February 2011 Archives

Increase in Divorces = An Improving Economy?

February 23, 2011

growing_graph.jpgYahoo Finance recently ran an article listing the top 10 signs the economy is on the upswing. Item Number 10 on the list was "More couples are calling it quits." The article reported that members of the American Academy of Matrimonial Lawyers had a 37% drop in divorce cases in 2008 and a 57% drop in 2009. Although no numbers were given for 2010 or the first two months of 2011, many divorce lawyers reported that they have more business than they can handle. The article concluded the reason for the increase is due in part to credit loosening up.

There are many ways that the loosening of credit may help increase divorce rates. A spouse who operates a community property business may now be able to obtain credit to buy out the non-operating spouse's interest in the business. A spouse who wishes to retain the marital residence (or other real property) may be able to obtain credit to buy out the other spouse's interest in the residence.

On the other hand, if the parties decide to sell their residence, looser credit may enable more potential buyers to qualify for a loan to purchase the residence. This is particularly good news for San Diego residents who are contemplating a divorce because the Los Angeles Times reported on February 22, 2011, that the Standard & Poor's/Case Shiller Index, which tracks the real estate market in 20 major U.S. cities, shows that San Diego is one of two cities on the Index that reflected an increase in value from December 2009 through December 2010. San Diego's increase was 1.7%. So, not only may more buyers qualify for a loan to purchase the residence, the selling price could be higher than a year ago as well.

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Valuing Goodwill in a Divorce; If You or Your Spouse is a Creative Professional, There May Be a Twist

February 22, 2011

1099457_ciak.jpgThis year's Academy Awards will be held at the Kodak Theater in Hollywood, California on February 27, 2011. It airs live in San Diego on ABC at 5 p.m.

Among the awards to be given out, perhaps one of the most anticipated is best director. This year's nominees for best director include: Darren Aronofsky for Black Swan, David O. Russell for The Fighter, Tom Hooper for The Kings Speech, David Fincher for The Social Network, and Joel and Ethan Coen for True Grit. Who the Oscar will ultimately go to is anyone's guess. But, regardless of who wins, all of the nominees share one thing in common: they are all celebrities.

The status of celebrity brings a twist on the issue of valuing goodwill in a divorce. Generally, goodwill, as defined by the California Business & Professions Code ยง 14100, is the expectation of continued public patronage of a business. In a divorce, if a community property business is found to have goodwill, that goodwill is valued and then included in the community property to be divided equally between the spouses.

One might think celebrity goodwill, or the excess earning capacity attributable to status as a celebrity, would be treated the same way. However, that is not the case.

Remember the 1980's movie Die Hard? Die Hard director John McTiernan (other notable movies include Predator and the Hunt for Red October) was on the winning side of this issue, when it was decided in his divorce case. In re Marriage of McTiernan & Dubrow (2005) 133 Cal.App.4th 1090.

The Court decided in McTiernan's favor, finding that there was no goodwill value in his career as a director. Basically, the Court determined that goodwill can only exist where there is a business, that is, a professional, commercial or industrial enterprise with assets. A person simply doing business does not, by itself, qualify. Additionally, in order for goodwill to have value, it must be transferable.

Although the coined term is "celebrity goodwill", this issue may arise in a divorce anytime one party is performing services as a natural person rather than as a business or profession, and their expectation of continued public patronage is not transferable, such as may be the case with a creative professional as opposed to a doctor, dentist or attorney, whose practices are generally thought to be transferable.

San Diego Co-Parenting Resources

February 18, 2011

It's official, Kelsey and Camille Grammer are divorced. Reflecting on the divorce process, as well as what is to come, Camille told US Magazine: "I am grateful to my family and friends who have stood by me through this time - I will never forget their love and support. What I most hope is that Kelsey and I can improve our communications and truly co-parent our two wonderful children..."

As a family law attorney, many of my clients face the challenge of co-parenting after a divorce. Sometimes, a court will grant one parent sole legal custody, in which case that parent is solely responsible for making decisions relating to the minor child's care, upbringing, educational training, religious training, social and recreational activities, medical care and treatment, and treatment of emotional needs. Other times, parents will share joint legal custody. When both parents are responsible for making decisions relating to their child's welfare, and they need to make those decisions together, challenges can arise.

While some might think that parents inherently know how to co-parent after a divorce, realistically, it's a learned skill. Think back to when you brought your son or daughter home from the hospital. Over those first few days, weeks and months, you had to learn how to be a parent; you had to learn how to change a diaper, what to feed the baby, and what her different cries meant. In this same way, co-parenting after a divorce is a skill that needs to be learned. You will need to learn how to put your relationship issues aside, and work together for the benefit of your children.

If you are interested in learning parenting skills for divorcing parents, the San Diego Superior Court has a list of class providers.

Reasons for Delaying Entry of Judgment

February 17, 2011

Why Would Anyone Delay Their Official Divorce Date?

Yahoo News reported that on Thursday, February 10, 2011, Los Angeles Superior Court Judge Hank Goldberg finalized Charlie Sheen and Brooke Mueller Sheen's divorce, however, the Sheen's will not be officially divorced (i.e., legally single) until May 2, 2011. AP reported on February 15, 2011, that Christina Aguilera and Jordan Bratman finalized their divorce but the judgment will not become official until April 15, 2011.

In California, there is statutory six-month waiting period before a divorce judgment can be final for the purpose of terminating a marital relationship. California Family Code Section 2339. In both cases, the delay is because the six-month waiting period has not expired. Sheen filed for divorce in November, thus their marriage cannot be dissolved until May. Aguilera filed for divorce in October, thus her marriage cannot be dissolved until April.

For many of our San Diego clients, the day they become legally single cannot come quickly enough. However, the six-month statutory waiting period is not the only reason soon-to-be-divorced couples may decide to delay their official divorce date. Two other common reasons are health insurance and tax planning purposes.

Health insurance may come into play when one spouse has great insurance through his or her employment. After a divorce is granted, most health insurance plans do not allow a employee spouse to cover their former spouse. Although the non-covered spouse may apply for COBRA coverage, it is often more expensive than the cost of the insurance coverage to the employee spouse.

For example, let's assume that: (1) the non-covered spouse has an upcoming surgery with rehabilitation that will take nine months; (2) the cost of insurance is $200 per month for the employee spouse, and (3) the cost of COBRA will be $1,200/mo for the non-covered spouse. The parties' may decide to delay entry of judgment for nine months until the non-covered spouses rehabilitation has ended, thus saving the non-covered spouse $10,800. In exchange for delaying the divorce and keeping the non-covered spouse on the insurance, the employee spouse may have negotiated a reduction of spousal support for the nine month period he or she is providing the health insurance.

Another scenario is if one spouse just started a new job and has a three month waiting period before their new health insurance coverage begins. The parties' may delay the date of their divorce for three months until the party's new insurance begins.

With regard to tax planning purposes, sometimes the parties' accountant will recommend they delay their divorce date until after December 31st, especially if there are significant tax benefits to each party.

San Diego Resident Charles Brandes Pays $500,000 per month in Spousal Support to Ex Wife Linda Brandes

February 10, 2011

Do you think your spousal support payment is too high? A few weeks ago, the San Diego Union Tribune and the Wall Street Journal ran articles about the never-ending divorce saga of San Diego County's wealthiest couple, Charles and Linda Brandes. According to Forbes, Mr. Brandes is ranked number 269 on its 2010 list of the 400 Richest People in America with an estimated net worth of 1.5 billion. The San Diego Union Tribune reported that Mr. Brandes income is $16 million per month and he pays $500,000 per month in spousal support to Ms. Brandes.

Some of you may be wondering how a judge determines how much spousal support a person must pay his or her former spouse. Unlike child support, which is generally calculated by a mathematical formula, spousal support is determined by a consideration of factors set forth in California Family Code Section 4320. The trial judge must both recognize and apply each of these factors when setting spousal support.

Translated into understandable terms, the factors include: the income of each party; the marketable skills of the supported party; whether the supported spouse did not work so he or she could tend to domestic duties; whether the supported party contributed to the other party's education, training, license or career position; the ability of the supporting party to pay spousal support; the needs of each party based on the how the parties lived during the marriage; the assets and debts of each party; length of marriage; whether the supported party can work without interfering with the interests of the children; the age and health of the parties; domestic violence between the parties; tax consequences; a balance of the hardships; whether the supported party can be self-supporting within a "reasonable period of time;" the criminal conviction of an abusive spouse; and any other factors the court determines are just and equitable. That last factor is a catch-all provision, meaning whatever else the judge finds relevant.

When there is an existing spousal support order and one party is requesting a modification of spousal support, there generally needs to be a material change of circumstances since the last order. The court is required to reconsider the same standards and criteria set forth in Family Code Section 4320 it considered in making the initial long-term order at the time of judgment and any subsequent modification order. Although a showing of changed circumstances is necessary to obtain the court's consideration of a modification of spousal support, it does not ensure that a modification will be granted.

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Tony Hawk files for divorce in San Diego

As reported by NBC SanDiego.com, professional skate boarder Tony Hawk recently filed for divorce in North San Diego County. Hawk filed for divorce from third wife Lhotse Merriam. Hawk and Merriam were married in 2006; they have one child.

Raised in San Diego, Hawk is well known for a videogame series based on his skateboarding. Tony Hawk: Ride, a game which involves riding on a skateboard shaped controller, was launched in 2009. Because the game was launched during Hawk's marriage to Merriam, one question that may arise during the divorce process is whether any intellectual property rights Hawk may have in the game are community property to be divided in the divorce.

Absent a prenuptial agreement to the contrary, intellectual property rights (e.g. patents, copyrights, trademarks, trade secrets) are property to be classified and, if appropriate, divided in a divorce. In a divorce, property is generally classified as either separate property or community property. Property that is classified as community property is then divided between the spouses.

For intellectually property rights to be classified as community property to be divided in a divorce, they must be acquired from work that was done during the marriage.

But what if the rights were acquired from work only partially done during the marriage? For example, a spouse begins to write a book during marriage, but doesn't finish the book until after the divorce? In this case, the community would have a proportional interest in the property.

What if additional time and effort is then needed to market the book? Such post-marital efforts generally decrease the community's interest in the property.