Articles Posted in Divorce Lawyer

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A recent Forbes article reveals why it is important for couples who are contemplating divorce to rely on the advice of attorneys who specialize in handling such matters, rather than information gleaned through conversations with friends and family, or the tabloids and news outlets.

News accounts regarding the divorce of Bethennay Frankel and her husband have provided erroneous information regarding New York state law and the couples’ property rights.

In the article, the author uses the divorce of Bethenny Frankel from her husband, Jason Hoppy as an example. The couple is best known for their roles on the television show, Real Housewives of New York. Frankel is also the force behind Skinnygirl, a line of low calorie alcoholic drinks. Hoppy is a pharmaceutical sales rep. Frankel and Hoppy filed for divorce in January of this year.

News reports have indicated that the couple continues to live together in their marital home, a $5 million Tribeca loft apartment, with their young daughter, Bryn. These accounts suggest that both parties want to remain in the home because moving out would constitute abandonment of the property under New York state law and make it more difficult to claim the property during the couple’s divorce settlement.

However, this information is erroneous, under New York state law, the couple’s apartment is considered marital property since it was acquired during the marriage using marital assets. This means that the property will be subject to division during the divorce settlement, irrespective of who’s been living at the address during the separation. This has been the law in New York since 2010, when the state established non-fault divorce. Prior to this, leaving the marital home could have been used to make an assertion that the property was abandoned by the leaving spouse.

Couples maintain their property rights in the marital home even if they leave during separation; however it is important to reach an agreement on key issues. Alimony

Although the reference here is to New York law and not that of California, the lesson applies to divorcing couples in California as well. This being said, Laura A. Wasser, a Los Angeles based attorney and author of a forthcoming book about financial matters relating to divorce, states that although she almost always advises clients to establish distance when they separate, it is important for couples to have a serious discussion regarding their property before doing so. Wasser suggests having a conversation about the following issues:

1. Care of the Property: This includes maintenance and interim financial obligations.

2. Property Left in the Home: This includes what property is being given up and what property will be divided and retrieved at a later point.

3. Parameters: This includes what entitlements the leaving spouse has to the home after they leave. Can they use the home on certain occasions or in some circumstances? Or does the remaining spouse receive exclusive use and an expectation of privacy in the home.

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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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Health Insurance.jpgHealth insurance is a hot topic these days, spurred on by the passage on March 23, 2010, of the Patient Protection and Affordable Care Act (PPACA), more commonly known as Obamacare. The primary purpose of the PPACA is to reduce the number of uninsured Americans while reducing overall medical costs. On June 28, 2012, the United States Supreme Court upheld the constitutionality of the PPACA in the case, National Federation of Independent Business v. Sebelius. With all the recent developments in this area, it is important to know how health insurance coverage plays out in the divorce process.

If both you and your spouse are employed and maintained health insurance coverage through your respective employers, then maintaining that arrangement should be addressed during divorce negotiations and specifically stated in the marital settlement agreement or divorce decree. If, however, you maintain health insurance through your spouse’s employer, once the divorce is finalized, you will no longer be eligible for coverage. Address the issue early on so that you do not end up with a gap in coverage, which could jeopardize your eligibility for health insurance.

There are several options available. If your spouse’s employer has more than 20 employees, then you are eligible to apply for continued health insurance coverage under the federal law known as COBRA (Consolidated Omnibus Reconciliation Act), passed by Congress in 1986 to provide for the continuation of group health coverage that might otherwise be terminated. A divorced spouse may elect COBRA coverage for a maximum of 36 months, but be warned: COBRA is usually more expensive. Under COBRA, you will be responsible for the entire amount of the premium plus two percent (2%) for administrative costs.

If your spouse’s company has fewer than 20 employees, a second option in the state of California is to elect coverage under the California plan know as Cal-COBRA, which is basically an extension of the federal COBRA law for California residents who do not qualify for federal coverage. Cal-COBRA is “a mini COBRA health insurance plan set up by the California government.” See http://www.cobrainsurancedirect.com. You may elect Cal-COBRA for a maximum of 36 months, but it too is expensive. Under the plan, you will be responsible for the entire amount of the premium plus ten percent (10%) for administrative costs. Given the cost and time limit associated with COBRA and Cal-COBRA, you may want to check into private plans, which may be cheaper and more permanent. If you are employed, a third option may be to obtain health insurance coverage through your employer.

If children are involved, it is important to keep in mind their health insurance coverage issues, including which parent will provide coverage and who will pay the co-pays and other out-of-pocket medical expenses. Such issues should be raised during divorce settlement negotiations and made part of the marital settlement agreement or divorce decree.

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Social Media.jpgDivorcing couples face many pitfalls and trials during the process, both in the divorce proceedings and the emotional strife that accompanies it. In the modern age, where seemingly everyone has at least one social network account, it is easy to reconnect with childhood friends, first romances or college roommates. However, social media networks also present difficulties during a divorce where you can see pictures of your spouse looking very friendly with someone new or read his or her status update about going out to dinner with friends when you believed they could not make the children’s school event because of work.

When going through a divorce, you need to use social media very cautiously. In fact, you should assume that every tweet or status update could be used by your spouse against you. Even if you are no longer “friends” with your spouse on Facebook, “followed” by them on Twitter or “connected” to them on LinkedIn, it may still be possible for your spouse to see the information that you post. Even with your privacy settings at the highest level, the information posted may make its way back to your spouse one way or another. Mutual friends, acquaintances or family might be able to access your posts. In addition, the confusing privacy settings on sites like Facebook could lead to your information going beyond the friends you intended. For example, on Facebook, if a friend “likes,” “comments” or “shares” your status, then that person’s friends can often see the status as well.

If you do use social media and are in the midst of a divorce, then you should consider the following:

· If the thought is not too difficult, consider deleting your social media profiles. It may seem like a drastic step, but the difficulty of “rebuilding” your social network is likely much less than the cost of your spouse finding unfortunate information on your social network page or finding emotionally damaging information about your spouse’s life.

· If you cannot bring yourself to delete your social media accounts, then you should at least think twice about posting anything. While you may initially think that it is okay to post a picture of yourself giving a toast at your friend’s wedding, your spouse may argue that it is an example of heavy drinking in front of your children. Such evidence could be used by your spouse to hurt your case for custody, regardless of the truth.

· Go through your friends and followers on all of your social media accounts, carefully considering which connections to keep. You should probably remove access to anyone who you think might share your information with your spouse. It is important to remember that our spouse can subpoena anyone to testify in your divorce or custody proceedings.

· Be careful about changing privacy settings. Facebook, in particular, has a habit of changing privacy settings that could allow your information to become more widely available. Constantly checking your privacy settings can help to prevent any unintentional sharing of information.

· Never, ever, ever share conversations that you had with your attorney. Sharing your attorney’s legal advice could waive the attorney-client privilege, which could allow your private communications with your attorney to be used against you.

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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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storm - child support.jpgWhen a married couple with children separates or divorces, or where only one of an unmarried couple has custody, the non-custodial parent may be responsible for paying child support.

Child support is typically based upon the non-custodial parent’s income and the number of dependent children. California courts use child support guidelines – a matrix allowing the court to apply the parents’ total income and match it with the number of children. The matrix then provides the amount of money the family should provide for their children. Then the court can determine what percentage each parent contributes to the monthly income. Under California law, in unique circumstances, the court may deviate from the guidelines. However, such deviations are rare, and the court must then state the reasons for doing so. It is the legislative intent in California that a parent’s first and principal obligation is to support his or her minor children.

In the past, parents were left on their own to work through child support issues. However, state child support enforcement agencies are now taking a significant and aggressive position with regard to seeking payments from non-custodial parents. Even where the non-custodial parent has a reduced income, whether due to a job loss or salary reduction, they must still continue to pay child support. They may seek to have the child support obligation reduced, but they cannot decide on their own to simply reduce the amount they pay in child support.

Remedies that may be used to collect child support include:

Earnings Withholding Order for Support (Garnishment): An order issued on writ of execution, directing an obligor’s employer to withhold and pay a percentage of obligor’s earnings to the levying officer to satisfy a judgment for support.

Earnings Assignment Order: A court order directing an obligor’s employer to withhold and pay a percentage of obligor’s earnings to the obligee under a support order. Earnings assignment orders are automatic for support orders issued or modified on or after July 1, 1990, unless the assignment order is stayed or quashed.

Security Deposit Before Delinquency: A court order directing an obligor to establish a child support trust account in a state or federally chartered financial institution, into which obligor must deposit of up to one year’s child support. Amounts may be deducted from the account and paid to the obligee if the obligor is 10 or more days late in making support payments.

Security Deposit After Delinquency: A court order directing an obligor to deposit cash or other assets with a court-designated deposit-holder to secure future child support payments. The assets may be used or sold to pay child support arrearages if payments continue in arrears.

Government Benefits Intercept: Permits a support obligee in cases in which the support obligation is not being enforced by a local child support agency to intercept certain payments by state agencies and other public agencies to the obligor to enforce a support obligation owing to the obligee, including tax returns.

Monetary Penalty on Delinquent Support Payments: Allows support obligee to file and serve a notice of delinquency on the obligor whenever payments under a support order are more than 30 days in arrears. Any payments that remain unpaid for more than 30 days after such a notice has been filed incur a penalty of 6 percent per month, up to a maximum of 72 percent of the unpaid balance.

Loss of Driver License: In cases where the local child support agency is enforcing the support obligation, your driver license can be suspended, revoked, not issued, or not renewed if you are delinquent in child support payments.

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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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Heart Carabiner.jpgIn California, the property acquired or earned by either spouse during the marriage, is considered community property. California law mandates an equal split of community property (division of property). While many people are aware that items like houses, cars and other physical property must be divided during a divorce, they forget about life insurance. Life insurance can be a community asset, which is divided based upon the type of coverage.

Term Life Insurance

Term life insurance gives the policyholder coverage for a proscribed period of time, specified by the specific policy terms. Term life insurance tends to be the least expensive type of coverage available, since it will only cover the holder for a limited period. In addition, the premium only pays for the insurance policy. Once the term ends, the holder may renew the policy, but the premiums tend to increase with each renewal, as the policyholder ages.

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Calculator.jpgBusiness valuation in divorce cases and the distribution of marital property in many divorces can be complicated and the source of much frustration, anger, and contention for both parties. The process is even more complicated if the divorcing couple’s community property includes interest in a business. The business interest will often be the most valuable part of the divorcing couple’s community property. In addition, the business interest may generate profits and salaries for one or both of the divorcing spouses. The business interest is a part of the community property and, as such, must be divided as part of the divorce. In order to properly divide the community property, the business’s value must be determined.

The valuation of a business is not a simple tax, and the use of a professional business appraiser is almost always required. There are several methods to determine business value, and the appraiser will typically select the most appropriate valuation method according to the type of business in question and the information available. Valuation methods fall into three categories: asset approach, income approach and market approach.

Asset Approach

The asset approach determines the business’ value by using one or more methods based on the value of the assets minus any liabilities. The asset approach initially seems very simple, however, there are a number of complicating factors. For example, the value of property and equipment can, at times, be difficult to ascertain because their value is not always the equivalent of book value. In addition, assets like goodwill and intellectual property are notoriously difficult to value, because they are intangible. The asset approach is typically relied upon when the business is an investment or holding company, or with very small businesses or professional practices where there is little or no goodwill.

Income Approach
The income approach determines the value of the business using one or more methods that convert anticipated economic benefits into a present single amount. The income approach is the most widely used method for valuing small, privately held businesses. In reaching a business valuation, the expert will collect and review the business’ historical financial data, in an attempt to estimate future business earnings. The valuation expert will attempt to determine the future income, along with the risk that the projected income will actually be received.

Market Approach
The market approach determines the value of the business by comparing the business to similar businesses that have been sold. The market approach is very similar to the method used by real estate agents when valuing homes. The difficulty with the market approach lies in finding data about other comparable business sales in the same geographic area. In fact, most businesses being valued are small, privately held businesses, while most transactional information available relates to large publicly held companies, with significant differences in size, sales, profits and geographic location.

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Tunnel.jpgWhile the receipt of your final divorce decree from the court signals the end of your marriage, there is still some work to be done so that you can move on with your life. The following list is not exhaustive, but provides an excellent starting point.
Name Change
Women generally prefer to revert to their maiden name after the divorce is finalized. Filing for an official name change is not difficult, and your attorney will be able to assist you with the paperwork. Of course, once your name change is official, you’re still not finished. You will typically need to send or show a copy of your divorce decree to numerous agencies, offices, and companies in order to change your name in every aspect of your life. Remember, you will need to change your name for:

· Drivers license and car registration
· Professional licenses
· Social Security
· Internal Revenue Service
· Insurance companies
· Banks, credit cards, mortgage company, student loan provider, and auto loan company
· Library card
· Magazine and other subscriptions
· Associations and clubs
Estate Issues
Once the divorce is final, you will want to review your will and other estate documents in light of your life changes. Most likely your former spouse is listed as your primary beneficiary, and the divorce will not necessarily change that. An attorney can assist with the drafting of a new will, to ensure that your estate is properly taken care of and your property will pass to those you want. In addition, you will want to change any final directives and living wills as well, so that your former spouse is not making end of life decisions for you. Finally, review your life insurance policy to make sure that your former spouse is no longer your beneficiary, because a divorce will not affect the policy’s payout.
Financial Matters
Most married couples have a number of joint financial accounts. It is important to remember that you need to cancel your joint credit cards, and open new credit card accounts in your own name. In addition, you will need to first open a new bank account in your own name and, with your former spouse, close your joint bank accounts. Your divorce decree will most likely state how the bank accounts will be divided, so that should not be a concern at this time.
It is highly recommended that you obtain a credit report six months after the divorce becomes final. The credit report will allow you to make sure that you no longer have any joint accounts with your former spouse.
Insurance
If one spouse has been covering the other on medical insurance through employment, it will be necessary to obtain the paperwork for continuation of benefits through COBRA. The usage of COBRA will allow the non-covered spouse to obtain coverage through their own employer or to obtain individual insurance coverage, depending on their needs and financial situation.

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