Articles Posted in Divorce Finances

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You probably didn’t need to come to this web site to know that California has laws compelling parents to financially support their children. The reasons for this are obvious. When parents make the decision to procreate, they are financially responsible for that decision. I think we can all agree that the taxpayers shouldn’t have to foot the bill to support a child when one or both of that child’s parents can do so themselves. It should be no surprise then, that Family Code section 4053 holds that “a parent’s first and principal obligation is to support his or her minor children acceding to the parent’s circumstances and station in life” and that the “financial needs of the children should be met through private financial resources as much as possible.”

Did you know, however, that there is such thing as “parent support” in California too?

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It was recently reported that actor Jeremy Renner (best known for his lead in 2008’s The Hurt Locker and as Hawkeye in the Avengers movies) is refusing to pay his half of their daughter Ava’s preschool tuition.   Jeremy’s ex-wife, Sonnie Pacheco claims that she has asked for Jeremy to pay half of the $1,600 monthly tuition, but he has refused.   She also claims he has fallen behind on his child support payments to the tune of $48,367.  Now I have to admit I have never read Jeremy’s court orders, but I have a really good guess what order is he running afoul of.

In California, it is mandatory for the Court, when making child support orders, to allocate the costs related to the children’s uninsured medical expenses (e.g. co-pays, deductibles) and for the cost of child care so that a parent can work or go to school/training.  These are referred to as “mandatory add-ons” since the court is required to make them part of all child support orders.  Typically the cost of these expenses is split equally between the parents, but the court has discretion to allocate the cost however is most appropriate in light of the parties income and expenses.  So for example in Jeremy’s case above, if the court ordered that Jeremy and Sonnie were to split the cost of their daughter’s pre-school, then Jeremy would owe half of the $1,600 tuition or $800 each month.

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In Family Law, tracing is the method by which a party proves that funds in a particular account are, or were, used to acquire separate property.  Family Code section 760 holds that all property acquired during a marriage, regardless of source, is community property, it can sometimes be a difficult and expensive endeavor to try to perform a tracing. In California Family Law, there are three ways to prove a tracing: 1) Direct Tracing; 2) Exhaustion 3) Total Marital Recapitulation.

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For years, Christina Estrada’s life read like a fairytale; former international supermodel fell in love with a billionaire Saudi Arabian sheikh, raising a daughter and sharing a mansion in the British countryside with an unlimited monthly budget to spend on whatever their hearts desired. She is quoted describing her married life as “magical.” Unfortunately, just as with most fairytales, the magic came to an end and reality set in when the sheikh obtained a divorce in 2014 in Saudi Arabia, under Islamic law, without Christina’s knowledge. And that was AFTER he had already married a 25-year-old Lebanese model, without Christina’s knowledge…and obviously while he was still married to her.

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One of the first 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

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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

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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

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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

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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

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In 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.”Many 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.
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