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We’re Getting Divorced – Who Gets the Stock Options?

August 20, 2013/in Family Law /by Mitchell Ehrlich

This year, compensation packages for top levels executives rebounded considerably following a decline last year and the most significant increase was seen in stock option awards.* For example, Apple’s Bruce Sewell led the pack with a whopping $66,571,750.00 in stock options! Though usually not to the tune of $66 million dollars, you or your spouse may have received some number of stock options during your marriage. During divorce, characterizing stock options and how determining how to appropriately allocate the options between the spouses often becomes very contentious. However, there are two prevailing methods for allocating intermediate stock options, i.e., options that were awarded during the marriage but will vest after the date of separation: the Hug formula** and the Nelson formula***. Ultimately, the Hug formula tends to be more favorable to the community, while the Nelson formula is typically more favorable to the employee spouse.

Under the Hug formula, the number of options determined to be community property is the product of the following fraction: the numerator is the total number of months between commencement of employment and the date of separation, and the denominator is the total number of months between the commencement of employment and the date when each option vested. This fraction is then multiplied by the number of shares of stock which could be purchased on the date each option vested.

In the Marriage of Hug, the Court recognized that stock options could be construed, depending on the particular facts of the case, as compensation for either past, present, or future services or a combination of these possibilities. The Court found that in Hug, the stock options were granted partly to entice the husband to leave his prior job and partly as an incentive to work hard in the future. Therefore, the Court concluded that the husband was earning the options from the date his employment started to the date the options vested.

On the other hand, under the Nelson formula, the numerator is the number of months from the date of grant of each block of options to the date of separation, and the denominator is the period from the time of each grant to its date of exercisability.

In the Marriage of Nelson, the Court observed that the options in Marriage of Hug were designed to attract new employees and more generously reward past services. However, in Nelson, only prospective increases in the value of the stock could result in a profit to the employee option-holder. Therefore, the Court determined that it was appropriate to place more emphasis on the period following each grant to the date of separation than on the employee’s entire tenure with the company up to the time of separation.

Allocating stock options is a very complicated and confusing issue. If you have any questions regarding the appropriate characterization of your stock options or you are simply looking for more legal advice regarding your current situation, please contact our California Certified Family Law Specialists (as certified by the State Bar of California Board of Legal Specialization) at Lonich Patton Erlich Policastri. Our attorneys have decades of experience handling complex dissolution proceedings and are more than happy to meet with you.

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.

*Corporate Counsel Finds 2012 General Counsel Compensation Turnaround: Every Pay Category Rose, Stock awards Jumped 64.8%: http://www.alm.com/about/pr/releases/corporate-counsel-finds-2012-general-counsel-compensation-turnaround-every-pay

** In re the Marriage of Hug, 154 Cal. App. 3d 780 (1984).

*** In re the Marriage of Nelson, 177 Cal. App. 3d 150 (1986).

Sperm Donors: Are You (Legally) My Father?

July 19, 2013/in Family Law /by Gretchen Boger

When actor Jason Patric broke up with his long-time girlfriend, Danielle, he told her he didn’t have any money to give her at the end of their ten-year-relationship – but he could give her his sperm so she could have a baby. In return, Danielle agreed to never tell anyone, never to ask for child support, and made herself an appointment to be artificially inseminated (this is important). In 2009, Baby Gus was born, and true to his word, Jason never paid child support. Then last year, Jason decided he wanted to be part of Gus’ life after all and he filed for 50/50 custody. Fast forward to today, and Jason’s story has evolved from Hollywood headline-fodder into a California legislative bill: Senate Bill 115 (SB 115).

Under current law, sperm donors are not legally considered to be the natural fathers of the children born using their donated sperm except under certain circumstances.* Furthermore, Cal. Fam. Code § 7613(b) makes it clear that if a man provides his semen to a licensed physician, surgeon, or sperm bank for the purpose of impregnating a woman who is not his wife, the man is legally barred from claiming parentage of the child the woman conceives.**

For example, in a 1986 case, Jhordan C. v. Mary K., a man gave his semen directly to a woman to artificially inseminate herself. The Court held that these facts did qualify for the statutory preclusion of paternity, because a California statute required the semen be instead given to a licensed physician. Accordingly, the Court allowed the donor to raise his claim for paternity.*** Conversely, a strong aspect of Jason and Danielle’s case is that she was inseminated by a physician – their case was not statutorily barred because her pregnancy did not result from a do-it-yourself insemination.

The purpose of the current artificial insemination laws is to allow unmarried women and women married to an infertile spouse the freedom to conceive via a sperm donor without the fear that the donor would interfere following the baby’s birth by asking for parental rights. However, SB 115 now seeks to allow a specific group of sperm donors to claim parentage – any donor who has “received the child into his home and openly holds out the child as his natural child,” regardless of the method of conception, would be presumed to be the father of the child. SB 115 passed the California senate in April 2013 and now, it’s up to the California assembly to determine if the bill will be signed into law. This raises questions about what qualifies as “openly holding out” a child as one’s own. There are many definitions of the concept of “family,” and the impetus for agreements to claim, or not to claim a child can change over time.

Parental rights can be a complicated and confusing issue. If you have any questions regarding your parental rights and obligations, or you are simply looking for more information regarding your legal options, please contact our California Certified Family Law Specialists (as certified by the State Bar of California Board of Legal Specialization) at Lonich Patton Erlich Policastri. Our attorneys have decades of experience handling complex Family Law proceedings and 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 include legal issues, it is not legal advice. Use of this site does not create an attorney-client relationship.

*The Uniform Parentage Act, http://codes.lp.findlaw.com/cacode/FAM/1/d12/3.

**Unless the donor and the woman agreed otherwise in a signed writing prior to the conception of the child. http://www.leginfo.ca.gov/pub/13-14/bill/sen/sb_0101-0150/sb_115_bill_20130408_amended_sen_v97.pdf

*** Jhordan C. v. Mary K., 179 Cal. App. 3d 386 (1986).

Cohabitation Agreements: A Beneficial Tool For Both Parties

July 8, 2013/in Family Law /by Gina Policastri

So your relationship is going well and you’ve decided to start living together. Before couples get married, many consider creating a pre-nuptial agreement. But you’re just moving in together, just testing the waters – no harm, no foul, right? Not necessarily.

Although it may seem like no legal consequences can arise from simply living together*, California recognizes a particularly pesky action: the Marvin claim. In 1976, the California Supreme Court held that express contracts between non-marital partners are enforceable.** In Marvin, Lee and Michelle lived together as an unmarried couple for seven years and Michelle claimed Lee promised to take care of her for the rest of her life. Although Michelle was ultimately unable to provide proof of an implied contract, the Court’s holding was clear: express contracts between unmarried couples are fair game and enforceable.

As a result, with the sharp increase in the number of cohabitating couples in the past decade, a cohabitation agreement is a highly useful tool for unmarried couples to consider – much like a prenuptial agreement is for married couples. Some factors, amongst many more, to keep in mind when drafting a cohabitation agreement include:

Everything must be voluntary: cohabitation agreements must be entered into freely and voluntarily – just like prenuptial agreements.
Put everything in one document: include an integration clause that provides that the document signed by you and your partner constitutes the entire agreement – that there are no other outside agreements or oral agreements to be taken into consideration.
Put everything in writing: have a clause that requires all amendments to be made in writing, preventing the possibility that one party will later argue that later oral or implied changes were made to the original agreement.

A cohabitation agreement can benefit both the Lee’s of the relationship – the wealthier partner who has financially more to lose, and the Michelle’s of the relationship – the “weaker” partner who relied upon a partner’s promise to her financial detriment. If you are interested in creating a cohabitation agreement or reviewing your current cohabitation agreement, please contact our California Certified Family Law Specialists (as certified by the State Bar of California Board of Legal Specialization) at Lonich Patton Erlich Policastri. Our attorneys have decades of experience handling complex Family Law matters and are more than happy to meet with you and 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 include legal issues, it is not legal advice. Use of this site does not create an attorney-client relationship.

*1 in 4 people living together believes they have the same legal protections as married couples (http://www.guardian.co.uk/money/2013/mar/09/cohabitation-agreement-essential-non-married-couples).

**Marvin v. Marvin, 18 Cal. 3d 660 (1976)).

The Indian Child Welfare Act: Child Custody and Adoption Issues Hit The Supreme Court

June 13, 2013/in Family Law /by Gretchen Boger

Family law cases, albeit important, are almost never heard by the U.S. Supreme Court because the Tenth Amendment typically leaves family matters to the states. However, a recent custody clash over an adorable Native American girl has found its way to our nation’s highest court, giving the Justices an opportunity to scrutinize the 1978 Indian Child Welfare Act (ICWA). The law was put in place to protect the one-third of Native American families who were losing their children to white foster and adoptive parents. However, as you will see, this 35-year-old law and its sweeping effects may be out of place in today’s modern society.

At the heart of the current dispute is a three-year-old girl who is the product of a relationship between a Cherokee Indian man and a Hispanic woman. The couple was previously engaged but, when the couple broke up before the child’s birth, the father let the pregnant woman know that he was relinquishing all of his parental rights. The child was born, put up for adoption, and spent two years with her adoptive parents until a South Carolina Court ordered that the girl be returned to her biological father. Apparently, the child’s father only intended to relinquish his parental rights to the Mother—not to an adoptive family—and he objected to the adoption four months after the adoption took place.

The little girl’s adoptive family is devastated, and rightfully so. If the state of South Carolina was permitted to apply its standard child custody procedures, and the “best interest of the child” standard adopted by many states including California, the biological father would have had no rights whatsoever and the little girl could have remained with the parents who raised her from infancy. Nevertheless, in the United States, the U.S. Constitution and Federal Statutes enacted by Congress are the supreme law of the land and completely trump any state laws that come into conflict. Justice Kennedy noted, “What we have here is a question of a federal statute which…displaces the ordinary best interest [of the child] determinations of the state courts.”

The Supreme Court will deliver its opinion on this case later this month. In all likelihood, the effects of the decision will reach not only families interested in domestic adoption, but will also touch on the bigger question that asks who is best-suited to handle family law matters or determine parenthood—the states and their family courts or the federal government? We should have an answer soon.

As you can see, even simple family law matters like adoption can quickly become complicated. If you have any questions relating to adoption or any other family law issue, please contact the certified Family Law Specialists (as certified by The State Bar of California Board of Legal Specialization) at Lonich Patton Erlich Policastri. Our attorneys have decades of experience handling complex family law matters and would be happy to meet with you for 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.

My Spouse Won’t Sign: Till Death Do Us Part?

June 5, 2013/in Family Law /by Mitchell Ehrlich

When contemplating divorce, it is hard to ignore the “what-ifs” that inevitably arise. Questions like, “who will get the house?” and “where will our kids end up living?” are complicated, and you will inevitably receive the typical lawyer response from your attorney—“it depends.” This is because most questions regarding divorce really do depend on the circumstances of your case. While there is substantial California family law which the Court will apply to the facts of your particular case, it is impossible to predict or guarantee outcomes with absolute certainty. In some cases it can take months before you see concrete results. Nevertheless, there is one great guarantee with divorce law in California: as long as you are a California resident*, you are entitled to a divorce if you want one.

We have all seen a movie where one party is trying to obtain a divorce, but the other party just won’t sign the divorce papers. Sometimes the other party is a romantic who is holding out for reconciliation, but nine times out of ten, the other party refuses to cooperate out of spite. Worried this could happen to you? Never fear! If the only certainty you have is that you want a divorce, then go ahead and make preparations to file:

“Either spouse or partner can decide to end the marriage, and the other spouse/partner, even if he or she does not want to get a divorce, cannot stop the process by refusing to participate in the case. If a spouse or domestic partner does not participate in the divorce case, the other spouse/partner will still be able to get a “default” judgment and the divorce will go through.”**

The State has your back; California law will not force you to be prisoner to a broken marriage. Unfortunately though, no one can promise that your divorce experience will not resemble a scene from a movie (but there is a way out if your personal life resembles a drama fit for Lifetime). Whether or not anyone is “at fault,” you can file for divorce and either your spouse responds to your papers, or the court will make a decision for him or her. If you are ready to liberate yourself, or are interested in learning more about the divorce process, contact the certified Family Law Specialists (as certified by The State Bar of California Board of Legal Specialization) at Lonich Patton Erlich Policastri. Our attorneys have decades of experience handling complex family law matters and would be happy to meet with you for 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.

*A “California Resident” is a person who has lived in California for the last 6 months and has lived in the county where the party desiring a divorce has lived for the last 3 months.

**Source: California Courts: Judicial Branch of California, “Options to End a Marriage or Domestic Partnership,” found at: http://www.courts.ca.gov/1224.htm

Private Justice: Family Law’s Low-Hanging Fruit

April 2, 2013/in Family Law /by Mitchell Ehrlich

If you are contemplating divorce, there is one question you ought to ask: is a private judge right for me? The answer could be a positive one if you are looking to conclude your divorce quickly and would prefer to avoid the crowded (and very-public) family court. What’s the catch? Well, private temporary judges (typically retired veteran family lawyers) must be compensated for their time much like an attorney.

Nevertheless, hiring a privately compensated temporary judge could be an investment for you and your family. Although there is a cost on the front end, a private judge will undoubtedly have more time to devote to your case. This means that your divorce could be finalized in a fraction of the time with a private judge, compared with the several months or even years that you could spend tied up in the public family court . Your judge will apply the exact same California family law statutes, evidentiary codes, and rules of court as a publicly-sitting family judge. However, the scheduling flexibility that comes with a private judge means that you can work through your case on your time. As a result, you and your spouse will spend less time in litigation, potentially saving your family a great deal of money and stress in the long run.

Private judging is legal in Santa Clara County and can be requested through the Clerk’s office. A private judge may not be the best option for every family, so talk to your family lawyer for more information. Contact the certified Family Law Specialists (as certified by The State Bar of California Board of Legal Specialization) at Lonich Patton Erlich Policastri to learn more about the possibility of pursuing divorce with a private judge. Our attorneys have decades of experience handling complex family law matters and have worked directly with private judges in the past.

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.

Contemplating Divorce: What to Consider Before You Cut Ties

March 21, 2013/in Family Law /by Gina Policastri

Divorce is simple, right? Absolutely not, unfortunately. There is a great deal to consider—financially and emotionally—before filing for a divorce. In some startling ways, divorce slams one chapter of your life closed. Nevertheless, obtaining a divorce decree could be the first step into the first chapter of the new life you’ve been dreaming of.

Natasha Burton’s article, “What I Wish I Knew Before I Got Divorced”* features solid considerations for individuals who are thinking about divorce or legal separation. Though Burton’s article was written for a female audience, the predominant message of the article applies to everyone: be prepared in more ways than one. Some noteworthy observations and considerations:

Recovery from divorce could take you a long time—which is absolutely normal.
Choose your legal counsel wisely.
Create a detailed plan for tackling your future living expenses.
Take a hard look at your joint finances and educate yourself.
Be ready for “unexpected” costs like health insurance.
Being vengeful toward your spouse will probably harm your family in the end and is public record.
Being divorced is not something to be ashamed of.
The holidays will be hard—really hard.
Your children will suffer from the divorce and may act out.
Finally, divorce can be completely worth it.

These considerations highlight just how far reaching the impact of a divorce can be and why it is so important to be fully prepared. Take it from Burton and be prepared from the start by choosing your legal counsel wisely. Contact the certified Family Law Specialists (as certified by The State Bar of California Board of Legal Specialization) at Lonich Patton Erlich Policastri to learn about your legal options. Our attorneys have decades of experience handling complex family law matters.

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.

*Used with permission via email from Women’s Day author Natasha Burton.

Annulment: Cleaning the Marital Slate

February 15, 2013/in Family Law /by Gina Policastri

Whether or not we care to admit it, Kim Kardashian remains in the spotlight. Consequently, so do her legal troubles. Kardashian and Kris Humphries were famously married in August 2011. Their nuptials allegedly cost $11 million and the wedding itself was televised as a special on the E! Television network. After 72 days of marital bliss, Kardashian filed for divorce in October 2011.

Although the couple split almost two years ago, Kardashian and Humphries remain legally married. Their divorce has never been finalized because Humphries is seeking an annulment. Humphries believes that Kardashian fraudulently lured him into marriage for financial gain as Kardashian reportedly made $1 million from the wedding. Humphries claims she had planned to take the money and run. Kardashian, of course, claims that she married for love.

In the eyes of the law, a successful annulment makes a marriage disappear as if it never happened.* There is a fundamental difference between a judgment of dissolution and a judgment of nullity. While a judgment of dissolution terminates a valid marriage, a judgment of nullity declares that the marriage was invalid from the start. In California, a marriage built upon a fraudulent foundation is not a marriage at all. An annulment is, however, much more difficult to attain than a divorce.

According to California Family Code Section 2210, a marriage that is voidable may be declared a “nullity” only in the event at least one of six specific conditions existed at the time of marriage:

Infancy
Bigamy
Unsound Mental State
Fraud
Force
Physical Incapability

The certified Family Law Specialists as certified by The State Bar of California Board of Legal Specialization at Lonich Patton Erlich Policastri have decades of experience handling complex family law matters. If you find yourself on either side of an annulment, contact Lonich Patton Erlich Policastri for further information.

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.

Retirement Benefits: I Earned Them So They Are Mine, Right?

February 7, 2013/in Family Law /by Gretchen Boger

When parties consider divorce or separation they are rightfully concerned about their property. For example, parties may contemplate who will get the house, the dog, the cars, or even the family’s prized Dyson vacuum cleaner. But what about retirement benefits? They don’t typically rank at the top of the “coveted marital property” list, but maybe they should. If you have worked for an organization for most of your adult life, you and your spouse may be entitled to substantial benefits.

Under the California Family Code, retirement benefits are divisible community property assets and will be affected by divorce, legal separation, or termination of domestic partnership. Even if the party that earned the benefits has not yet retired and has no immediate plans to retire, all retirement benefits accrued during a marriage or domestic partnership are fair game when the parties decide to part ways. In fact, the non-earning spouse is generally entitled to fifty percent of any retirement assets accumulated during the marriage.

Division of retirement benefits can be complicated and may implicate complex tax issues. The Lonich Patton Erlich Policastri team, which includes several certified Family Law Specialists who are certified by the State Bar of California Board of Legal Specialization, offer decades of experience handling complex family law matters. If you are contemplating divorce, legal separation, or termination of a domestic partnership or have been served in an action for divorce, legal separation, or termination of a domestic partnership, please contact Lonich Patton Erlich Policastri for further information.

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.

Partnering Your Prenups and Estate Plans

February 9, 2012/in Estate Planning, Family Law /by Michael Lonich

Premarital, or prenuptial, agreements are usually associated with pre-marriage planning and divorce. However, they also provide several benefits for estate planning. Premarital agreements can protect one spouse from liability for the other spouse’s separate debts and help to implement other estate planning strategies. When premarital agreements and estate plans are considered in concert, couples can maximize financial planning and estate planning goals and avoid potentially triggering unintended tax consequences or inconsistent estate planning.

In California, a community property state, a surviving spouse has a 50% interest in all community property. This right supersedes the terms of a will but may be waived in a premarital agreement, which does not necessarily equate with disinheritance. Waiving community property rights allows spouses to specify the manner in which their assets will be distributed and helps to ensure that estate plans will be carried out as intended. This may be helpful, for example, in a family business setting. If one spouse runs a family business with his or her children, a waiver of community property rights will allow the business to pass more easily to the children without the other spouse acquiring an interest in the business, through divorce or inheritance.

There are several other scenarios in which a premarital agreement may affect an estate plan. Premarital transfers may trigger income and gift taxes; estate tax exemption opportunities for surviving spouses may be missed; and premarital agreements may not comport with estate plans for a family home. Premarital agreements often provide for the disposition of the family home or give the surviving spouse a right to continue living there. However, these provisions in a premarital agreement should be drafted such that they will not impede an estate plan’s ability to execute home-related strategies such as transferring the home to a qualified personal residence trust.

If you are interested in learning more about premarital agreements and estate plans, please contact the experienced family law and estate planning attorneys at Lonich Patton Erlich Policastri for further information. 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.

Posts

We’re Getting Divorced – Who Gets the Stock Options?

Sperm Donors: Are You (Legally) My Father?

Cohabitation Agreements: A Beneficial Tool For Both Parties

The Indian Child Welfare Act: Child Custody and Adoption Issues Hit The Supreme Court

My Spouse Won’t Sign: Till Death Do Us Part?

Private Justice: Family Law’s Low-Hanging Fruit

Contemplating Divorce: What to Consider Before You Cut Ties

Annulment: Cleaning the Marital Slate

Retirement Benefits: I Earned Them So They Are Mine, Right?

Partnering Your Prenups and Estate Plans

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