Archive: Litigation Articles

DISCLOSURE REQUIREMENTS, PART 1

YOU MUST DISCLOSE YOUR INCOME IN THE DIVORCE PROCESS.

     Divorce is not a game of poker.  You don’t get to “hold” your financial cards.  Instead, you must disclose, disclose and disclose.  Think of divorce as a game of poker where all the cards are face up.  Failure to disclose may result in you being hit with serious monetary sanctions.

     In this article, I will give a brief overview of the disclosure requirements regarding income.   Future articles will deal with property, debts and investment opportunities, business opportunities and income-producing opportunities.

     Family Code section 2102 ( c) states: “From the date of separation to the date of a valid, enforceable, and binding resolution of all issues relating to child or spousal support and professional fees, each party is subject to the standards provided in Section 721 as to all issues relating to the support and fees, including immediate, full, and accurate disclosure of all material facts and information regarding the income or expenses of the party.”

     What does this mean?  Simply put, as you are going through the divorce process you must immediately disclose to your spouse all material facts and information regarding any change in your financial circumstances and that disclosure must be full and accurate.  With regard to income, if if pending your divorce you receive a raise, you must report that raise to your spouse fully, accurately, and immediately.  Failure to report may result in monetary sanctions against you.  Likewise, you would report any drop in income or loss of employment, but nearly everyone is quick to report that.

     The duty to disclose income continues from the date of separation through the date your divorce is final.  Some even argue that in cases where child and spousal support are involved, this duty to disclose income continues after the divorce is final—until support is no longer an issue.  I do not share that view because the California Family Code allows each party to demand an exchange of income and expense information and tax returns from the other party once per year after a divorce is final.  You can also build this requirement into your divorce agreement or ask the Court to order the other party to report their income more than once per year, if the circumstances warrant that.  Still, even if your divorce is over and you receive a big raise that would impact support, you might want to consider giving your ex-spouse the information voluntarily, rather than wait until she/he finds out and takes you back to Cour for more child support.  You may be able to settle out of Court and save money that way.

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For more information, please call Philip A. Wasserman at 661-294-8484 or email him at paw@santaclaritafamilylaw.com.

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HOW TO PROTECT YOURSELF ONLINE IN DIVORCE OR POST-DIVORCE MATTERS

 

You should expect that anything you post on social networking and dating sites such as Facebook, Twitter, Match.com etc., can and will be used against you in your divorce case or post-divorce case.  You don’t need to delete all your social networking profiles, provided you understand that a family law judge may read them one day.  If you are comfortable with that, keep using social media.  However, you should probably limit your social media to photos, videos and matters that are innocuous, i.e., matters that are not controversial or offensive.  Dull is good when it comes to social networking sites and divorce matters.

I recall one former client who testified in court that she never drank alcohol.  However, her social network profile had a picture of her partying with her friends and clearly having a drink.   Another client said he didn’t drink alcohol (this was an issue in the divorce), but he listed himself as a social drinker on a dating web site.

A number of attorneys now search social networking sites to get background information, i.e. “dirt” on their client’s spouse or ex-spouse.

What about e-mail?  Assume that your spouse is able to read all of your e-mail.  So, if you are starting the divorce process, get a new e-mail account. Better yet, if you can afford it, get a new computer—preferably a laptop so you can take it with you.  If you are sharing a computer with your soon to be ex-spouse, assume that you have no privacy and that he/she can and will not only read and copy all of your e-mails, but they will also know each web site you have visited.

Finally, if your spouse leaves the residence, you should still get a new computer or have your computer swept for spyware.  I know of one case where a husband left a very specific type of spyware on the home computer and he could read every e-mail that his wife wrote or received and every web site she visited, even though he no longer lived at home.

This all may sound a bit paranoid, but forewarned is forearmed.

 

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THE CHANGING FACE OF SPOUSAL SUPPORT

     In 1970 only 4% of husbands had wives who earned more than they did. In 2007, that share rose to 22%. These figures come from a new Pew Research Center study, as reported in the Los Angeles Times.   I’ll bet that the percentage of wives who out earn their husbands is even higher today.   As more women out earn their husbands, this is having an impact on spousal support, what used to be called alimony here in California. Traditionally, wives have been the recipients of spousal support in divorce.

     However, it is both sexist and just plain wrong to assume that only women can receive spousal support and that women never pay spousal support to men.   The California Family Code is gender neutral and family law courts can and routinely do order wives and ex-wives to pay spousal support to their husbands or ex-husbands.

     Remember, that unless otherwise agreed, spousal support payments are tax deductible to the payor and are taxable to the payee.   However, to obtain the tax deduction, there must be either a court order, judgment or written agreement requiring one party to pay spousal support to the other.

     Here in California, there is a presumption that in a short term marriage, which is defined as a marriage of less than 10 years, spousal support will last no more than one-half the length of the marriage.   However, that is presumption and can be rebutted.   Importantly, a party receiving spousal support should always keep in mind that it is the public policy of the State of California that they become self-supporting within a reasonable period of time, and the failure to do so may be one of the factors a family court considers in reducing or terminating spousal support.

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CHILDREN AND DIVORCE – WISE ADVICE

I recently attended a conference where I listened to adult children of divorce.  Here is some of their wise advice: 

“Don’t let or allow your children to lose their childhood in your divorce.”

“You don’t have to have 50/50 custody to be a 50/50 parent.  Quantity of time is less important than the relationship you build with your child.”

“Don’t abdicate responsbility for your bad behavior to your lawyers.”

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Attorney-Client Relationships: Built on Trust

Why did the client cross the road? Because his attorney told him not to. Of course, this joke underscores that the attorney-client relationship must be built on trust. Here are some tips on how to interact with your divorce lawyer that should save you time, money and help you avoid frustration and misunderstandings.

First, you must be candid with your lawyer. One of the biggest problems attorneys face are clients who don’t disclose damaging information early in their case. I recall one former client who, only ten minutes before a custody hearing, revealed to me that he had a six-month-old arrest and conviction for drug use. You can bet the other side already knew about it. Your attorney can help with damage control if you tell him or her the “bad” news from the start, or whenever it happens. It usually turns out that something a client thinks is very bad isn’t, or can be mitigated.

Second, be honest about your assets and debts. The last thing you want to do is to try to hide money or property from your spouse. Remember that you, and not your attorney, signs the financial declarations under penalty of perjury.

Third, your divorce lawyer is your advocate, not your therapist or financial guru. There is no substitute for a good therapist to help you through the emotional ups and downs of divorce, and a good financial planner.

Fourth, tell your divorce attorney what’s most important to you. It may be more time with the children, the house, or a favorite antique. Your attorney is not a mind reader. You and your attorney are a “team.” It’s OK to ask your attorney what you can do to keep costs down and help expedite your case through the system. Be proactive and involved.

Finally, don’t get hung up on the “pots and pans.” Remember that all your furniture, furnishings and appliances are valued at the money you could get them at the local swap meet or garage sale. Unless you have art or antiques that can be appraised, there’s no use spending new money in attorney fees and court costs to get old furniture and appliances. Today, these items are commodities and unless you purchased furniture as art, it doesn’t make sense spending thousands of dollars to fight over that old sofa.

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DIVIDING COMMUNITY PROPERTY THE HARD WAY

The Associated Press reported on October 10, 2008 that a couple in rural Cambodia terminated their 18 year marriage with a divorce settlement that entailed sawing in two the wooden house they once shared.  The husband took away with him all the bits and pieces of his half of the house.  I’ve never heard of a divorcing couple in California going to that extreme, but even when you don’t take a saw to the house, dividing community property can be more complicated than dividing by two.  California is a community property State and that means all property acquired during marriage is presumed to be community property.  Property acquired outside of the State of California during marriage is called quasi-community property, but is treated the same way.  However, there are exceptions to this rule and they can be quite complex, which requires an experienced family law attorney to recognize these issues.  One exception is that property acquired by gift or inheritance is normally a spouse’s separate property, but the character of that property can change, depending on the actions of the spouse after receiving the gift or inheritance.  For example, if one spouse uses his/her community efforts by day trading his/her inheritance to stock market riches, the community may gain an interest in the rising stock portfolio. But if the spouse is an investor and only trades on occasion, the community may gain no interest in a rising stock portfolio, and the entire inheritance will likely remain that spouse’s separate property.  Getting back to that Cambodian couple, apparently the wife got the better part of the deal because she got to keep the land the house was built on.

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Failure to Disclose Lottery Winnings is a Lesson for All Divorcing Couples

If you’re getting divorced don’t forget in re Marriage of Rossi (2001) 90 Cal.App.4th 108. Rossi is one of the most important cases in all of California divorce law. Why? Because of the penalty imposed on Ms. Rossi for failing to disclose her 1.3 million dollar lottery jackpot. The case was big news a few years ago, but people have short memories, so a reminder is due.

Ms. Rossi never told her husband about her lottery winnings while they were married. The parties’ divorce judgment said they had made a full disclosure of all gifts and property. It also provided that a party who failed to disclose an asset that was later discovered would pay its full market value to the other party. This is common divorce judgment language. Ms. Rossi never mentioned the lottery winnings and she arranged to have the money mailed to her mother’s house.

But, the postman always rings twice and Mr. Rossi found out about his ex-wife’s lottery winnings when he got a letter in the mail offering to buy out lottery winnings. He moved to set aside the divorce judgment on grounds of fraud, breach of fiduciary duty, and failure to disclose. He asked the trial court to award him 100 percent of the lottery money plus attorneys’ fees. The trial court ruled that Ms. Rossi had intentionally breached her fiduciary duty to Mr. Rossi by concealing the winnings from him. It awarded Mr. Rossi 100 percent of the winnings. Ms. Rossi appealed, but lost.

The lesson of this story should be obvious: Parties in a California divorce have a duty to disclose all of their assets, debts, liabilities and income, whether they believe them to be community or separate property. This is the law, no ifs, ands, or buts. You must list this information on your Preliminary and Final Declarations of Disclosure. And it doesn’t hurt to have a private investigator run a propety check on your spouse sometime after the divorce is over. Mr. Rossi learned of his wife’s lottery winnings by chance through the mail. Who knows, you may have won the lottery and not even know it.

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Highlights on Family Law

Attorneys are required to complete Continuing Legal Education courses each year. Here are some highlights from the course that I recently attended on family law:

“Flexibility” has become the new buzzword in family law with respect to custody of minor children. Gone, it appears are the days of the primary custodial parent (historically the mother) telling the father that he can only see the kids on the days listed in their court order. As one family law expert stated, “We are entering the era of ’21st century parenting.’ ”

The new case of In re Marriage of Melville (2004) 122 Cal.App 4th 601, sets forth the current thinking of the Court of Appeal, that trial judges in the family courts are supposed to follow. The justices in the Melville case said that the primary custodial parent should not only follow the court order regarding visitation, but must also be flexible. The lesson here: Don’t deny your ex-spouse some extra time with the kids if you receive reasonable advance notice of the request. Of course, there may be exceptions, – such as cases involving domestic violence, substance abuse and cases that require monitored and supervised visitation for one party. If you’re not in one of those categories, you may want to consider being flexible when it comes to sharing the kids. If you can’t agree with your ex-spouse, the court order controls until modified.

Grandparent visitation rights survive in California. The California Supreme Court says that Family Code section 3104, which provides grandparents with visitation rights in divorce cases, is constitutional and is not overturned by the U.S. Supreme Court’s decision of a few years ago in the Troxel case. Still, grandparents have an uphill battle for visitation with their grandchildren.

Spousal support may include money for savings. In Marriage of Wittgrove (2004) 120 Cal.App. 4th 1317, the Court of Appeal said it was okay for a trial court to use a history of savings as part of the status quo when determining spousal support. In that case, father argued that mother’s spousal support needs didn’t include savings. Both the trial court and the Court of Appeal disagreed.

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Keeping Hold of the Big Ticket

The house is usually the “big ticket” item in a divorce. In many cases, women often trade their community property interest in their husband’s pensions or 401(k) plans for the house. But, holding onto the house may not be the best choice. First, you must consider whether you can afford to keep the house. Even if you are receiving child support and spousal support, you must consider what would happen if your ex-husband got laid off or sick and your support ended or was significantly reduced. Could you afford the house under those circumstances? Second, consider the cost of upkeep, such things as insurance, repairs, property taxes, and so on. Before considering whether you are going to trade your interest in a pension for the house, take stock of all the expenses each month. Will you have enough income to cover all expenses and more importantly, will you be able to save money for emergencies?

A better strategy may be to sell the house, divide the money and purchase a less expensive residence. That way you still keep your community property interest in your ex-spouse’s pension, which means that you’ll have that income for retirement. Additionally, you can start your own IRA after the divorce. I generally caution my women clients not to trade their interest in their husband’s pension, especially government pensions, for the house. Government pensions are generous, backed by the government, and often come with cost of living increases. Before trading the pension for the house, you must consider not just where you are financially today, but where you will be at the age of retirement and beyond.

One of the biggest mistakes women make in divorce is not having a clear picture of their finances. If your husband has been the one handling all the money, it is time to get financially educated. Your divorce attorney is not a financial advisor, but should be able to point you in the right direction and suggest resources to help you become financially educated. Make sure you have a clear picture of your finances before giving up your interest in that pension or 401(k) for the house.

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Marriage of Brown and Yana

The recent California Supreme Court decision in Marriage of Brown and Yana reminds me of the old joke that goes like this: “Where does the 800-pound gorilla sit?” The answer is, “Anywhere it wants to.”

Marriage of Brown and Yana involved a divorced mom’s plan to move from San Luis Obispo County to Las Vegas, Nevada with their 12-year-old son Cameron and mom’s children with her new husband. Dad opposed the move and the inevitable move-away battle began in the trial court. The trial court appointed an attorney for Cameron, who reported that Cameron was “a conflicted young man” who said “different things at different times, based upon who he happened to be with at the time.”

At the end of the day, mom got to move with Cameron and her new husband to Las Vegas. As the case wound its way through the legal system, and all the way up to the California Supreme Court, little Cameron became a not so little teenager. Cameron apparently decided he preferred to leave Las Vegas to live back in San Luis Obispo County, so he moved back and began living with his dad. The 800-pound gorilla made his choice.

Does this mean that 12-year-old children have the final say regarding which divorced parent they want to live with? As far as the law is concerned, the answer is probably no. Remember, however, that Cameron became a teenager while this case went from the trial court to the California Supreme Court, and that changed everything from a practical standpoint.

California Family Code Section 3042 provides that courts shall consider the preference of a child in making custody orders if that child is of sufficient age and capacity to reason so as to form an intelligent preference as to custody. The practical implication of this Code Section is that teenage children become the 800-pound gorillas in divorce and post-dovorce cases. Something to think about before spending the time, money and emotional capital fighting over custody of your teenage children. An alternative for families in confilict with teenage children is family counseling.

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