Articles Posted in Property Division

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joint business adventure and divorceAny divorce involves deep emotions, crushing decisions, and complicated relationships that extend beyond the couple itself. When couples are joined in both marriage and a joint business venture, things can get even more complex. In these situations, the counsel of a local attorney is essential.

Joint Business Venture – Steps to Consider

While some couples may contemplate remaining in joint business venture bliss together, others know from the get-go that working together is not a viable option. How can everyone come out a winner with so much at stake? Experts have some tips as to how to proceed:

Compartmentalize: It is important now, more than ever, to separate issues that do not belong together. Financial issues and business interests should be handled independently of childcare and emotional matters. While unraveling the feelings from the business side of the relationship can be difficult, it is much easier to establish a win-win outcome when individuals are able to step back and handle business concerns rationally.

Get the joint business venture support you need: Things are going to be tough for a while. You will need a shoulder to lean on in the moments that seem overwhelming, as well as trusted legal counsel. Understand that there are many ways to carve up a business, and plowing through those options can be exhausting. If you choose to continue working with your former spouse, examining any potential shifts in roles, financial interests, and decision-making authority will be critical. If you decide to make a total break, that will carry its own set of concerns.  

  • Look at your options with clarity: If the business has run smoothly while utilizing the talents of both you and your spouse, is it possible to continue, despite the failed relationship? Or will the divorce impact your ability to interact professionally? The climate at work is going to be set by the two of you, so if you are not going to be able to remain genuinely positive at work, looking for a new partner may be your best bet.
  • Create explicit role definitions: If you do decide to give the business a chance together, make sure you both understand precisely what role each of you will be playing at work. Nobody wants to be micromanaged, so having clearly delineated responsibilities will be essential. Determine just how much collaboration will be workable for you.
  • Re-evaluate the situation over time: If you choose to continue working together, be sure you have a contract that takes a fresh look at the terms down the road. Who knows how you will feel once the dust settles and you take a look at the situation. Maybe you will have established a new, comfortable rhythm. Perhaps you will have discovered that what you thought would be a conciliatory working relationship just never evolved into the professional repartee you were hoping for. Either way, having a contractual obligation to re-examine and tweak things later will be helpful for both you and your former spouse.

If you choose to get out of the business altogether, get a fair valuation of the company. Have a professional examine records and come up with a fair buyout plan. Then walk away and do not look back. Continue reading →

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community property divisionCommunity property division in a California Divorce. There is no question but that divorce can be ugly and difficult, or amicable and seamless. Here is something not everyone thinks about right off the bat: divorce can be expensive! Just look at some of these celebrity settlements:

  • Rupert & Anna Murdoch: Rupert forked over $110 million in cash as part of a $1.7 billion settlement;
  • Mel & Robyn Gibson: The couple decided an even split of Mel’s $850 million net worth was fair;
  • Michael & Juanita Jordan: In what appeared to be an amicable settlement, Michael agreed to a $168 million settlement.
  • Steven Spielberg & Amy Irving: Amy walked away with $100 million after four years of marriage;
  • Madonna & Guy Ritchie: Madonna paid Ritchie somewhere between $76 and $92 million.
  • Kevin Costner & Cindy Silva: Costner parted with $80 million.

It is guaranteed that none of these celebs took on a divorce without competent legal help, and neither should you.

Community Property Division in California

While you may not be a millionaire, you should be clear about the fact that every penny of your shared marital assets is fair game in a divorce. California is a community property state. That means that all assets and debts accrued during the marriage are evenly divided between the divorcing spouses. Whether you own a mansion or are renting an apartment, here is some legal lingo with which you should be familiar:

  • Marital Property: This includes any earnings that occurred during the marriage, and items obtained with those earnings.  The same goes for debt.
  • Separate Property: This refers to assets accrued prior to the marriage, as well as inheritances, gifts, pension proceeds that were vested prior to the marriage, and items purchased with separate funds. These monies stay with the person who had them to start with.
  • The Marital Home: Generally the home may stay in the hands of the custodial parent if there are children involved. That parent would be responsible for the mortgage and associated costs, barring a huge income disparity between the parties. Once the children are no longer minors, the house could be sold and the proceeds divided.
  • Retirement Benefits: Depending on the type of plan, one party may choose to cash-out another, or benefits may be shared as they are paid out.

What About Community Property Division and the Engagement and Wedding Ring?

What if the engagement ring was a family heirloom that had passed through the giver’s family for generations? Does the giver have any hope of getting it back? The courts say no—rings purchased and exchanged prior to the I do’s count as personal, separate property, regardless of sentimental value (California Civil Code 1590).  

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In many relationships, one partner–often the higher earning husband, takes on the responsibility of handling the couple’s finances. The partner who does not participate in financial decision making may have a general idea of where the couple stands financially, but is usually unaware of the couple’s precise income and investments, or how to access the couple’s assets.

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Spouses who are do not have a clear picture of finances within their marriage may face financial difficulties during their separation.
While this type of arrangement may feel harmless or even efficient when the couple’s relationship is prospering, it can place the spouse who doesn’t have a clear picture of the couple’s finances in a difficult position should the couple decide to separate. A partner who has not been involved in the couple’s finances may not be able to easily determine how they will pay for living expenses. In addition, they may be at greater risk of entering a divorce settlement that does not reflect their fair share of the couple’s assets.
Separating spouses should be aware of their rights and entitlements with regard to joint accounts.
Individuals who are considering separating from their spouse should be aware of their rights and entitlements with regard to joint assets. One of the first questions that individuals who are in the process of separating often inquire about is how to handle funds that are kept in joint accounts.
A recent Forbes article written by Jeff Landers, President and Founder of Bedrock Divorce Advisors, which is a divorce financial strategy firm, provides some useful suggestions regarding how joint accounts should be handled during a separation.
Separating spouses should determine their immediate financial needs and consult with an attorney to determine whether it is appropriate to secure that amount from joint accounts.
Landers advises individuals who are either planning to file for divorce in the near future, or believe their partner may be doing the same to set aside funds from the couple’s joint account for their immediate needs. He acknowledged that when and how much an individual should withdraw is a complex question with legal implications.
For example, in many states, including California, spouses can freely transfer and withdraw funds prior to formally filing for divorce. However, once the divorce process has begun and a legal filing is submitted to the court, the couple’s assets are subject to certain restraining orders that may impact either spouses’ ability to access joint accounts.
Since spouses are generally entitled to half of the couples jointly titled assets during a divorce, they may consider withdrawing that amount from joint accounts prior to a formal divorce filing. However, if a spouse is aware of other accounts that are in the sole name of their partner, the individual may think about withdrawing more than half of the funds in the joint account in order to offset those amounts. However, partners who withdraw funds from joint accounts should consider how their actions may impact the way their spouse handles the divorce proceeding. In some circumstances, withdrawing funds prior to a divorce filing may cause the opposing spouse to become vindictive and uncooperative during the divorce process.

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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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California is a community property state, which means that when a couple divorces, property acquired during the marriage is divided equally between the former spouses. Generally, this includes pension and retirement benefits acquired during the course of the couple’s marriage. However, there are a number of specific laws regarding how retirement and pension benefits are handled when a couple divorces.

For example, a recent California Supreme Court ruling may impact the way state or municipal pensions are handled when a marriage ends. According to one of the attorneys involved in the case, the California Supreme Court’s ruling will affect many government employees whose retirement or pension benefits are administered by a California state plan. These plans include: the California Public Employees’ Retirement System (CalPERS) and the State Teachers’ Retirement System.

Husband purchased credits for time served in the armed forces prior to the couples marriage through CalPERS using marital funds.

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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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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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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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