Articles Posted in Divorce Finances

One of the firsringing moneyt issues a new client will ask us about is support.  Whether it is child support, spousal support, or both, support is one of the most important issues in your family law case.  It’s easy to understand why.  During your marriage income and expenses are shared and over time you find a happy medium between the amount of money you have coming in and the amount of money you have going out to pay expenses.  After you separate, the income doesn’t change, but the expenses will often double.  That means two rent payments, two food bills, two utility payments…the list goes on.  If you and your spouse were just making ends meet before the separation, odds are it will be twice as difficult now that expenses have increased. Continue reading

Elvis

On June 13 Lisa Marie Presley filed for divorce from her fourth husband, Michael Lockwood. While Lisa Marie isn’t the only star we’ve written about to go through multiple divorces, her specific case highlights a common and sometimes very complicated issue in divorce which occurs when one spouse has taken control of the finances and the other has little to no involvement in financial matters (the so-called “out spouse” is the one who stayed out of financial matters during the marriage).   Continue reading

Money

The Court of Appeals just issued what could be a very important opinion on the issue of commingling separate and community funds in certain accounts. The name of the case is Marriage of Cooper and it is a stark reminder of the perils that may result from mixing separate and community funds in the same account. This case stands for the proposition that once separate property funds are deposited into an investment account held in both parties’ names, those funds lose their separate property character and become community property. However, the spouse who contributes his or her separate property to the jointly titled account has a right of reimbursement under Family Code section 2640. So what does this mean in plain English and how will it affect future cases?  Continue reading

divorce-separation-marriage-breakup-split-39483

As a cast member of the Real Housewives of New York, Jules Wainstein is no stranger to drama. Surprisingly though, Jules’ impending divorce from husband Michael Wainstein filed in June has already been deemed the most dramatic divorce in Housewives history. And while it may be the most dramatic divorce the show and its cast have ever seen, Jules’ situation is actually not all that uncommon out here in the REAL, real world.

According to all of the press that the couple has received as of late, it would seem that Jules caught Michael cheating on her with one of her close friends. At that point Michael was prompted to file a petition for divorce after their eight year marriage. Since then, numerous accusations of domestic violence have surfaced, along with recent pictures of police outside the couples’ apartment. Continue reading

401k

Currently American investors are seeing significant losses in the market. For most Americans the effects are being felt in their 401(k) accounts or mutual funds. (Hence the 401(k) to a 201(k) joke…I know it’s not very funny). In the long term, this downturn is just part of the market cycle, but if you are nearing retirement this can be very concerning.

In a divorce, other than homes, retirement accounts are often the biggest asset to divide. Continue reading

spousal-support-job.jpgIn Part One of this blog, I discussed the issue of income imputation (often referred to as earning capacity) in child support cases. The focus of the article was about your options if the other parent voluntarily quit their job and was seeking a modification of child support. As that blog explained income imputation (assigning income to a party that is not actually earned) is fairly straight forward based on California’s significant state interest of ensuring parent’s support their children. If you missed this blog, and you are facing a modification of child support based on the other party voluntarily quitting their job, I highly recommend you go back and read that blog.

But what happens if there are no children; or as is typically the case, there are orders for child and spousal support? Can you still seek to impute income at a party’s previous income when they voluntarily quit their job? The short answer is yes you can.

Family Code Section 4320(c) lists the earning capacity of the supporting spouse as one factor to consider in making spousal support orders. [“The ability of the supporting party to pay spousal support, taking into account the supporting party’s earning capacity, earned and unearned income, assets, and standard of living. Family Code §4320 (c)]

Although Section 4320(c) speaks of earning capacity, the code does not specifically define what it means. For that answer we look to the case, Marriage of Simpson In Simpson, the California Supreme Court stated “‘[E]arning capacity’ represents the income the spouse is reasonably capable of earning based upon the spouse’s age, health, education, marketable skills, employment history, and the availability of employment opportunities.”

spousal-support-who-pays.jpgMany of the same principles associated with the imputation of income with regard to child support apply to the imputation of earning capacity for spousal support. Just as with child support, the three-prong test of ability, opportunity and willingness that is found in Marriage of Regnery must be proven for spousal support as well. This also includes the principal that no finding of “bad faith” is required to support an imputation of income.

For a very long time, the Courts held that there needed to be a finding of bad faith, or in other words a deliberate attempt to avoid paying spousal support, before a court could impute income for spousal support purposes. This holding came from the case Philbin v. Philbin (1971) 19 Cal.App.3d 115. And yes, it is the same Philbin your thinking of as you read the case name.

In Philbin, Regis Philbin was working as a comedian in the late 1960’s, but his income had fallen dramatically since he left as Joey Bishop’s sidekick on the nationally syndicated “The Joey Bishop Show.” At the time the case was heard by the trial court, Regis’ annual income dropped from $95,000 per year to $27,000 per year (or $635,000 a year to $181,000 in 2014 dollars.) The Court of Appeal ultimately held that imputing income to Regis was not warranted since there was no bad faith on his part.

However, more recent case law suggests that the requirement of a bad faith finding for the purpose of proving earning capacity is no longer required.

It is important to note the Appellate Court has refused to impute income to a supporting spouse who voluntarily quit his job when the decision was based on a decision to follow a path of good works and services. In Marriage of Meegan (1992) 11 Cal.App.4th 156, the court upheld the trial court’s reduction of spousal support for a spouse who quit his high paying executive position to pursue a life in a monastery as a Catholic priest. The court held, the “[r]eduction [was] appropriate where Husband [was] acting in good faith and did not resign [his] job to avoid [his] spousal support obligations.” It is important to note that Meegan addressed only a spousal support order and child support was not at issue. In fact, Mr. Meegan voluntarily agreed to pay $875 per month towards his 2 adult children’s college expenses. I believe if child support were at issue in the Meegan case, the court would have made a different finding.

The Meegan case is an interesting example of a situation where the Court refused to impute income to a party who voluntarily quit their job and depressed their income. It also illustrates how very fact specific income imputation case can be. It is important to contact a qualified attorney to review your case and specific set of facts to determine whether an income imputation is appropriate.

The Court’s authority to impute income to a party is not limited to situations where the party quit their job. If one party refuses to get a job, or has been unemployed for a long period of time, the court may consider imputing earning capacity in these situations as well. In this situation, the party who wants to impute income will need to seek the assistance of an expert, called a vocational evaluator, to provide evidence of the 3 factors discussed above.

Spousal support requests, especially when they involve a request to impute earning capacity to a parent, can be difficult to navigate without the assistance of skilled family law attorney, so it is important to discuss your case with a qualified attorney.
Continue reading

divorce-life-insurance.jpgAt the beginning of each divorce case, the parties always have questions regarding how the divorce will impact their daily lives, especially their finances. One of the biggest issues, and often most disputed, is support. The parties cannot plan for their separate futures until they know whether a support order will be made and the level of support which will be ordered. Once the parties have a support order or agreement they will next consider what that support amount is intended to cover? Will my spouse have to continue paying my health insurance? Will my spouse pay for our children’s health insurance? Will my spouse pay for uncovered medical and dental expenses? Will my spouse pay for extracurricular activities? Will my spouse pay for childcare? Typically these are the main concerns for divorcing parties when discussing support issues. However, it is not uncommon for family law litigants and their attorneys to forget one important issue – support in the event of the death of the paying spouse.

Life insurance can be an uncomfortable topic of discussion; however, the issue of life insurance is an extremely important subject to include in divorce settlement negotiations. In the event that the parties cannot reach a full agreement regarding all issues, they can ask the court for orders. The court has jurisdiction to address the issue of life insurance and to make appropriate orders for the parties. In cases where child and/or spousal support amounts are relatively high, it is reasonable to consider insuring the paying spouse as a form of security for support. In high conflict cases the supporting spouse may be hesitant to agree that his or her former spouse will be the beneficiary of an insurance policy on the supporting spouse’s life. The supporting spouse often says “I don’t want to give my former spouse more incentive to kill me”. This type of argument will not likely be given much weight by a family court judge.

divorce-insurance.jpgThrough agreement or court order, once the parties determine that the supporting spouse’s life should be insured as security for support, the attorneys and clients should discuss the amount of policy and which party should be responsible for the premiums. In cases where the parties take out life insurance as security for child support, the supporting spouse may be ordered to pay the life insurance premiums in the form of additional child support. If available, the parties often agree that the supporting spouse shall maintain a currently existing life insurance policy. The total amount of insurance should be based on the monthly support obligation and the number of years support will likely be paid. Each case is unique; therefore, it is important to discuss the issue of life insurance as security for support with an experienced family law attorney.
Continue reading

New-Year-Divorce.jpgAlong with the New Year comes a plethora of New Year’s resolutions. Most people chose a resolution like exercising more, eating less or starting a new hobby. Some are able to stick to their resolution the whole year while other barely make it through the first of the year. For divorced individuals, there are a handful of resolutions that could put you on the right track for the upcoming year if you can resolve to stick to it throughout the year. These resolutions focus on improving your post-divorce relationships with your ex-spouse, your children and yourself.

Whether you just wrapped up your divorce or you have been divorced for quite some time, there is always room for improvement in the following areas.

1. Attempt to Communicate Better with Your Ex-Spouse
Divorce is filled with a variety of emotions, typically emotions that include a whole lot of anger and resentment. After the divorce is finalized you might have a bitter taste in your mouth and want nothing to do with you ex-spouse. However, if you have kids, chances are you aren’t quite done seeing or speaking with your ex. Do yourself a favor and make a resolution to work on communicating better with your ex-spouse. Simply avoiding the snarky emails to your ex can put you in a step in the right direction. And if you’re up to it, perhaps you could try going to lunch with your ex-spouse. This will give you an opportunity to catch up on the children’s activities and exchange information. Better communication will inevitably lead to better co-parenting.

New-year-kids.jpg2. Put your Attention on Your Kids, Not your Ex-Spouse
Chances are you have spent a whole lot of time thinking about your ex-spouse…thoughts about what you could have done to make it work or thoughts about how upset you still are with him/her. Well it’s a new year and that means its time to shift your focus to your kids! Whether they show it or not, your kids have gone through a lot of change as a result of your divorce. Putting more attention on your kids can help them adjust in the New Year.

3. Limit Sharing Your Private Life on Social Media
Although Facebook, Twitter and other social media sites offer you the perfect opportunity to just say what is on your mind and let the whole world know about it, resolve to stop “bashing” your ex-spouse through your status updates. Also, if your ex-spouse can still view your social media profiles think about putting a halt to posting intimate details of your new relationship. If there were unresolved feelings between the two of you, this will give your ex-spouse a chance to heal without stirring up more feelings of anger and resentment.
Continue reading

financial-disclosure.jpgWe often blog about the statutory requirement in all California divorces for divorcing parties to exchange complete financial disclosures. The required disclosure documents consist substantially of an Income and Expense Declaration and a Schedule of Assets and Debts. Through the completion of these documents, the parties are obligated to provide all material facts and information regarding their income, expenses, assets and debts. Failure to complete these forms in accordance with the highest duty of good faith and fair dealing may result in severe sanctions imposed by the court. Considering these strict requirements, the California Court of Appeal surprised family law attorneys in a recent case, In re Marriage of Evans, in which it held that the parties could reach enforceable divorce settlements prior to the exchange of the financial disclosure documents.

In Evans, prior to filing for divorce, the parties negotiated and signed a “pre-divorce agreement” which divided their interest in the marital residence. After a Petition for Dissolution was filed, Mr. Evans filed a motion to set aside the parties’ pre-divorce agreement. Mr. Evans argued that the agreement was invalid because the parties did not exchange their disclosure documents prior to its execution. The trial court disagreed with Mr. Evans and held that the pre-divorce agreement was valid and ordered its terms to become part of the Judgment of Dissolution. Mr. Evans appealed the trial court’s decision and lost again. The appeals court held that the financial disclosure statutes only were intended to apply after service of a divorce petition.

pre-divorce-agreement.jpgWith the Evans ruling now a published opinion, there is a loop hole for parties who wish to enter into property agreements prior to exchange of disclosure documents. It is important to note that Evans does not extinguish the requirement for both parties to abide by the disclosure statutes once a divorce has been filed; it only addresses agreements made prior to filing for divorce. In addition, pre-divorce agreements made in contemplation of divorce may be set aside for various other reasons. If you and your spouse would like to enter into a pre-divorce agreement, but are not yet ready to file for divorce, it is important to consult with an experienced family law attorney prior to executing any agreement. The right attorney can help you draft an agreement that will be enforceable in the event of divorce.
Continue reading

home-loan-divorce.jpgGetting through a divorce and preparing to move on from a marriage is an emotionally and financially draining process. However, if all of the issues were handled correctly, you should be able to make a new start and begin building your new future without your former spouse. Unfortunately, sometimes important issues fall through the cracks because they were not within focus for the parties at the time they negotiated their settlement. If you want the ability to purchase a new home after divorce, below are some considerations which must be addressed at the time of settlement or trial.

It is not uncommon for divorced parties to discover that they are still liable on their old home loans when they approach a bank for a loan on a new home. In many San Diego divorces, one party buys the other party out of their interest in the parties’ home and remains in the marital residence (often with the children). When the parties reach these types of agreements, their settlement documents might only contain a provision awarding the home and all encumbrances to one party with a simple “hold harmless” clause. This means that the party retaining the home is responsible for all obligations encumbering the home. However, this provision is irrelevant to the creditor who holds the note on the loan. The creditor can still seek payment from either party. The only way to get off of your home loan is to sell the home or have your spouse refinance the home into his or her name alone.

home-loan-checkbook.jpgDepending on your finances, if you are still liable on a home loan, you will likely not qualify to purchase a new home even if your spouse is responsible for the debt. It is important to talk to a certified family law specialist regarding this issue before your divorce judgment is finalized. If your spouse will not qualify for a refinance in his or her name alone, you may want to consider selling the home so that you are able to separate that one remaining financial tie. If your spouse may qualify for a refinance, ensure that your divorce judgment has appropriate provisions in place regarding transfer of title and a deadline for the refinance. For example, you can require that your spouse refinance the home within 120 days of execution of the settlement. If your spouse does not refinance, the home will be listed for sale. If your spouse does complete the refinance, you will execute a quitclaim deed transferring title to his or her name alone.

If you do agree to a buy-out by your spouse and your spouse is unable to refinance the home, it is important that your name remain on title to the home. Review your settlement documents carefully to ensure you are not required to transfer title without your removal from all related loan obligations.
Continue reading