THE EVOLUTION OF DIVORCE AND PROPERTY DIVISION IN CALIFORNIA

Posted May 31, 2018 in Family Law by Michael Lonich.

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May 31, 2018
THE EVOLUTION OF DIVORCE AND PROPERTY DIVISION IN CALIFORNIA
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California laws for property division in divorce has undergone significant change over the years. Due to its Spanish roots, California began as a community property state, in which all property acquired during the marriage is part of the community thus subject to equal division in divorce. Divorce in California really took off in 1969 when Governor Ronald Reagan signed into law “no-fault” divorce making California one of the first no-fault divorce states. The new law eliminated the need for couples to articulate spousal wrongdoing in pursuit of a divorce. In the decades that ensued, almost every state in America would follow California’s lead and enact “no-fault” divorce of its own. This legal transformation would open the floodgates to divorce in the United States. From 1960 to 1980, the divorce rate more than doubled. With the major influx of California divorce came novel legal questions on how to fairly divide property between divorced spouses. The California legislature and judiciary would create new laws to address these issues.

Perhaps the most landmark amendment to the Family Code is the addition of Family Code §2640, which requires reimbursement of a spouse’s traceable separate property contributions towards the acquisition of community property before division can commence. Under this statute, all separate property used to obtain a property with joint and equal ownership is reimbursable separate property. Moreover, Family Code §2640 states that the spouse who made a separate property contribution is entitled to interest-free reimbursement for the down payment, improvements, and principal, but not an ownership interest. This reimbursement also does not include payments towards taxes, insurance, or maintenance.

Prior to the enactment of this statute, the California Supreme Court presumed that any separate property funds (e.g. money acquired before marriage and inheritances) used to purchase an asset during the marriage was presumed to be a “gift” to the community. This presumption, colloquially referred to as the “Lucas Presumption” precluded a spouse from claiming any interest in a community asset regardless of whether the spouse spent much of his own separate property money to purchase it. In most cases today, the Lucas Presumption no longer applies, thanks to the 1984 California Legislature. However, in certain rare cases for property acquired before the statute, the court will use a two-part analysis to determine whether retroactive application of section 2640 violates due process under the Constitution. First: The significance of the state interest served by the law and the importance of the retroactive application of the law to the effectuation of that interest; and Second: The extent of reliance upon the former law, the legitimacy of that reliance, the extent of actions taken on the basis of that reliance, and the extent to which the retroactive application of the new law would disrupt those actions. (In re Marriage of Heikes (1995) 10 Cal.4th 1211, 1219).

even if the property was acquired after 1984 and either party is entitled to reimbursement under section 2640, it is vital that the necessary records are maintained so that a court can trace the funds from the community asset back to all separate funds. Burden of proof and problems arise if the monies were commingled into a joint account. These issues are especially apt in lengthy marriages where a spouse may not have kept a record of his or her separate contributions. As previously explained in other blog posts, the best way to ensure adequate accounting for separate property assets is to proactively keep an inventory of its rents, issues, and profits. In instances where a community asset is purchased with commingled funds it may still be possible to obtain reimbursement under the method of tracing by recapitulation. Under this method, a court may conclude that the asset was purchased with separate funds if the party can prove that all community funds had been exhausted by community expenses at the time of the transaction.

The date of separation has also undergone significant change in California. The date of separation in a California divorce can play a very important role in determining the division of assets and debts. It can be the difference between whether an asset is community or separate property and whether a marriage is of “long duration” or “short” for purposes of determining spousal support. Initially, the rule was that the date of separation occurred when either spouse did not intend to continue the marriage and their conduct was consistent with the complete and final breakdown of the marriage. Then in July 2015, the California Supreme Court abrogated that rule in a decision called Marriage of Davis. This decision created a bright-line rule making physical separation a necessity to separate. This meant that parties who could not afford to live out on their own were precluded from legal separation. Many family law lawyers, judges and the California legislature did not like this decision. Thus, in 2016 Governor Brown signed into law Family Code section 70 defining separation as the date that a complete and final break in the marital relationship has occurred, as evidenced by (1) a spouse’s intent to end the marriage and (2) conduct of the spouse that is consistent with his or her intent to end the marriage. The law requires courts to take into consideration all relevant evidence.

If you are seeking information or counsel regarding estate planning or protecting your property during divorce, please contact one of the experienced attorneys at Lonich Patton Erlich Policastri – we offer free half-hour consultations. We also offer free wills to all of our family law clients during the process of their divorce.

Lastly, please remember that each individual situation is unique, and results discussed in this post are not a guarantee of future results.  While this post may detail general legal issues, it is not legal advice. Use of this site does not create an attorney-client relationship.

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PROTECTING YOUR ESTATE DURING DIVORCE

Posted May 4, 2018 in Estate Planning by Michael Lonich.

Going through divorce may be one of the most challenging and stressful ordeals you will experience. There are numerous questions you have to answer, a slew of documents you have to dig up, and brings an incredible amount of emotional turmoil. While you may be ready to forget your ex-spouse completely, do not forget to change your estate plan.  If you have a previous plan, you likely named your ex-spouse as the successor trustee, executor, power of attorney, and/or beneficiary. It is very unlikely that you will want to leave your ex-spouse in that role, making it vital to change your estate plan.

In a revocable trust, the trustor or trustee, not the beneficiary, has control over when and if the benefits are distributed. However, when you die, whomever you named as executor of your will or successor trustee of your trust will have control over when and if the benefits are distributed. It is likely that you would designate your spouse as executor and successor trustee during marriage, so it will be important to have a new estate plan done, in order to designate a new person to fill these rolls. It is your decision who will fill the roles. Your executor or trustee does not need any special training, but must be an organized, prudent, responsible, and honest person. Additionally, you will want to consider who is named as beneficiary on any retirement accounts, life insurance, or additional benefits. If you had named your spouse, you would want to give your estate attorney at least one new person who would be a beneficiary.

While most assets are subject to your estate plan at death, there are some exceptions. These exceptions include life insurance policies, IRAs, and other tax-deferred retirement plans. These are distributed according to beneficiary designations, which override the designation in your will or trust. It is important to update beneficiary designations right after the divorce, if you choose not to during the process, as just updating your estate plan will not affect who gets the benefits of these plans.

Further, if your ex is your agent on your durable power of attorney for property, you should consider changing his/her name immediately to prevent your ex from having unlimited access to bank accounts or financial assets. Additionally, you should name another person as your agent to make health care decisions for you if you are unable to make your own decisions. It is important to also name an alternate agent to act for you if your first choice is not willing, able, or reasonably available to make decisions for you.  You may choose to limit the authority of your agent, but if you choose not to limit his/her authority, they may, but are not limited to, consent or refuse care, treatment, or procedures, agree to tests, surgery, and medication, and designate anatomical gifts. Who you choose to make these decisions should be someone you believe understands and will respect your wishes.

Finally, you may also be wondering how to provide for your minor children in the event of your death, if your ex has no custody rights over them. You should nominate a guardian to supervise and care for your child until he/she is 18 years old. Under California law, a minor child would not be legally qualified to care for him/herself, or to manage his/her own property. You can make the designation in your estate plan.

If you are seeking information or counsel regarding estate planning or protecting your property during divorce, please contact one of the experienced attorneys at Lonich Patton Erlich Policastri – we offer free half-hour consultations. We also offer free wills to all of our family law clients during the process of their divorce.

Lastly, please remember that each individual situation is unique, and results discussed in this post are not a guarantee of future results.  While this post may detail general legal issues, it is not legal advice.  Use of this site does not create an attorney-client relationship.

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