Articles Posted in Divorce Finances

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One of the most common questions posed by supported parties to family law attorneys is “can my spouse force me to work?” Often times supported spouses are threatened by their high earning counterparts with statements like “you could be earning more money,” “you could be earning at least minimum wage” or “I am going to ask the court to make you get a job”. The more money earned by the supported spouse, the less money the supporting spouse must pay in monthly support. However, income is not the only factor considered by the court in setting spousal and child support. According to a recent case, In re Marriage of Ficke, the court must take into consideration the best interest of minor children (if any) when making child and spousal support awards.

The simple answer to the question above is “No,” your spouse cannot force you to get a job, work more hours, or pursue a higher earning position. In addition, the court will not specifically order you to work or to get a specific job. However, the supporting spouse can petition the court for an imputation of income. If a request for an imputation of income is successful, the court will assess an income level (based on ability and opportunity) for the supported spouse and use that amount for purposes of calculating support. For example, if the court determines the supported spouse has the ability and opportunity to earn minimum wage, the court will use a monthly minimum wage number as the income for the supported spouse. As a result, the court does not force the supported spouse to work but essentially pretends he or she is earning up to his or her full potential when setting support. If the supported spouse receives a lower amount of support based on imputation of income, he or she may need to obtain employment in order to meet monthly expenses.

In In re Marriage of Ficke the wife, Julie, was recently laid off from a position where she was earning over $700,000.00 per year. Her husband, Greg, also earned a substantial income during marriage. At the time the court made its support award, Julie was only earning $251.00 per month. However, as a result of different job offers that Julie turned down and the findings of a vocational evaluator, she was imputed with a monthly income of $13,333.00 per month. Julie was awarded a 95% timeshare with the children and $1,368 in monthly child support from Greg. The court also made an award of spousal support payable by Julie to Greg. Julie appealed this order arguing that the court failed to contemplate her inability to work in such demanding positions considering her timeshare with the children. Julie reasoned that such high paying positions required her to work days, nights, and weekends which interfered with her care of the minor children.

Ficke stands for the position that although both parents have an equal responsibility to financially support their minor children, the trial court should not impute income to a custodial parent (like Julie) unless such imputation would benefit the children. California cases have recognized that time spent with children by a parent is incredibly valuable. Therefore, an imputation of income to a custodial parent will not be in the best interest of the children when the imputation deprives the children of considerable time with their parents.
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As we have previously blogged, healthcare can be a big financial concern for divorcing spouses. In many cases, one spouse provides health insurance for the entire family through his or her employer. However, upon divorce, the non-providing spouse must obtain his or her own health insurance. This can be a difficult process if he or she has a pre-existing condition and is denied coverage or if the premiums are prohibitively expensive. Additionally, obtaining health insurance can be especially problematic for those part of the “gray divorce” trend.

Divorce attorneys have noticed that the number of divorces involving spouses over 50 years old has been increasing. This phenomenon is known as the “gray divorce trend“. Many spouses in this age group are even holding out to finalize their divorce until they reach the age of 65 and are eligible for Medicare. Another tactic employed by spouses who cannot obtain outside health insurance upon divorce is to file for legal separation. These couples become legally separated but remain married to maintain their health insurance benefits. This strategy is not always a permissible option under an employer’s healthcare plan and the employee spouse may be charged with fraud and required to make financial restitution.

Beginning January 1, 2014, health insurance may not be such a financial hardship for the uninsured divorcing spouse. Health insurance may be more affordable and more accessible under the Affordable Care Act. Under this Act, health insurance companies will no longer be able to deny coverage or charge exorbitant premiums on the basis of a pre-existing condition. The knowledge of the spouse’s ability to purchase affordable healthcare will take a significant amount of fear out of the divorce process.Since health insurance is a factor considered in support calculations, divorce attorneys anticipate that Obamacare will also have an impact on that area of family law. When calculating child support, the Court will consider the health insurance premiums paid by both spouses and adjust accordingly. The “uninsured spouse” will typically be forced to pay extremely high premiums to obtain insurance and therefore his or her need for support is greater. This means that currently the supported spouse may argue for higher spousal support awards if they are obtaining new health insurance. With the introduction of Obamacare, the supported spouse may have a reduced need for support as healthcare may be more affordable. Additionally, many people may be eligible for a government tax credit toward their health insurance premiums. Undoubtedly, supporting spouses will ask family law judges to take this into considering when calculating support.
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In divorce cases where the parties have offshore assets, those assets are generally not reported to the Internal Revenue Service (“IRS”). However, California family law imposes a strict fiduciary duty of disclosure on all divorcing spouses. Throughout the pendency of a divorce case, the parties are under an ongoing obligation to disclose all material facts and information regarding income, expenses, assets and debts.

This includes unreported income and assets hidden overseas. If a spouse has made efforts to conceal income or assets from the federal government he or she may feel very conflicted about disclosing that information in a state dissolution matter. Therefore, the spouse may be torn by a desire to cooperate with the divorce process and make full disclosures yet fearful of criminal and pecuniary penalties which may be imposed by the IRS. In many cases, both spouses may be aware of the offshore assets or at least suspect they exist.

If a California family court determines that a spouse has failed to meet the strict fiduciary disclosure requirements, he or she will likely be sanctioned in an amount sufficient to deter repetition of the impermissible conduct. In high asset/high income cases, the amount of the sanction could be staggering. In addition, failure to disclose an asset exposes the non-disclosing party to the possibility of the court awarding 100 percent or an amount equal to 100 percent of the asset to the other spouse. On the other hand, if a spouse’s failure to disclose offshore assets and/or reportable income to the IRS is discovered by federal authorities, the spouse will likely face time in jail in addition to substantial financial penalties.

In these cases, the client has limited options. The client could attempt to amend prior tax returns to fully comport with IRS requirements and immediately disclose all hidden assets/income in the divorce case. If a client pursues this option, there is still no guarantee of avoiding federal prosecution. If this option is no longer available, the client could enter the Offshore Voluntary Disclosure Program (“OVDP“). The OVDP was started in 2012 and allows taxpayers to voluntarily disclose offshore assets before they are uncovered by other means. Entering the OVDP can help taxpayers avoid criminal prosecution; however, they will likely still face harsh financial penalties for nondisclosure.

It is incredibly risky for a divorcing spouse with hidden assets or income to fail to make efforts to become compliant with IRS regulations. In a divorce proceeding, attorneys and clients spend substantial time and resources digging into the finances of both parties. It is unlikely that hidden assets or income will remain uncovered under such scrutiny.
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Divorce can have a devastating effect on many aspects of the parties’ lives. In some cases, the parties may not even realize the full effect of the divorce for years to come. For example, in the heat of litigation many spouses may not consider how divorce will impact their social security benefits. In order to get specific information regarding your case, it is important to consult with a divorce attorney who is a financial specialist. However, below are a few general principles to consider.

The first factor to consider in any social security analysis in the context of divorce is the date of separation, and accordingly, the length of the marriage. Neither spouse will be entitled to the other spouse’s social security benefits unless the marriage lasted 10 years or more. A marriage which lasts 10 years or more is typically considered a “long-term marriage“. For the purposes of spousal support, if a marriage lasts less than 10 years, the length of a spouse’s spousal support obligation is generally limited to half the length of the marriage. In a marriage of long duration, the term of spousal support will likely not be limited to half the length of the marriage. Therefore, the length of the marriage will be a significant issue in the context of social security and the divorce in general.

If you are looking to collect social security benefits based on your former spouse’s earning record, the next factor that your divorce attorney will ask you to consider is your marital status. You cannot collect social security benefits based on your former spouse’s earning record if you are currently married. However, if you remarried following your divorce and your second marriage ended in death, divorce or annulment, you may still be able to collect social security benefits as a result of your first marriage. Further, the benefit you would collect based on your former spouse’s earning record must be higher than what you are eligible to collect based on your own earning record.

In order to collect social security benefits as described above, you must meet age requirements and your spouse must meet eligibility requirements. The minimum age to collect social security benefits is age 62. In addition, your former spouse must be eligible to collect or currently receiving social security benefits. In other words, you cannot collect benefits based on your former spouse’s income if he or she is not eligible to collect. If your former spouse is eligible to collect his or her social security benefits but has elected not to receive them yet, you must have been divorced for a minimum of two years before you can collect based on your former spouse’s earnings. If you are considering a divorce, the effect it may have on your social security benefits is another factor to keep in mind when planning for your retirement years.

Read more from SSA.gov about qualifying for divorced spouse benefits
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Along with the emotional challenges of a divorce, financial challenges often also accompany a divorce proceeding. In relation to the many financial challenges, one question that often comes to the mind of our San Diego clients is:

How does divorce affect my credit?

The fact that you are now divorced won’t directly affect your credit, credit scores or credit history. This is because your creditworthiness is not based on your marital status. However, divorce can indirectly affect your credit in a number of ways, and usually not in a good way.

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A divorce almost always results in a change in housing for one or both spouses. As if qualifying for a new mortgage isn’t hard enough, unfortunately, getting a mortgage after a divorce can be further complicated by several factors related to the dissolution. During a divorce proceeding, family lawyers frequently answer the question:

“How do I get a mortgage after a divorce?”

Mortgage lenders look at your overall debt-to-income ratio to see what you quality for. Thus, it is important to keep in mind that the following liabilities will be considered as part of your ability to qualify for a mortgage:

  • Child and Spousal Support Obligations:
    Lenders will look for any undisclosed financial obligations such as the payment of child support or spousal support pursuant to the divorce decree. These financial obligations will, unfortunately, reduce your ability to qualify for a mortgage because they are looked at as debts, which reduce your income.
  • Credit card debt, student loans, and automobile loans: These liabilities will also be considered as part of your ability to qualify for a mortgage unless you are able to prove that your ex-spouse is responsible for the credit obligation by showing twelve months of canceled checks or bank statements.

Although getting a mortgage after divorce can be complicated by the above factors, with some extra planning, discipline and awareness, it surely is not impossible. Here are some tips to help make it easier to get a mortgage after divorce:

  • Disclose receipt of child support and/or spousal support: The income received as child support and/or spousal support pursuant to your divorce decree can be used to help you qualify for a mortgage.
  • Carefully review your credit report: Make sure the accounts on your credit report belong to you only, not jointly with your ex-spouse. This can be quite a process and time some time to sort through but it is worth it because, for instance, if your ex-spouse pays a debt (pursuant to the divorce decree) late that is on your credit report, it will negatively affect your credit score and make it harder to qualify for a mortgage.
  • Provide evidence that ex-spouse is responsible for current mortgage: You can improve your ability to qualify for a new mortgage if you own a house and are currently on a mortgage with your ex-spouse but the divorce decree awards the home to your ex-spouse and he/she is willing to provide evidence that they make the mortgage payments on the home.

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One of the biggest battles in many contested divorce cases is the issue of spousal support (also commonly referred to as alimony) and analysis of California spousal support factors. The most prominent factors a court typically considers when making a spousal support award are the supported spouse’s needs and the supporting spouse’s ability to pay support. Therefore, the supported spouse wants to make sure the court considers every single source of income the supporting spouse has available for support. The supporting spouse wants to minimize his/her income as much as possible without misleading the Court or the other party. One issue that has been litigated in California courts is whether fringe benefits or “perks” received through employment are income available when calculating support.

Many companies offer alternative compensation or perks to employees such as car allowances, cell phones, business meals, and company-provided day care. Parties and attorneys often debate whether these “non-cash” perks should be considered income from which the supporting spouse can pay support. Under California law, perks can be considered as income available for support if the benefit is not being divided as an asset and it has an economic value which can be added to the spouse’s income for the purposes of support calculation.

Learn more about division of property in divorceIn cases where a benefit will directly reduce the supporting spouse’s monthly expenses, divorce attorneys will argue that it should be considered as income for support purposes. For example, if the supporting party’s employer pays for his/her cell phone every month and the cell phone is not limited to company use, the supporting party will not have to pay monthly cell phone premiums for personal use of a cell phone.

Likewise, if a company pays for the supporting party’s gas or auto insurance, the supporting party will not pay those expenses out of pocket. In these situations, the fringe benefit will likely be valued and included as income available for support.

Another major issue of contention in this area of law is whether the value the benefit assessed should be considered “taxable” or “non-taxable” income. According to the divorce attorneys at the firm, one California case holds that tangible benefits should be included as taxable income. However, until the employee actually pays taxes on such benefits it is unfair to consider them as gross deductions.In addition, some benefits such as a business meal may not reflect the cost of a normal meal. The supporting spouse may get to eat a $50.00 lunch on the company’s dime; however, if he/she had bought their own lunch, he/she would likely have spent less than $10.00. The court will use discretion in considering a request from a party or divorce attorney to categorize these types of benefits as income where the result might seem unreasonable.

Read more about the effect of divorce on taxes and finances

Unfortunately, there is no such thing as a San Diego spousal support calculator, and analysis of the factors affecting spousal support in California is complicated. Often times, a person will need to rely on the advice of an experienced and knowledgeable divorce lawyer in order to understand the theories and process involved.
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Former NFL player and Super Bowl champ, Jeremy Shockey, and Daniela Cortazar enjoyed a brief eight months of nuptial bliss before Shockey filed for divorce in January 2013. TMZ now reports that Shockey “is playing dumb with his finances according to his soon-to-be ex-wife.” Cortazar claims that Shockey’s net worth is over $15 million but apparently Shockey is pretending to know nothing about his finances in his legal documents. Shockey is even refusing to provide information regarding his net worth. Cortazar is asking a judge to punish Shockey with fines or jail time. More importantly though, to get a fair share in the divorce settlement, Cortazar should take prudent measures to make sure that Shockey doesn’t have any hidden assets tucked away.

Hidden assets are those assets which are not readily visible typically because signs of ownership have been concealed or disguised by the other spouse. Hidden assets typically include liquid assets such as bank accounts, mutual funds, stock and bonds. These types of liquid assets can easily be transferred into another person or entity’s name. Sometimes, these assets are even transferred into accounts in banks offshore which prohibit being touched under the laws of the particular country.

Learn more about divorce and property divisionHidden assets are particularly important in divorce cases because when a court does not know about a particular asset, it cannot properly divide the asset or award it to one party or the other. Hiding assets is clearly illegal because both spouses lawfully have a claim to all marital property during a divorce proceeding. Therefore, being attentive to marital finances can help ensure that your divorce settlement is fair to you.

The first step in hunting down hidden assets during a divorce proceeding requires a diligent tracking and study of all financial records. Looking at old financial statements may help to identify suspicious transactions. For instance, an asset may initially be present in financial documents and then suddenly it has disappeared near the time of divorce or during divorce proceedings.

Other tips on finding hidden assets include the following:

  • Get a credit report on your spouse. Credit reports may contain information regarding financial accounts or credit that are unknown to you.
  • Look for payment of excess income tax and then a subsequent filing for the tax refund after the divorce.
  • Have items such as artwork, hobby equipment, antiques, original paintings, etc. appraised.
  • Be diligent about locating any cash kept as traveler’s checks. You can do this by tracing bank account deposits and withdrawals.
  • Look for any inconsistencies which may indicate delayed disbursements of bonuses or stock options.
  • Be aware of any income that isn’t reflected on either financial statements or tax returns.

Read more about property division and divorce in San Diego


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In San Diego Family Courts, Judges take the issue of breach of spousal fiduciary duty very seriously. Harsh punishments are available in family court for nondisclosure of assets, failure to provide truthful information regarding income and assets and other misconduct. In April 2013, the California Court of Appeal ruled in In re Marriage of Simmons, a case of first impression. In this case, Mr. Simmons failed to disclose a separate property savings account with a value of $245,850.24. As a result of Mr. Simmons’s breach of fiduciary duty, the trial court awarded Ms. Simmons the account in full. However, the appellate court reversed that award.


California Family Code § 721 imposes “a duty of the highest good faith and fair dealing” on spouses when dealing in transactions with each other. Family Code § 1100 clarifies that duty by stating that it “includes the obligation to make full disclosure to the other spouse of all material facts and information regarding the existence, characterization, and valuation of all assets in which the community has or may have an interest…” During a divorce case, both spouses are obligated to disclose all assets regardless of whether those assets are community property or separate property. The court may impose various sanctions for failure to disclose an asset. If a spouse discovers an undisclosed asset he or she may request 100% of the asset or an amount equal to 100% of the asset as a remedy.

Although the Family Code is clear regarding the availability of the “value of the asset remedy” if the asset is community property, Mr. Simmons disputed the availability of that remedy with regard to separate property assets. The appellate court agreed with Mr. Simmons and, for the first time, ruled that the “value of the asset remedy” is not available if a spouse has only failed to disclose separate property assets. However, despite the appellate court’s inclination to rule in favor of Mr. Simmons, it was still aggravated by his pattern of misconduct. Therefore, the appellate court remanded the case back to the trial court level directing the trial court to consider any additional sanctions it would like to impose against Mr. Simmons. Various other family codes, such as Family Code § 271, are available to the trial court as authority upon which to base an additional sanctions awards.

Under Family Code § 271, the court may impose monetary sanctions against a party for obstreperous conduct which impedes the policy of settlement in a divorce case. The court is not limited to an amount of sanctions and may impose them in an amount sufficient to deter future misconduct. Under this provision, the Simmons trial court may decide to order $245,850.24 in sanctions against Mr. Simmons for failure to disclose his separate property asset.

Breach of fiduciary duty is a complex divorce issue that requires representation by a competent attorney. Don’t settle for less when determining your rights.

www.BickfordLaw.com


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Considerations for Your Second Marriage and New Blended Family

The United States, especially California, has a bad reputation for its “high” divorce rate. However, along with the high rate of divorce is also a high rate of remarriage. Considering the amount of marriages and remarriages, it is not surprising to family law attorneys that 65% of remarriages involve blended families. “Blended family” is the term used by divorce attorneys to describe families including children from a previous marriage of one or both spouses. Blended families will face some unique challenges. With proper planning and awareness, individuals who intend to remarry after divorce in Del Mar can give their marriage a better chance.

Finance

One of the issues that can arise when two families come together after experiencing divorce is finance. Each family may be accustomed to a particular lifestyle that will have to change when the two families combine. Financial planners and family law attorneys recommend that blended families keep three separate bank accounts if both spouses earn income.

If this approach is followed, each spouse maintains his or her own bank account in which his or her income is deposited and both spouses share one joint account. Each month both spouses deposit a percentage of their income or a fixed amount into the joint account from which all household bills and expenses are paid. Using this method, the blended family can avoid conflict and resentment regarding how much money the spouses spend on their own children. Additionally, maintaining separate accounts can protect both spouses from the other’s debts including child support and spousal support obligations from a prior marriage.

Read more about divorce and finances from the lawyers at the firm

Real Property

Many times after a divorce, one spouse will continue to live in the marital residence. If both spouses in a blended family own a home from a prior marriage, they will be faced with the emotional and complicated decision of where to live together. All children will likely not want to leave their home after a divorce but neither spouse may feel comfortable living in the home of his or her new spouse’s ex. One possible solution is to sell both homes and to purchase a new home together that fits the needs of the blended family. However, both parties should be aware of possible tax consequences of selling their home.

Premarital Agreements

After experiencing a painful and expensive divorce, couples can be a little hesitant to jump into a new marriage to try again. After a divorce, many Del Mar couples opt to sign a premarital agreement (commonly referred to as a “prenup”) or a postnuptial agreement (if they are already married) to provide a bit of comfort when entering a new marriage. Formal agreements allow the parties to clarify ownership of assets and protect savings that may have been set aside for the children’s future. If new issues arise after the parties have entered into prenup or postnuptial agreement, the parties can consult with an attorney to amend their current agreement or draft a new one.

www.BickfordLaw.com


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