community property Archives - Lonich Patton Ehrlich Policastri

Posts

10 Common Divorce Questions

September 6, 2019/in Family Law /by Gretchen Boger

Divorce is very nuanced. There are many things to consider which can make an already difficult situation more challenging. Lonich Patton Ehlich Policastri has put together a comprehensive guide of the most commonly asked questions. Get an answer to your divorce question now.

1.What Is The Difference Between Divorce Mediation And Divorce Collaboration?

Mediation is when a neutral third party is hired to facilitate resolution of issues between two people during a divorce. The mediator helps with paperwork, mutual communication between all parties, and securing 60%-70% of goals or desires are met for each party.

Collaboration is a binding contract between both parties and their attorneys stating neither will go to court. If this contract is breached, the parties will have to fire their attorneys and start the process over. Attorneys can help clients identify what’s important to them and how to work through issues. It is common to have non lawyer professionals involved in collaborative divorce. Mental health professionals, divorce coaches and financial specials can add clarity to emotions and difficulties that arise during the resolution of a marriage.

2. How Much Does It Cost To Get Divorced?

This is probably the most common divorce question. The answer is different for everyone. It depends on what issues you have. Do you have children? If so, you will need to deal with the issue of custody. How will your property be divided? Do you own a business together? What if one of you needs spousal support? Is there a post nuptial or a prenuptial agreement? All of these factors impact the cost of your divorce. The best way to find out what cost you’re looking at is to call an attorney. If you live in San Jose, Lonich Patton Ehrlich Policastri offers a free 30 minute consultation that can answer tough questions like this.

3. How Long Will A Divorce Take?

The answer for this divorce question is similar to the question above. It depends on your unique situation. The attorney you work with will need to know of any estate plans, businesses or property you and your spouse own. They will also need to consider any children and custody agreements involved. It depends on how much you and your spouse agree upon. If you go through mediation or collaboration, it could take less time than going through litigation.

4. How Is Property Divided In A Divorce?

In California, this comes down to two rules: Community property and Separate property. Separate property is anything you acquired before your marriage and that hasn’t been commingled or shared between the two parties during the marriage. If you owned a house before your marriage and have kept it separate from community property, that is added to your separate income when division begins.

An attorney answers the burning divorce question of how property is divided after divorce.

Community property is anything acquired during the marriage or shared during the marriage. This includes a family home, cars, debts or anything earned or gifted during the marriage. Community property is divided during the dissolution of the marriage. This doesn’t mean it is necessarily divided in half. If you have two assets of equal value, one person may receive one while the other party receives the other; an example being a house and a retirement savings plan.

5. What Are My Rights During A Divorce?

You have rights protected under the Bill of Rights. You have the right to a fair trial; the right to a safe trial free of harassment from a spouse or their attorney. You have the right to see your child unless a court states otherwise. Speaking with an experienced attorney such as the ones at Lonich Patton Ehrlich Policastri is the best way to learn about your rights during your divorce. Get your questions answered in a free 30 minute consultation.

6. How Does The Court Decide On Child Custody During A Divorce?

Child custody is decided based on many factors. Often, during the case, temporary custody is assigned. This allows the child to have a stable routine they can depend upon and prevents their lives from being upended. Judges can be hesitant to change this plan when deciding on permanent custody as they don’t want to remove that stability from the child’s life. Temporary custody can be an indicator of the end result of child custody, but it isn’t guaranteed. Once divorce is filed, the state your child currently resides in becomes their home state. If a parent wants to move out of the state or relocate, this can affect the outcome as well.

Judges consider the wellbeing of the child over everything else. This means they will look into any history of mental illness, drug abuse or addiction, and financial stability (to name a few). Courts tend to favor the spouse who is able to put their differences and issues from the divorce aside for the betterment of the child. This means the more level headed you are, the better.

7. Does My State Have A Separation Requirement?

This is a crucial divorce question to research before filing. In San Jose, CA, there is no separation requirement. You must have lived in CA for 6 months before filing for divorce however. Once you have filed, you must wait another 6 months before the finalization of your divorce. If you file for legal separation in the state of California, there is no waiting period making it a great option for those who haven’t lived in the state for 6 months.

If you don’t know if your state has a separation requirement, the best way to find out is to research your state laws or contact a local divorce attorney.

8. How Do I File For Divorce?

This is another common divorce question clients ask. To be eligible for a divorce in CA, you must have lived in the state for 6 months. When it comes to counties, you must have lived in the specific county you file in for 3 months.

Before no fault divorce existed, a spouse had to provide a reason for the dissolution of marriage. This typically involves extramarital affairs or domestic violence and the practice is still common in some states. In California, all divorces are no fault which means one party can simply want a divorce from the other without providing a “fault.” This means that wrongdoing has no impact on the division of assets according to the judge.

After filing, there’s a 6 month waiting period for the finalization of divorce. You and your spouse can work collaboratively to make a plan for child custody and property division without legal assistance and if that doesn’t work you can seek help from a mediator. This is where you might consider collaborative divorce or mediation. The last option is divorce litigation which is also the messiest. This should be a last option if you and your spouse cannot agree on anything.

For help filing in Santa Clara county, contact Lonich Patton Ehrlich Policastri.

9. Will I Have To Go To Court?

You may not need to go to court if you are able to resolve issues and division of assets through mediation or collaboration. This is an ideal situation and all papers can be filed with the court with a judgement on your case sent in the mail. Sometimes you may still be required to show up for a hearing in these cases.

Proper divorce planning and mediation can help you avoid going to court.

If you opt for divorce litigation, the matter will be handled in court and this can be pricey. If you can avoid litigation, it’s in the best interest of everyone involved. However, at LPEP Law, they know how contentious divorces can get and understand not everyone will be able to settle their issues out of court.

10. How Do I Decide On A Divorce Lawyer?

You should make sure your divorce attorney specializes in family law and divorce cases. You want someone who has handled a myriad of divorce situations and will work to get you the best possible outcome.

Ask how many years of experience they have. If you’re going to court, do they know the court and the judges who preside there? Are they board certified? These are all important questions to ask when deciding on a lawyer.

If you’re considering divorce in San Jose, contact Lonich Patton Ehrlich Policastri for a free 30 minute consultation. They can help you decide if mediation, collaboration or litigation is the right option for you. Get any divorce question you have answered.

How Is Property Divided After Divorce?

September 6, 2019/in Family Law /by Lonich Patton Ehrlich Policastri

Financial issues following a separation can be complicated. Proper divorce planning and record-keeping can be invaluable to a smooth divorce proceeding. Determining what is community property and what is separate personal property can become complicated very easily. For example, you may ask “What happens to my house after divorce?”

Seemingly simple issues such as who stays in the community home and who pays the mortgage after separation carry significant weight. To assist in these issues, Epstein Credits and Watts Charges are used.

Epstein Credits And Community Property

In 1979, the case Marriage of Epstein gave the court the power to order Epstein Credits. Epstein Credits are used to determine the amount one spouse will be reimbursed for debts paid after separation but before trial. Epstein Credits allow a spouse who pays community expenses or debt after separation to be reimbursed for their one-half share of the expense or debt. An example of this is a mortgage on a community property home. This does not apply to separate personal property.

An attorney signs paperwork dividing community property in a divorce

When requesting Epstein Credits, it is important to keep accurate records. Records should include the expenses or debts made and from what sources the expenses or debts were paid from. The more extensive the records kept, the easier it will be to determine what reimbursement may be made from Epstein Credits. Proper divorce planning can assure you have all the records you need to proceed with this process. Further it is important to raise the issue of Epstein Credits as early as possible. This helps to avoid extra complexity at trial.

Watts Charges And Community Property

The case Marriage of Watts in 1985 introduced the concept of Watts Charges, allowing a spouse to charge the other spouse for the use of a community asset after separation. While Watts Charges can apply to almost any community asset, a common situation that arises after separation is that one spouse will remain in the community owned home exclusively. When one spouse remains in the community home the other spouse may charge that spouse one-half of the community home’s fair monthly rental value.

Courts prefer that prior written notice of the intent to seek Watts Charges be given. This notice simplifies issues at trial. It makes it known that Watts Charges are within the reasonable expectations of the spouses. Like Epstein Credits, the earlier that a claim for Watts Charges are raised the better. The claim will be retroactive to when written notice was given.

Epstein and Watts Together

In some circumstances, Epstein Credits and Watts Charges may partially or even completely offset each other. If a spouse is both living in the community home and paying the mortgage, if the mortgage payment is equal to the value of the monthly rent, the two will offset each other. If however if the value of the rent is higher than the mortgage payment, the difference in value will still be owed to the respective spouse. It is also possible to owe both Epstein Credits and Watts Charges. Consider if a spouse is living in the community home, and the other spouse is paying the mortgage for the property. In this case, the spouse living in the home may owe both the one-half rent and the one-half payment of the mortgage.

An experienced attorney sitting with a client helping to divide up community property in a divorce.

Regardless of the circumstances surrounding separation and community property, these financial issues are complex. They are best addressed by a knowledgeable and experienced attorney. If you are separated or looking at a high net worth divorce, please contact one of the experienced attorneys at Lonich, Patton, Ehrlich, Policastri. They offer a 30 minute free consultation where they can assist you with divorce planning and answer any questions you may have.

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.

Educational Degrees and Divorce

May 24, 2017/in Family Law /by Michael Lonich

More individuals today have received some sort of professional degree or training than ever before. But with the influx of costs for higher education many married students rely on their spouse for financial support. And upon legal separation or divorce a spouse who supported the other through their education may be entitled to reimbursement for their community fund contributions.

If a spouse chooses to obtain a professional degree or training during their marriage usually two events occur. First, the non-student spouse supports the other financially by paying for the community and educational expenses. Second, after the education is complete, community funds may be used to repay any outstanding loan amount. Upon legal separation or divorce in California these educational loans will be assigned to the spouse who received the education or training and the non-student spouse may have a right to reimbursement for their community contributions. However, California does not recognize an obtained degree or training as community property and therefore its value cannot be divisible upon divorce.

The reimbursement for community fund contributions to a spouse’s education or training is an exclusive remedy governed by Family Code Section 2641. But the spouse seeking reimbursement has a burden to trace the funds to a community property source such as earnings acquired during the marriage. Reimbursement is seen to give a fair “quid pro quo” (this for that) of the community’s investment in the education of a spouse. A supporting spouse may receive reimbursement if the education or training “substantially enhanced” the earning capacity of the spouse or the marriage has ended before the community obtains a benefit from such education. Contributions that may be reimbursed involve payments made with community or quasi-community property to support the student spouse’s education expenditures. These expenses include: tuition, fees, books, supplies, transportation, and directly related educational expenses. However, a spouse will not receive reimbursement for ordinary living expenses since these would have been incurred regardless of a spouse’s educational expedition.

Full reimbursement is not guaranteed though and a court may choose to impose limitations on a spouse’s reimbursement amount if their case’s circumstances warrant such a decision. There are several reasons for a limitation and the ones listed below are by no means exhaustive, but merely illustrative.

A person embarks on an advanced degree or training for a multitude of reasons, one of which may be for better financial standing. Yet, even though there is an expectation that the education will benefit the marital community there is no presumption that the enhancement will be “substantial.” Thus, if a spouse cannot demonstrate the education received in fact substantially enhanced the earning capacity, then reimbursement may be limited.

“Unjust reimbursement” can also limit reimbursement. This occurs when a court determines specific circumstances within a case renders a full reimbursement of the community contributions unfair. For example, if both spouses have obtained a degree or training at the community’s expense a reimbursement to only one would be unjust since both were at one point supported by the other. Unjust reimbursement may also occur when a spouse receives education or training that substantially reduces their need for spousal support. These examples however are merely illustrative and many other circumstances may lead a court to deem full reimbursement to a spouse as unjust.

Finally, a written agreement between the spouses that waives or modifies a reimbursement right may limit a spouse’s amount receivable. Such a waiver or modification must be written expressly; it cannot be agreed upon orally or implied and must be signed by the adverse party.

The achievement of obtaining a degree or training is rewarding for all involved. However, upon legal separation or divorce, rights to reimbursement for community contributions can become complex. If you are considering a divorce or legal separation and would like more information about divorce and educational reimbursement, please contact the experienced family law attorneys at Lonich Patton Ehrlich Policastri.

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.

Understanding the Spousal Fiduciary Duty

September 9, 2016/in Family Law /by Gretchen Boger

Marriage prompts a lot of change—last names, bank accounts, estate plans, housing—but one of the most important changes that arrives once you say “I do” is a fiduciary duty to your new spouse. Fiduciary duty may sound like a term reserved for the boardroom, but a broad fiduciary relationship exists between married spouses as well.

At the most basic level and as prescribed by California Family Code § 721, spouses possess a duty of “the highest good faith and fair dealing,” and “neither spouse shall take any unfair advantage of the other.” Further, the spousal fiduciary duty includes “the same rights and duties of nonmarital business partners” as outlined in the California Corporations Code. Although the Corporations Code uses business-centric language, the Family Code incorporates partner-based duties and applies them to spouses. Thus, spousal fiduciary duties include: 1) allowing access to transaction books, 2) providing full and true information about any community property, and 3) an accounting of any benefit derived from any community property transaction by one spouse without consent of the other spouse. Additionally, spouses owe each other a duty of loyalty—spouses must refrain from dealing with each other as an adverse interest and must refrain from competing with each other—and a duty of care.

Returning to the Family Code, Section 1100 details the fiduciary duties that accompany the control and management of community property. Of note is subsection (b): “a spouse may not make a gift of community personal property for less than fair and reasonable valuable, without the written consent of the other spouse.” In other words, even when giving a community fund-purchased gift to his/her children, a spouse needs the written consent of the non-purchasing spouse. Typically, a nonconsenting spouse is unlikely to challenge holiday and birthday gifts given to his/her own children, but that spouse does have the legal ability to void the gift and receive compensation for its value—an issue usually raised during a separation or divorce proceeding.

Importantly, even after spouses separate or file for divorce, they still owe a fiduciary duty to one another—until all assets and liabilities have been officially divided, spouses must act with respect to each other and fully disclose all material facts and information regarding community property or debts.

Ultimately, most spouses don’t actually keep (or legally, even have to keep) detailed transaction books in the manner expected of business partners, nor do most spouses actually ask for formal consent before making routine purchases, but it is important to note that unilateral transactions could be used as ammunition in a separation or divorce proceeding. Therefore, if you are pondering a large purchase or gift, it is wise to document the process, seek the written consent of your spouse, and/or use your own separate property to make the purchase.

If you would like more information about the fiduciary duty you owe to your spouse, please contact the experienced family law attorneys at Lonich Patton Ehrlich Policastri. From pre-nuptial agreements to divorce proceedings, we can help you understand how the spousal fiduciary duty plays a role in your marriage.

Sources:

California Family Code § 721

California Family Code § 1100

How SB 1255 (the “anti-Davis legislation”) Will Impact Your “Date of Separation”

August 29, 2016/3 Comments/in Family Law /by Mitchell Ehrlich

Currently divorcing spouses or couples considering divorce better consult a lawyer soon—a newly enacted statute has changed the method by which California courts determine a married couple’s “date of separation.” On July 25, 2016, the governor of California, Jerry Brown, signed SB 1255 (aka the “anti-Davis legislation”), a bill which amends California Family Code § 771 and adds section 70 to the Family Code. As a result, the existing standard that governs a married couple’s “date of separation” has been changed. Previously, Family Code § 771 instructed that spouses were not separated until they were “living separate and apart”—a phrase which courts interpreted to mean “living in separate residences.” With the passing of SB 1255 though, spouses may now be considered “separated” even if they share a common residence.

A couple’s legal “date of separation” is important because it determines the point at which a spouse’s earnings and accumulations are no longer considered “community property” and instead, are considered a spouse’s own “separate property.” In turn, the difference between community and separate property is important because absent a written agreement stating otherwise, all community property must be evenly divided between divorcing spouses.

SB 1255’s nickname—the “anti-Davis legislation”—came about because of the case its creation abrogates: In re Marriage of Davis. In July 2015, the Davis court held that “living in separate residences ‘is an indispensable threshold requirement’ for a finding that spouses are ‘living separate and apart,’” or in other words, for determining a “date of separation.” However, the Davis court didn’t create new law—it merely affirmed what it believed was the California legislature’s intention when it coined the phrase “living separate and apart” many years ago.

To ascertain the legislature’s intent, the Davis court had to do go back 146 years to 1870 when the phrase was first used in a statute that protected the rights of married women. Similarly to section 771, the 1870 Act did not define “living separate and apart.” However, according to the Davis court, section four of the 1870 Act suggests that the legislature intended for the phrase to require separate residences: a wife, who was “living separate and apart” from her husband and wished to sell her real property without joining her husband, had to record a declaration that included a description of “her own place of residence” and a statement that “she is a married woman, living separate and apart from her husband.”

Additionally, when the California legislature repealed a number of Family Code sections in 1969, it created a new statute (section 5118) that reproduced the 1870 Act language. Once again though, the legislature provided no specific definition of “living separate and apart.” The Davis court reasoned that the legislature’s continued use of the phrase—without defining it—expressed its satisfaction with earlier judicial interpretation of the language.

Further, the Davis court also relied on a notable 2002 case—In re Marriage of Norviel—which concluded that “living apart physically is an indispensable threshold requirement to separation, whether or not it is sufficient, by itself, to establish separation.” Therefore, relying on legislative history and case law, the Davis court affirmed the Norviel holding—spouses had to live in separate residences before they could be considered separated.

While the Norviel and Davis courts may have correctly discerned the original meaning of “living separate and apart,” our modern legislature took issue with their holdings and in response, passed SB 1255. The bill expressly abrogates Norviel and Davis, and rather than provide a specific definition for “living separate and apart,” the legislature did away with the phrase all together. Instead, section 771 (the modern statute that contained the disputed language) now uses the phrase “after the date of separation” to determine when a spouse’s accumulations and earnings transition from “community” to “separate” property. In turn, newly added section 70 defines “date of separation” as a “complete and final break” that is evidenced by two factors: 1) a spouse has expressed his or her intent to end the marriage to the other spouse, and 2) the conduct of the spouse is consistent with his or her intent to end the marriage. Further, section 70 requires that a court look at all “relevant evidence” when making the above determination.

This statutory change was spurred on by Senator John Moorlach (R-Costa Mesa), the author of SB 1255. He believed it was necessary to change the Family Code language because many spouses wish to separate legally in order to protect their personal finances, but also, wish to continue sharing a residence in order to save costs during their divorce. Thus, SB 1255 should better reflect the reality of modern divorce experiences.

While the amended Family Code sections do provide clarity and allow couples more post-separation flexibility, it is important to note that SB 1255 may not be the end of legal disputes about separation dates—in the coming years, case law will further refine section 70. Additionally, couples in the process of a divorce should not let SB 1255 pass by them unnoticed because when the new law goes into effect on January 1, 2017, it may retroactively apply to any cases pending on that date, but this issue still needs to be resolved and addressed by the Family Courts in California. Look for another blog post on this topic specifically. However, consulting now with your attorney to develop a “date of separation” strategy is in your best interest.

If you are considering a legal separation or divorce, please contact the experienced family law attorneys at Lonich Patton Ehrlich Policastri—we can help you navigate the effects of SB 1255 and answer any questions you may have about how the new law will impact your divorce. The sooner you understand how SB 1255 will affect your current or impending legal plans, the better you can prepare for the new rule when it goes into to effect on January 1, 2017.

Sources:

2016 Cal. Legis. Serv. Ch. 114 (S.B. 1255)

In re Marriage of Davis (2015) 61 Cal.4th 846

In re Marriage of Norviel (2002) 102.Cal.App.4th 1152

Going to California, The Quasi-Community Property State

June 27, 2016/in Estate Planning, Family Law /by Michael Lonich

A move to the Golden State has the potential to change the character of your property. Upon arrival in California, meeting with an experienced California estate planning attorney is a must!

Generally, there are two kinds of property systems: community property and separate property. California is one of nine community property regimes in the United States.* Presumptively, community property is all property acquired by a couple during marriage. The community property system gives each spouse a fifty percent (50%) interest in the property, among other characteristics. In California, separate property is all property owned by a person before marriage and all property acquired by gift, bequest, or devise during marriage.

California’s community property system is unique because it also recognizes “quasi-community property.” Quasi-community property includes all property, wherever situated, that would have been treated as community property had the acquiring spouse been domiciled in California at the time of acquisition. For example, if husband bought a car with funds earned during marriage, while living in Minnesota, a separate property state, the property would be the husband’s separate property. However, if husband and wife moved to California and then filed for divorce, the car would be considered quasi-community property. The reason being is that if the husband was domiciled in California at the time he had purchased the car, it would have been characterized as community property. Pursuant to California law, all property acquired during marriage, including a spouse’s earnings, is community property. Therefore, in accordance with the quasi-community property statute, each spouse would have a fifty percent (50%) interest in the car.

The example above is just one of many that may give rise to quasi-community property. Nonetheless, it illustrates the potential effect a move to California can have upon one’s property. Moreover, each state has the authority to make its own property laws. Therefore, it is imperative that when you move to a new state, especially from a separate property state to a community property state, you visit an experienced estate planning attorney.

For more information about quasi-community property or estate planning in general, please contact the experienced estate planning attorneys at Lonich Patton Ehrlich Policastri for further information. The attorneys at Lonich Patton Ehrlich Policastri have decades of experience handling complex estate planning matters, including quasi-community property issues, and we are happy to offer you a free consultation. 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.

*https://www.irs.gov/irm/part25/irm_25-018-001.html

The Many Forms of Nonprobate Transfers

October 7, 2015/1 Comment/in Estate Planning /by Michael Lonich

Many Americans, even those with children, die without a will. State intestacy laws may provide a framework for how a decedent’s asset should be divided amongst his or her heirs. However, many know that it might be wise to avoid the probate process because it ties up property for months and it can be very costly.[1] There are other processes in place for transferring remaining assets after death. In California, there are several options to transfer assets without probate administration.

Here are a few of these options for transferring assets at death, while avoiding probate: 1) joint tenancy, 2) community property with right of survivorship, and 3) California Probate Code Section 13100 et seq.

Joint Tenancy
- Pros
  - Joint tenancy has a right of survivorship.
  - Each joint tenant owns an identical percentage of the entire asset.
  - Clearing the title to a joint tenancy upon the death of a joint tenant is often a straightforward process.
  - Joint tenancy may be severed unilaterally.
- Cons
  - The new joint tenants will have the power to manage the asset along with the original owner, which may not be the intention of the original title owner.
  - The transfer may have gift tax consequences.
Community Property with Right of Survivorship[2]
- Pros
  - Real or personal property may be owned by a married couple as community property, but with the survivorship features of an asset held in joint tenancy.
  - Community property with right of survivorship is normally more favorable than joint tenancy ownership since both the decedent’s and the survivor’s half of the asset receive a basis adjustment equivalent to the fair market value of the asset at the death of the first person to die. When the surviving spouse dies later still holding the asset, the basis will receive another adjustment to the fair market value.
  - A spouse can establish an account that provides for a nonprobate transfer at the spouse’s death to a non-spouse beneficiary.
  - There is no gift tax consequence.
- Cons
  - A spouse may be able to act alone to revoke the right of survivorship.
Probate Code Section 13100 et seq.
- Pros
  - If the total gross value of the decedent’s real and personal property in California does not exceed the amount of $150,000, the decedent’s personal property may be conveyed by affidavit or declaration pursuant to Probate Code Section 13100 et seq. and no court involvement will be required.
- Cons
  - Probate Code Section 13100 et seq. is only available if no probate proceeding will be commenced for the decedent’s estate or the personal representative of the decedent’s estate consents in writing to the transfer of property through this method.
  - May not be used to transfer real property, regardless of the value of real property.

These are only a few of the methods to avoid probate administration of a decedent’s estate. In planning for nonprobate transfers, individuals should be aware of the pros and cons of their options and anticipate which option works best for their needs. Individual should also be aware of issues regarding liquidity and the intended beneficiaries. Even so, many can benefit from the use of the various nonprobate transfers.

Estate planning is a highly complex area of law. If you are interested in nonprobate transfers or have any questions regarding your current estate plan, please contact the experienced estate planning attorneys at Lonich Patton Ehrlich Policastri for further information. The attorneys at Lonich Patton Ehrlich Policastri have decades of experience handling complex estate planning matters, including nonprobate transfers, and we are happy to offer you a free consultation. 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.

[1] http://www.nolo.com/legal-encyclopedia/why-avoid-probate-29861.html

[2] Cal. Civ. Code  § 682.1

[3] California Trust and Estates Quarterly (2014)

Tax and Estate Planning for Same-Sex Couples

August 1, 2014/in Estate Planning, In the Community, Probate /by David Patton

Earlier this week, the U.S. Court of Appeals for the 4th Circuit struck down Virginia’s same-sex marriage ban, saying that withholding the fundamental right to marry from same-sex couples is a form of segregation that the Constitution cannot tolerate.

In June 2013, the Supreme Court of the United States in United States v. Windsor, held that the federal government must recognize same-sex marriages and that it is up to state Legislatures to define marriage within state boundaries. Since then, numerous law-suits challenging the constitutionality of state DOMAs on equal protection and due process grounds have prevailed in various federal and state courts. Currently, 19 states, including California, plus the District of Columbia recognize same-sex marriage (recognition states), while 40 states prohibit it (non-recognition states).

The prevailing prediction is that a Supreme Court guarantee of a right to marriage is on its way. American support for same-sex marriage is at a new high of 55 percent, and California support is at 61 percent and increasing, if the trends continue. It is important for all couples to create an estate plan. Additionally, it is important for same-sex couples to be aware of the potentially complicated issues that arise when they move across state lines.

Same-Sex Couples Living in California

Same-sex married couples now living in California enjoy the same benefits and burdens under state and federal law as married opposite-sex couples. Before Windsor and IRS Revenue Ruling 2013-17 (which extended federal tax benefits to married same-sex couples, regardless of their state of residency), many married opposite-sex couples likely took this preferential treatment for granted.

Some of these benefits include:

Property transferred between spouses incident to a divorce is not subject to income or gift tax;
Spousal support (alimony) payments are tax deductible to the paying spouse;
Child support payments are not subject to income tax;
Spouses receive a community interest in 401(k) accounts and other retirement plans; and
Spouses receive all community property and anywhere from one-third to all of the deceased spouse’s separate property for intestate (when a person dies without a will or other non-probate instrument) inheritance purposes.

All couples should be aware of their legal rights at marriage, divorce, and death. It is important for both same-sex couples and opposite-sex couples to consider pre-marital agreements, estate plans, and any tax consequences that arise from marriage or divorce.

The Marital Status of Migrating Same-Sex Couples

When a same-sex couple moves out of California, their marital status will depend on the other state’s law with regards to various issues including, state tax filing status, intestate succession, guardianship and conservatorship appointments, and adoption and artificial reproductive technologies. In other words, a non-recognition state may not recognize the otherwise valid same-sex marriage.

If and when the Supreme Court guarantees a right to marriage, moving across state lines will no longer be an issue for same-sex couples. However, in the interim, it is important to be aware of the possible legal consequences.

For example, under Florida law, the definition of “heir” does not include same-sex spouses for intestate inheritance purposes. This means that a same-sex couple that was married in California, but permanently living in Florida, will not inherit from each other under the Florida intestate system. Some courts in non-recognition states are willing to recognize same-sex marriage in certain contexts through the doctrine of comity, which is where a court gives deference to another state’s laws. However, most surviving spouses want to avoid litigation because it can be a headache, requiring time, money, and mental energy.

In some cases, it might be worthwhile for same-sex spouses to opt out of the intestate system with non-probate instruments, such as estate plans. A same-sex couple’s estate plan needs to be drafted with precision, specifically naming beneficiaries, rather than using general terms such as “spouse.” This becomes especially important if a same-sex couple moves to a non-recognition state, where the court may not interpret a same-sex spouse to qualify as a spouse or heir. If any other blood related heirs of the deceased spouse were to contest the non-probate instrument, they could end up inheriting property that would have gone to the same-sex spouse in California or another recognition state.

If you are a same-sex couple and are considering marriage, or need to create or update an estate plan, please contact our California Certified Family Law Specialists. Our attorneys have decades of experience handling complex family law and estate planning matters and offer a free consultation.

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 include legal issues, it is not legal advice. Use of this site does not create an attorney-client relationship.

“No good marriage ever ended in divorce” – Louis C.K.

July 30, 2014/in Family Law /by Gina Policastri

“Divorce is always good news. I know that sounds weird, but it’s true because no good marriage has ever ended in divorce. That would be sad. If two people were married and they just had a great thing … and then they got divorced, that would be really sad. But that has happened zero times.”

-Louis C.K.

This inevitably leads to the question: what is a “good” marriage? Likely, the answer is there are no good or bad marriages. Instead there are a range of risk factors associated with divorce. When two people get married, they usually aren’t thinking that the marriage will end in divorce. But then hard times arise and sometimes they find themselves thinking either casually or seriously about divorce. Is there a way to know if your marriage is statistically likely to end in divorce? Below, we will take a look at some of the most common risk factors in the United States.

Current state of divorce

In the United States, researchers estimate that 40 to 50 percent of all first marriages will end in divorce or permanent separation. The risk of divorce is even higher for second marriages at about 60 percent. Divorce has always been present in American society although it has become more common in the last 50 years. Surprisingly, the highest divorce rates ever recorded were in the 1970’s and 1980’s. Since then the divorce rate has actually decreased a little but still remains at a historically high rate.

Researchers have found that individuals considering divorce make their decision to stay or leave based on the rewards they gain from the marriage, the barriers against leaving the marriage, their perceptions about finding a better relationship, and the amount of investment they have made in their marriage.

Barriers to leaving a marriage, such as concerns about money and the effects of family breakup on their children, can keep marriages together in the short term. However, unless there is improvement in the relationship, eventually the barriers are usually not enough to keep a marriage together in the long run.

What factors are associated with a higher risk for divorce?

The statistics which show that almost half of all marriages end in divorce might make it seem like staying married has the same odds as roulette – namely 50/50. However, research has identified various factors that are associated with a higher risk for divorce. Some couples may have a low risk and others might have a higher risk of divorcing. Understanding these factors may not directly help improve your marriage or make a decision about getting divorced, but they may help couples understand why they’re facing challenges. Researchers have identified the most common factors as:

Young Age. Marrying at a young age increases your likelihood of divorce, especially in the early years of marriage. People who married in their teens are at dramatically higher risk for divorce than those who married as early as age 21 or 22.
Less education. Researchers estimate that individuals who have some college education as opposed to not finishing high school have a lower chance of divorce. Investing in an education is a good way to build a foundation for a better marriage, not just a better job.
Less income. Tied to education is income. Research has estimated that individuals with incomes exceeding $50,000 have a lower chance of divorce. Finances can be stressful and having at least a modest income can help couples avoid stresses that can lead to divorce. If you argue with your spouse about finances once a week, your marriage is 30 percent more likely to end in divorce than if you argue less frequently about finances.
Premarital childbearing and pregnancy. In America, more than one-third (37%) of children are born to parents who are not married, and few of these parents eventually marry. Most of those parents will separate before the child begins school, some will never really get together.
If you have a daughter, you’re 5% more likely to divorce. This figure multiplies with the number of daughters. Researchers believe that this happens because fathers are more invested in family life when they have boys.
If you or your partner have had a previous marriage. Data shows that second (or third or fourth) marriages should be more successful than first marriages. However, this statistic is skewed by serial marriages and researchers have been unable to take the Elizabeth Taylors out of the equation.
Parents’ divorce. Of course, some risk factors for divorce you can’t control. If you experienced the divorce of your parents, unfortunately, that doubles your risk for divorce. If your spouse witnessed their parents’ divorce, then your risk more than triples. This does not doom your marriage to failure but rather suggests that individuals who experienced the divorce of their parents need to work harder to make good marriage choices and to keep their marriage strong and happy.
Same-sex marriages are more likely to end in divorce. Although the LGBT community is just starting to have legally recognized marriages in the United States, a research team led by Stockholm University on legal partnerships in Norway and Sweden found that male same-sex marriages are 50 percent more likely to end in divorce than a heterosexual marriage. If you’re a female in a same-sex marriage, this figure soars to 167 percent.

These are only a few risk factors that researchers have identified and none of them represent automatic doom for a marriage. However, if a number of these and other risk factors are present, seeking pre-marital or other counseling may be recommended, even if nothing seems wrong at the moment. Much like roulette, one can increase the odds in their favor by learning more about marriage, themselves and their partners.

If divorce seems inevitable, it is also recommended that couples take time to try to fix the relationship through counseling or some other professional service before making the decision to call it quits. However, we understand that sometimes there are no alternatives besides divorce.

If you are considering divorce or have questions about divorce planning, please contact our California Certified Family Law Specialists (as certified by the State Bar of California Board of Legal Specialization). Our attorneys have decades of experience handling complex family law proceedings and offer a free consultation.

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.

Sometimes Diamonds are Not Forever

June 23, 2014/in Family Law /by Julia Lemon

California is a community property state, which means that all property acquired during marriage by either spouse is presumed to be community property. Conversely, any property acquired by a spouse before marriage, by gift or inheritance during marriage, or after separation is presumed to be the acquiring spouse’s separate property. However, it is possible for a spouse to change the character of an asset by transmuting a community property asset into one spouse’s separate property, or vice versa.

Generally speaking, to qualify as a valid transmutation, there must be an express written declaration made, consented to, or joined in by the spouse whose interest in the property is adversely affected. These strict requirements were enacted to avoid “he said/she said” situations where one spouse was presenting “pillow talk” evidence.

For example, a couple buys a car during marriage with community funds for the wife to drive. When the couple later divorces, the wife claims the car is her separate property because she was the only one who drove it. Unless there is a written agreement signed by her husband stating that the car is her separate property, her argument will fail because there was not a valid transmutation.

This rule makes sense for expensive items, like a car. However, spouses give gifts to each other all the time, and requiring a written agreement for every birthday gift or anniversary gift would be impractical and somewhat annoying. Imagine, “Dear Wife, Happy Anniversary! I love you so much. Here is a necklace that I am gifting you as your separate property.” Fortunately, the Family Code does not require an express written declaration for gifts such as clothing, jewelry, or other tangible items of a personal nature used solely or principally by the spouse receiving the gift unless the gift is “substantial in value taking into account the circumstances of the marriage.” In other words, an expensive gift to one spouse may be considered community property absent a transmutation.

In Marriage of Steinberger, 91 Cal. App. 4th 1449 (2001), the husband purchased a diamond ring and gave it to his wife on their fifth wedding anniversary with a card congratulating her on her recent promotion. The ring was worth at least $14,000. At divorce, the wife argued that the ring was her separate property because her husband gifted it to her on their anniversary. The husband, however, argued that he purchased the ring as an investment for them both to enjoy, and that it was not his intent to give her the ring as her separate property. He testified that the most expensive gift he had given her during the marriage was a Christmas gift card that cost a couple hundred dollars. The trial court found that the ring was a gift to the wife since it was tangible personal property.

However, the California Court of Appeal reversed the trial court’s finding. The appellate court reasoned that the ring was of substantial value considering the circumstances of the marriage, so the exception to the written declaration requirement did not apply. Since there was no express written declaration, there had not been a valid transmutation, and the ring was a community asset that should have been divided equally upon divorce. When it comes to substantial gifts in California, formality takes precedence over informality.

If you have any questions about how your personal property or your last anniversary gift may be classified, feel free to contact our experienced family law attorneys at Lonich Patton Ehrlich Policastri for further information.

Remember that each individual situation is unique. While this post may detail general legal issues, it is not legal advice. Use of this site does not create an attorney-client relationship.