your divorce papers. The credit report can provide you with a great deal of information about your debts, including the status of your accounts, when they were opened, when they were closed (if applicable), and who is responsible for the debt. Your credit report could also remind you about old accounts that were never properly closed, which may be very important during the divorce proceedings if they are joint accounts.

Depending upon the circumstances, bankruptcy may need to be considered to deal with mounting debt issues. Depending upon the circumstances, one spouse may file on his or her own, or the couple may file jointly prior to finalizing the divorce. If most or all of the debt is in one spouse’s name, then it may be best for that spouse to individually file for bankruptcy. A couple may only file jointly for bankruptcy if they are still married, so once the divorce becomes finalized, a joint filing is not permitted. However, even if a couple is still married, a joint bankruptcy may not be possible due to conflicts of interests if they have already filed for divorce. It is important to remember that a bankruptcy will not discharge child support or spousal support obligations. In addition, Chapter 7 bankruptcies do not discharge any court-ordered obligations, but a Chapter 13 bankruptcy filing may still discharge such obligations.

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