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Who Gets Your Property If You Die Before Your Divorce Is Final?

When you’re in the middle of divorce proceedings, mentally you may already see yourself as no longer married. You may have shifted your financial focus to a single lifestyle with an emphasis on your children, other family members, or a new partner.

However, your marriage still exists, legally, and that can have a serious impact on your loved ones if you pass away before your divorce is finalized. Here are some factors to consider while your divorce is in progress.

A Bifurcated Divorce Could End Your Marriage Before Your Other Divorce Terms are Settled

It can take a long time to resolve all the issues that need to be settled to complete the divorce process. If you have a business or other complex assets or are going through a contested custody battle, divorce can take well over a year to finalize. However, it is possible to put a legal end to your marriage while the other issues are still being hashed out.

You can split your divorce case into two sections. The court can adjudicate just the issue of marital status and declare that you are no longer married. This can often be accomplished much more quickly than resolving all the divorce issues that are under contention. The Family Law Court will retain jurisdiction over the other issues such as how marital property is classified and divided.

If you obtained a judgment changing the marital status but leaving the other issues under the control of the Family Law Court, and you pass away before the other issues are resolved, then your divorce case would essentially continue after your death. Instead of an attorney representing you in the negotiation over property division, debt allocation, and other issues, the attorney will be representing your personal representative acting on behalf of your estate. However, your death would usually automatically end the court’s jurisdiction over custody, child support, and alimony.

Your former spouse would no longer be the beneficiary of your will, trusts, and retirement plans (although the spouse would get a share of retirement benefits as marital property). If you and your spouse owned property together, your interests in that property would pass to your heirs or beneficiaries, although if your spouse was the beneficiary of your life insurance policies, the end of the marriage would not change that designation.

Incomplete Divorce Proceedings May Have No Impact on Your Estate

Unless the Family Law Court has already adjudicated some issues, everything else pertaining to the divorce loses effect if you pass away before proceedings are finalized. Your estate plans—or lack thereof—would operate the same way as if you were still happily married. Your share of marital property and all your separate property would be distributed to beneficiaries under your will as written, even if everything is set to go to the spouse you wanted desperately to cut ties with. If you don’t have a will, trust, or other estate plans, the California laws of intestate succession will determine who receives your property. Your share of community property would go to your spouse, and some or all of your separate property as well.

Update Your Estate Plan to Protect Your Loved Ones

If you want to protect your children or other loved ones such as a new partner, it is a good idea to create or update your beneficiary clauses and estate planning documents to the extent that the law allows while your divorce is in progress. This includes creating or changing powers of attorney to give someone other than your soon-to-be-former spouse the ability to make medical decisions on your behalf or manage your finances if you become incapacitated.

Couples often create estate plans together, and since you know you are separating your life from that of your spouse, you can go ahead and memorialize that separation in your estate plans now. The law might restrict your ability to change your life insurance beneficiary and other facets of your plan while the divorce is in progress, but talk to an attorney about taking the best available steps to protect your loved ones during and after the divorce.

Holstrom, Block & Park Can Adjust Your Estate Plans While Your Divorce is in Progress

The actions you take in one aspect of your life can and should affect other aspects of your life, and estate planning is no exception. The team at Holstrom, Block & Parke, APLC includes not only experienced divorce attorneys but also a legal team dedicated to creating the right estate plans to protect you now and in the future. For questions about divorce or estate planning, call us at 855-426-9111 or contact us online to schedule a consultation with one of our attorneys today.

Divorce

How Much is Alimony in California?

Alimony—which is officially referred to in California as spousal support—is often awarded when spouses have been married for a considerable time and one spouse earns substantially less than the other. Whether you will be paying alimony or are seeking alimony to maintain your home and living situation, it is natural to wonder how much support courts typically award.

Couples can set their own terms for alimony, either in a prenuptial or postnuptial agreement or during negotiations in preparation for divorce. As long as both spouses follow the rules regarding disclosure, their agreement is likely to be approved by the court.

If you want to set your own terms, of course, it is helpful to understand what the default standard would be. So in this post, we explore the factors that go into setting alimony amounts in California.

Is There a Formula for Calculating Alimony?

While some courts use a formula for calculating temporary alimony, the approach to calculating long-term alimony is much more nuanced and subjective. Temporary alimony is paid to a spouse to provide support while the divorce proceedings are in progress. So, depending on the county where you file for divorce, the court may apply a formula to calculate support obligations while the divorce is in progress. A common starting point is to take 40% of the paying spouse’s net monthly income and reduce that by 50% of the receiving spouse’s net monthly income.

When a court is setting an amount of alimony to be paid after the divorce is finalized, the process is much more intricate.

Courts Must Consider a List of Factors

Section 4320 of the California Family Code sets forth a list of issues the court is required to consider when determining whether one spouse should pay support, how much support amounts should be, and how long support payments should be required. While there is some legal guidance regarding what each factor involves, there is no specific rule about whether certain factors are more important or how much weight should be given to each factor. Judges have considerable discretion to make decisions so long as they take the factors into consideration. This means it is important to work with an attorney who is prepared to present persuasive arguments in favor of your goals when it comes to alimony.

Understanding the Factors that Affect Alimony Decisions

Factors that impact the determination of alimony amounts include:

  • The duration of the marriage.
  • The couple’s standard of living during the marriage. This includes types of cars driven, vacations taken, and homes lived in.
  • The degree to which each partner earns enough to keep up the same standard of living that they enjoyed while married.
  • The assets held by each spouse and whether they are extensive enough to make support unnecessary.
  • The marketable skills of the spouse receiving alimony. Do they have skills or certification? Is there a job market for those skills? Does the spouse need additional training or education to find a job?
  • How greatly was the career of the receiving spouse damaged by time spent out of the workforce to care for the home?
  • Whether one spouse supported the other during education or career training.
  • Whether the spouse who will be paying support has enough income to pay support.
  • The needs of each party. In this instance, “needs” goes beyond basic necessities to include other factors involved in the lifestyle enjoyed during the marriage.
  • The age and health of each spouse.
  • Whether the spouse requesting support has limited ability to work due to the need to care for minor children.
  • Any history of domestic violence.

In addition to these and other issues, the court can also consider “any other factors” that the judge finds to be relevant. It is wise to work with an attorney who can present evidence regarding these factors in favorable light and who is also prepared to raise additional issues that support your goals for alimony.

Skilled Advocacy Can Make a Significant Difference in an Alimony Determination

Because the amount of alimony rests with the discretion of the judge, it is wise to work with an experienced and dedicated legal advocate when you are seeking alimony or being asked to pay support. In negotiations, a knowledgeable attorney from Holstrom, Block & Parke, APLC can argue for your objectives based on legal precedent to help you achieve an agreement without the need to incur additional court costs. If the issue cannot be resolved out of court, our team knows how to ensure that all the factors in your favor are presented persuasively to the judge.

To learn more about the ways we can assist with alimony or other divorce issues, just schedule a confidential consultation.  

Alimony

What is the Best Way to Hide Money from Your Spouse Legally?

There are many different reasons you might want to hide money from your spouse, and not all of them are negative. You might want to save up to surprise your partner with a gift. But more often, people want to hide money because they are worried. They may be concerned about having money for emergency expenses such as a medical need or car breakdown. Sometimes they want to set aside money just in case they need an exit plan.

There is no law against hiding money from your spouse while you are married. However, you can get into considerable legal trouble if you try to hide assets during divorce. So you need to take great care, and discuss plans with your attorney to make sure that your plans comply with the law. Here are some general factors to keep in mind if you want to hide money from your spouse legally.

Make Sure You’re Involved with the Finances

In most marriages, one spouse manages the money and pays the bills, and the other often has no idea about the financial picture. Make sure that’s not you. Even if your partner pays the bills, you should still know which accounts you have assets in and check the credit card bills and bank records. Know how to log-in to the accounts and review them regularly. If your spouse asks about your sudden interest, you can point out that you need to be prepared in case of an emergency or discuss the need for estate planning.

Keep Gifts and Inheritances in a Separate Account

California requires divorcing couples to divide marital assets evenly. However, assets considered to be separate property can be kept entirely by the spouse to whom they belong. Most property acquired during the course of your marriage is community marital property. However, gifts that were made solely to you, as well property inherited solely in your name, are both treated as separate property. You are allowed to hide these from your spouse while you are married. In divorce, you would need to disclose the existence of these assets, but you do not need to share them.

To maintain the character as separate property, you need to keep these assets separate from marital assets. Establishing a new bank account in your own name is the easiest way to do that. You might want to use a different bank than used for joint accounts and use work address or family member’s address so that if any documents arrive, you will not need to explain them. Keep records showing the source of funds in the separate account, and do not use those funds for marital purposes.

Strategies for Hiding Money

Remembering that you will need to disclose hidden assets in divorce and that learning you have been hiding funds can trigger an angry response from your spouse, here are some options for hiding funds temporarily in anticipation of a divorce or other emergency:

  • Ask for small amounts of cash back when paying with a check or debit card. You can then hide the cash until needed.
  • Open a safe deposit box in only your name. You can hide cash, jewelry, or other valuables and your spouse will not be able to access it or know what’s in it.
  • Pay back a fake loan from a family or friend. You can give money to someone to hold for you and tell your spouse that you are paying back money you borrowed some time ago.
  • Buy property that can be returned. You can buy items and keep them in the original packaging so that they can be returned later for a refund, or sold elsewhere if necessary.
  • Buy prepaid debit cards and gift cards—but make sure they won’t expire or get lost.
  • Buy cryptocurrency. It is becoming easier to buy cryptocurrency, but your account will still only be accessible and visible to you.

If you are concerned that your spouse will change passwords and shut you out of accounts, you might take out a credit card solely in your name and not provide information to your spouse.

These tactics can enable you to hide money legally during your marriage, but once you file for divorce, you will need to disclose all this information and be prepared to divide the value of marital assets. If you fail to disclose accounts and other assets, you will violate California law and could face serious legal consequences. Courts take a very dim view of spouses who try to hide assets in divorce, and you could be penalized in your divorce settlement on top of other legal penalties.

Let Holstrom, Block & Parke, APLC Protect Your Financial Interests in Divorce or Legal Separation

There is a fine line between hiding assets legally in California and hiding assets in a way that puts you in contempt of court. If you have been hiding assets from your spouse or you plan to do so to provide a safety net before your divorce, it is a good idea to discuss your options with an experienced attorney at Holstrom, Block & Parke, APLC. Our legal team has 300+ years of collective experience protecting clients in divorce, and we can develop the right plans to safeguard you during and after the divorce process. For a confidential consultation, contact our team today.

General

Custody Schedules in California—Setting the Right Schedule

Parents in California are often so worried about “getting” custody that they don’t focus enough on the details regarding parenting time. The details of a custody schedule will play a huge role in the lives of the parents and children going forward, so it is crucial to give careful consideration to the process of developing that schedule. Working with an attorney who is experienced in this process and who is willing to take the time to help you iron out the details can make a tremendous difference in your future as a parent.

With over 300 years of collective experience helping parents obtain the right parenting schedules, the team at Holstrom, Block & Parke has seen a wide range of custody schedules built to fit the specific needs of families in different circumstances. Here we explain some of the basics about establishing a custody schedule and give some examples of custody schedules that you can consider as you work to develop your own plan.

Parenting Plans in California

Generally, parenting plans in California address both legal and physical custody. Legal custody refers to the ability to make decisions about a child’s upbringing, so a custody schedule involves physical custody—where the child lives. Parents can share both types of custody or one parent may be granted sole custody. When one parent has sole physical custody, the court will establish an order regarding visitation for the other parent. This could be:

  • Scheduled visitation: The court order establishes dates and times that the child will be with each parent. Scheduled visitation can address holidays, vacations, and special occasions such as birthdays.
  • Open-ended visitation: The court order does not specify a schedule for visitation but allows parents to work this out on their own.
  • Supervised visitation: When the court has concerns about a child’s safety while with the noncustodial parent, the court order might specify the terms for supervising visits with that parent.
  • No visitation: If the court finds that even supervised visitation would put the child at an undue risk of physical or emotional harm, then the order will not allow any parenting time to the noncustodial parent.

So, a custody schedule is needed both in situations where parents share physical custody and in situations where one parent has sole physical custody and the other has parenting time.

Joint Custody Schedules

Some of the most common schedules for parents sharing physical custody are the “alternating weeks” schedule and the “3-4-4-3” schedule. As the names imply, the alternating weeks schedule has a child spending 7 days in one parent’s home and then switching to the other parent’s home for the next 7 days, while the 3-4-4-3 schedule puts a child with one parent for 3 days one week and 4 days the next.

Of course, parents are free to develop their own schedules, and just because parents have joint physical custody does not mean that they each need to have the child exactly 50% of the time. If one parent works a traditional weekday schedule while the other works 12 hour shifts on weekends, for instance, it might work best for the child to be with one parent from Friday afternoon to Monday morning while the other parent takes the child during the remainder of the week. In a joint custody arrangement, the child is with each parent at least 30% of the time, but parents can get creative about how they want to arrange the time. If the schedule provides a safe and secure atmosphere for the child, the court is likely to approve it.

Sole Custody Schedules

Even when the court order does not set a schedule for visitation, it is good for parents to establish a schedule on their own so that both parents and children can feel confident that they will enjoy parenting time on a regular basis. One traditional visitation that still works well for many families is for the child to be with the noncustodial parent one day during the week and every other weekend. While this works well for parents with traditional work schedules and children who are in school or daycare, it is not always the most advantageous in other situations.

For a young child and parents with unpredictable work schedules, it might work to have a standing arrangement that puts the child with the noncustodial parent on that parent’s first day off each week, whenever that happens to fall. It is important to consider childcare arrangements, parents’ work schedules, the child’s schedule, and a host of other factors when setting a parenting plan.

Holstrom, Block & Parke, APLC Can Help You Arrangement a Beneficial Custody Schedule

While it is particularly important to establish a workable and advantageous custody schedule when that schedule will become part of the court order, it is helpful to have a schedule that sets expectations in every situation, even when the court allows parents to be flexible. The experienced team at Holstrom, Block & Parke, APLC can work with you to consider all the details that will affect your parenting plan and help you develop the right schedule for your needs and the needs of your child. Contact us today to learn more about the ways we can assist with custody and other family law matters.

Child Custody

What Can Be Used Against You in a Custody Battle in California?

Custody battles often form the most contentious and painful part of a divorce. Advice and advocacy from an experienced attorney can help you achieve your goals for custody, but you need to take certain steps to protect yourself and preserve your best opportunities.

Specifically, you need to avoid certain conduct that could make you look bad to the judge and work against your interests. As experienced divorce attorneys, here are some of the most common and problematic mistakes we’ve seen parents make that hurt their chances in a custody battle.

Violating Court Orders

Of all the things someone can do to damage their reputation with a judge, refusing to follow court orders would need to be near the top of the list. No one wants their authority undermined and their instructions ignored, so violating a court order could be personally irritating to the judge. It demonstrates a lack of respect for the law that can harm a child in numerous ways. So it is important to follow orders regarding payment of child support and alimony, temporary custody arrangements, restraining orders, or anything else.

Physical and Verbal Abuse

It probably goes without saying that if you hit or otherwise physically abuse someone in your family, evidence of that conduct will be used against you in your effort to seek custody. What many parents fail to realize, however, is that evidence of verbal abuse can be just as harmful. This includes ranting on social media. Excessive displays of temper can damage a child’s psyche, and judges are aware of this. While it may be very difficult to keep your temper under control, try to vent frustrations away from your children and the other parent, and away from other witnesses if possible.

Failing to Cooperate with the Other Parent

The law presumes it is in a child’s best interests to have meaningful contact with both parents, and that requires cooperation. If you refuse to communicate with the other parent, show up late when it’s time to drop off the child, and deny the other parent reasonable opportunities to communicate with the child, you are demonstrating to the court that you are not willing to cooperate in the task of parenting. While you might feel that you shouldn’t have to cooperate and that the child should be in your sole custody, the court may be likely to feel that the child would be better off in the sole custody of the other parent.

Moving in with a New Partner

It is hard for a child to accept that their parents are no longer together, and it can take considerable time for a child to adjust to this new reality. When a parent starts living with a new partner, that can make the situation much more difficult for the child to grasp. In addition, there can be concerns about whether the new partner poses a risk to the child’s health or safety. Courts are often reluctant to expose a child to an unsettling, risky situation, so it is better to keep any new relationships quiet until the divorce is finalized.

Parental Alienation Tactics

Sometimes intentionally and sometimes without realizing it, one parent will engage in behavior that turns a child against the other parent. This could involve making disparaging remarks about the other parent, refusing to share information about school or other activities so that the other parent is not able to participate in the child’s life, denying contact, taking away gifts from the other parent, and saying things to hint that that other parent is putting the child in danger. If you do or say anything that could be viewed as an attempt to alienate a child’s affections or damage their relationship with the other parent, that can be considered engaging in parental alienation, and used against you

Other Issues That Can Be Used Against You

A skilled attorney can argue that many situations and actions create a situation that is not in a child’s best interests. Additional issues that could be used against you in a custody battle include:

  • Substance abuse
  • Removing a child from school or daycare without good reason
  • Placing the child with a caregiver for an extended period
  • Mental health issues that are not controlled adequately with medication
  • Criminal conduct

If the other parent raises a difficult issue, your attorney should be prepared to provide an explanation showing why the factor should not be used against you. In order to do that, your attorney must have accurate information, so it is important to be honest and thorough when reviewing issues with your attorney.

An Experienced Attorney Can Help You Take the Right Steps to Gain Custody

Getting—and following—good legal advice is often the key to gaining your objectives for custody and other matters in your divorce. The team at Holstrom, Block & Parke, APLC is ready to apply over 300+ years of collective experience to help you gain the best advantages for your future, including your preferred custody arrangements. Call us at 855-426-9111 or contact us online to schedule a free, confidential consultation with our team to learn more about how we can help.

Child Custody

Marital Lifestyle and Spousal Support in California

Contrary to what many people believe, a couple’s standard of living is not the single most important factor a court considers when determining an award for spousal support (also known as alimony.) The standard of living is just one of 13 factors courts are required to consider, and judges have discretion to take other issues into account as well.

However, the marital standard of living or MSOL can have a significant impact on support decisions, so it is important to understand what courts are looking at and how this factor works in conjunction with other factors that affect spousal support decisions.

What is the Marital Standard of Living?

Among the issues courts must consider in alimony decisions, the first factor listed in Section 4320 of the California Family Code is the “extent to which the earning capacity of each party is sufficient to maintain the standard of living established during the marriage.” The fact that this issue is listed first is why it often receives so much attention, but courts are expected to give it no more consideration than other factors listed in the statute.

The law does not define “standard of living” but guidance from the California Courts suggests that it includes factors such as the home you lived in during the marriage as well as the type of  vehicle you drove, the frequency and types of vacations you enjoyed, and your use of credit. However, court opinions and the wording of the statute itself suggest that marital spending is not the only indication of a standard of living. Couples can spend more than they earn and put themselves into debt, but that does not entitle a spouse to continue those spending habits. So when determining the standard of living enjoyed during the marriage, it may be important to consider income as well as spending. The standard of living acts can act as a ceiling in setting support amounts rather than establishing a minimum one spouse must have to live on.

Calculating the Marital Standard of Living in California

Courts generally review expenses of the couple during the 3-5 years before separation to estimate the standard of living. It is important to provide your attorney with accurate and detailed information to enable your legal advocate to make the best arguments supporting your desired outcome. Expenses to be considered can include costs for:

  • The family home and vacation homes
  • Vehicles owned including recreational vehicles
  • Outstanding loans and debts
  • Regular charitable contributions
  • Personal property such as jewelry and furniture
  • Social activities and memberships

Some of these expenses would remain the same regardless of the size of the household, while others vary depending on the number of people in a home. So-called “PITI” expenses are an example of the former. PITI stands for principal, interest, taxes, and insurance. For many families, PITI expenses make up about 40% of household expenses

By contrast, “user” expenses, which includes everything else such as food, clothing, gasoline, insurance, entertainment, vacations, and gifts will be significantly impacted by the number of people living at the residence for the 3 to 5-year period before the date of separation. Because there are so many expenses to be considered, it can be helpful to work with a forensic accountant who can help reconstruct the standard of living as reflected by evidence of expenses.

How the Earning Capacity of Each Party Factors into the Marital Standard of Living

Remember that the statute frames the standard of living factor in accordance with the earning capacity of each party. The issue involves considering not just how a couple lived but also what standard of living they can maintain.

When looking at earning capacity, the statute orders a court to consider:

  • The marketable skills of the supported party
  • The job market for those skills
  • The time and expenses required for the supported party to acquire the appropriate education or training to develop those skills
  • The possible need for retraining or education to acquire other, more marketable skills or employment
  • The extent to which the supported party’s earning capacity is impaired time out of the workforce to care for the home

During the 3 to 5-year period upon which the marital standard of living is calculated, there may have been one or two incomes, but even with two solid incomes, when the parties separate, it is highly likely that neither will earn sufficient amounts to be able to meet all the expenses of the previous standard of living. Therefore, during and after the divorce both spouses are likely to experience a standard of living which is lower than they enjoyed together before the date of separation. When the PITI expenses are no longer shared, the cost of maintaining living standards rises considerably.

When the spouse who receives spousal support has sufficient income to meet the standard of living expenses through a combination of earnings, spousal support, and other source of income, there would be a presumption against any increase in the amount of spousal support, because the marital standard of living is met with the current amount. So if the spouse paying support later goes on to earn considerably more money and increases their standard of living, the former spouse is not entitled to a share of the post-divorce success but only support to keep them up to the standard enjoyed during the marriage.

Skilled California Divorce Lawyers Can Help You Reach Your Goals for Spousal Support

Whether you are the spouse paying support or the spouse requesting support, you need to ensure that the court takes into consideration all the facts that weigh in your favor. The experienced divorce attorneys at Holstrom, Block & Parke, APLC have over 300 years of combined experience helping clients achieve the best outcomes in divorce. We understand the most effective ways to advocate to achieve your objectives for spousal support. To learn how we can assist with divorce or modification efforts, call us today at 855-426-9111 or contact us online to schedule a consultation.

General

Mortgages and Property Taxes in California Divorce

When couples own expensive real estate and other complex assets, divorce takes on an added level of stress and complexity. Before negotiating any settlements or turning over matters to the judge, it is essential for both spouses to understand the realities regarding mortgages, property taxes, and other issues that can affect their living arrangements and financial situation in the short and long term.

An attorney experienced in handling high net worth divorces should be aware of the issues, but you need to ensure that your attorney is willing to take the time to review those critical details with you so that you can make the right informed decisions for your future.

Be Prepared for Buyout Arrangements

In many divorce situations, both spouses want to keep the family home or a beloved vacation property. They may become so adamant that it can be difficult if not impossible to have a rational discussion on the subject. This is understandable because properties like these carry intense emotional value as well as financial value.

However, when a quick resolution is forced by a judge or the need to finalize the divorce, parties often make decisions without considering the practical consequences. Often, they agree that one spouse will buy out the other’s interest in the property without reviewing the logistics of the arrangement. Even when parties have substantial wealth, the transaction can be very difficult, particularly when one spouse earns less income than the other.

Be Aware of Income Requirements to Qualify for a Loan

Whether you are in a contested divorce or you are working together in a mediation or collaborative divorce process, if you own real property and both spouses are on the mortgage, odds are that at least one spouse will need to qualify for a new loan. This might involve refinancing to remove the other spouse from the loan and paying them their share of equity interest, or it could involve taking out a loan to purchase a new home.

Many divorce judgments require the spouse keeping the home to refinance the loan within a specific period of time—30 days, three months, six months—or sell the property. These orders often do not address the reality of qualifying for a new loan.

Lenders generally require proof of six consecutive months of income in order to establish eligibility for a new mortgage—and a refinance situation establishes just that. To qualify for the mortgage on a jumbo loan, a homeowner may need to demonstrate 12 consecutive months of income, depending on the lender. Conforming loan limits vary from county to county across California.

How Alimony Affect Loan Applications

The loan application is very likely to be denied if a spouse is using spousal support (aka alimony) to qualify for the loan and the spouse paying support has ever missed or fallen short on a payment. Also, when a borrower is relying on alimony to meet income requirements for a mortgage, the borrower must usually present an agreement signed by both spouses, and some lenders require the judge’s signature as well. When a spouse obligated to pay support applies for a mortgage, those obligations must be factored into their mortgage situation as well.

Establishing Arrangements Early Can Make the Process Easier Later

At the early stages of a contested case, when a spouse puts in a request for alimony, it is very common for a judge to “reserve” on ordering spousal support. This means that the court does not yet have enough information to make a decision so the ruling will be postponed to a later date.

In a collaborative divorce or mediation process, couples often agree to have the spouse with higher income to continue paying the bills, maintaining the status quo during the divorce proceedings instead of paying support. This can be a costly mistake. It is better for both spouses to have an order for support established early on because it will make it easier for the spouse receiving support to qualify for a mortgage, and that will get the other spouse’s name off the mortgage obligation sooner.

Important Property Tax Considerations in a Divorce

Whether a divorce is contested or congenial, both spouses need to understand how California tax laws figure into property values and how tax obligations will affect them going forward. For instance, Proposition 13 protects homeowners against escalating property taxes as the value of their property increases. Base year values cannot increase more than 2% annually, keeping the tax increase at a manageable level. Propositions 60 and 90 allow qualifying older sellers to carry their Proposition 13 tax base with them when purchasing a new property of equal or lesser value. Proposition 60 applies to properties within the same county while Proposition 90 is for properties across counties in California.

To understand the effect these provisions can have on a divorce situation, it is helpful to review how the rules apply to a couple who are remaining married compared with a couple who are divorcing.

Example A – Empty Nesters Who Want to Downsize

Couple A wants to sell their five-bedroom home on a large lot now that their children have grown up and moved away. They have lived in their current home for many years and the Proposition 13 base year value of $40,000 has only grown to $66,000. Their property tax bill is approximately $700 per year.

They found a townhouse with two bedrooms and no yard for a price is a little less than the value of their home. However, under Proposition 13, the change of home would establish a new base year value, and their tax bill would jump from $700 to approximately $3,700 per year. They do not want to pay an additional $3,000 per year in taxes. Fortunately, Propositions 60 and 90 permit people over age 55 to sell one home and take the Proposition 13 base value with them so long as they purchase a home of equal or lesser value within two years . Now Couple A can move to the townhouse and continue to pay only $700 per year in property taxes with increases no greater than 2% in the coming years.

Example B – Empty Nesters Who Want to Divorce

Couple B owns a home that has appreciated in value but retained the same tax obligations as Couple A. They agree to sell the house and divide the equity equally. However, one spouse buys a new home before the other and uses the provisions of Propositions 60 and 90 to transfer the property tax to the new home. That spouse continues to pay property taxes of only $700 per year. When the second spouse buys a home, the transfer opportunity has been used up, so that spouse must pay property taxes of $3,700 per year.

California Property Tax Issues are Often Overlooked in Divorce

The transfer permitted under Propositions 60 and 90 can be used only once. Moreover, the opportunity and resulting benefit cannot be divided between the spouses. This can lead to tremendous inequality following a divorce, but it is an issue frequently overlooked by couples, their attorneys, and the courts.

It is rare for a judge to ask about, or make orders allocating, the tax base transfer. Perhaps this issue rarely came up in years past because many divorcing couples did not meet the age qualification. However, in recent years, California has seen a sharp increase in “gray divorces” among people who are in their 50s or older. With the steep increase in property values, the tax base carryover available to those 55 and over can be of significant value in high asset divorces.

What Happens If You Don’t Discuss Propositions 60 and 90 During a Divorce?

If the tax transfer benefit offered in Propositions 60 and 90 is not resolved or even discussed in your divorce, then the first person to apply for the tax base transfer will get to use this benefit. It can take several months before the county updates the tax records to reflect a reduced/carried over tax base.

Oftentimes a divorced individual will not know that their former spouse filed the application first until the end of the year, or when they receive the rejection notice from their own transfer application.

The Details Matter When it Comes to Real Estate in a California Divorce

If you fail to plan properly, you could end up unable to buy a home or facing tens of thousands in extra property tax in the future. The details that lead to these consequences are missed far too often, especially in high conflict, protracted divorce situations where the spouses just want to be done or don’t quite understand all the complexities of the situation.

When you work with a knowledgeable divorce attorney, they can consult lenders, loan brokers, real estate agents, and other professionals to ensure that you will emerge from the divorce positioned to move forward and not backward.

Check with your divorce lawyer to ensure that these issues are resolved advantageously before you sign any judgment or make any requests for orders related to your real estate. Get the information from the experts to make sure your decisions are well informed and as complete as they can be. You need accurate information well before your trial date, preferably at the beginning of your divorce process. With the right planning and the right experts, you can complete your high asset divorce through a “win-win” agreement that will not lead to unpleasant surprises in the future.

Holstrom, Block & Parke, APLC Protects the Full Range of Your Interests in Divorce

When your future is at stake, it is important to work with a legal team you can trust to manage the big picture and the details that have such an impact on your future. At Holstrom, Block & Parke, APLC, our team provides the benefits of over 300 years of collective experience so that we can protect your interests throughout the divorce process. Call Holstrom, Block & Parke APLC today at 855-426-9111 or contact us online to schedule a consultation with a divorce lawyer who understands real estate issues in Southern California.

Divorce

Is Alimony Taxable in California?

For years, people got used to the idea that alimony was taxable as income and created a tax deduction for the spouse making payments. Then a few years ago, the federal laws changed. But what about California laws? And what about alimony agreements established before the tax laws changed?

State laws differ from federal laws in the way alimony is treated for tax purposes. So here we describe the basics on taxation of alimony in California. If you are creating a plan for alimony as part of a divorce or separation, it is wise to keep tax consequences in mind. The experienced team at Holstrom, Block & Parke, APLC can help ensure that you understand tax implications of your situation and help develop a plan that provides a fair allocation of obligations keeping the current tax factors in mind.

Federal Tax Treatment of Alimony

January 2019 was the start of the new rules for taxation of alimony at the federal level. If you are paying or receiving alimony based on a separation agreement or divorce decree executed before 2019, then you continue under the previous rules, meaning that if you receive alimony, it is generally treated as taxable income, and if you pay alimony, it is generally counted as a tax deduction. You can claim this deduction even if you take the standard deduction and do not itemize other deductions.

For alimony paid under the terms of an agreement executed in 2019 or later, alimony is not included in the federal gross income of the recipient and it is not tax deductible for the spouse or partner making payments. Moreover, if you were divorced before 2019 but you modified your divorce or separation agreement in 2019 or later, and your decree includes language indicating that the repeal for the deduction of alimony payments applies to your modification, then the new federal tax treatment applies to your situation as well.

Alimony for Purposes of California Income Tax

The Franchise Tax Board for the State of California does not follow the new federal rules when it comes to alimony. This can make it challenging to calculate state taxes because you may need to adjust your gross income, a figure used to calculate many state tax obligations.

For California income tax, just as with federal income tax for divorce agreements entered into prior to 2019, anyone receiving alimony payments needs to report those payments as income on their state tax return. Those paying alimony to a former spouse or registered domestic partner may be allowed to deduct the payments from income on their California returns.

For purposes of filing state returns in California, if alimony is paid under the terms of a pre-2019 agreement, then tax treatment is consistent with federal treatment, and the income and deductions will be included in the federal adjusted gross income. For alimony paid under the terms set or modified in 2019 or later, California taxpayers will need to make adjustments in Schedule CA to account for alimony payments, either as additional income for recipients or as a deduction for payors.

Account for Tax Treatment of Alimony When Developing Your Separation or Divorce Agreement

When figuring out the alimony, division of assets, and other financial matters involved in a divorce, it is crucial to take tax implications into account. Factor amounts into the calculations to help ensure that a spouse receiving alimony will have enough after taxes to provide resources to meet needs. Remember that a spouse paying support will receive a tax break on the state side of calculations at least, and this can help provide adequate resources to fulfill alimony obligations.

Not All Payments Between Former Spouses Constitute Alimony for Tax Purposes

The IRS has clear rules for determining whether payments constitute alimony. Essentially, payments that are not specifically required by a divorce order or separation agreement are not considered alimony for federal tax purposes. For instance, if a spouse makes payments voluntarily to provide support or payments that are technically part of a spouse’s community property income, those payments are not eligible for tax deductions.

Let Holstrom, Block & Parke Protect Your Interests in Divorce

With over 300 years of combined experience, the team at Holstrom, Block & Parke is ready to help calculate tax impacts and negotiate for advantageous determinations when it comes to the amount and duration of alimony. We can assist with establishing initial arrangements or seeking court orders to modify arrangements.

To learn more about the ways we can protect your interests with respect to alimony and other aspects of divorce, schedule a confidential consultation today.

Alimony

Forensic Accounting in Divorce

The popularity of crime shows makes many people automatically associate the word “forensic” with efforts to solve a murder. While the term can apply to the use of scientific methods to investigate potential crime, forensic also has a second meaning relating to the law and the court system. Forensic accounting in divorce references both meanings of the word.

If you are concerned that a spouse may be attempting to hide assets or dispute whether certain assets should be classified as one spouse’s separate property, a forensic accountant can trace assets and provide the answers you need to protect your interests. Moreover, a forensic accountant will also provide evidence in a form you can use in court. Here are some of the ways forensic accounting is used in divorce in California.

Locating Hidden Assets

A forensic accountant can analyze tax returns, financial statements, loan applications,and a host of other financial records to detect signs of hidden income or assets moved off the record. If a spouse owns a business, that provides additional opportunities to conceal money and property, so it is particularly helpful to have an experienced professional who knows where to look and how to identify discrepancies.

Forensic accountants use a variety of methods to locate and identify assets to detect different types of fraud in divorce.

Characterizing Property as Marital or Separate

In divorce, couples divide assets considered to be marital property, but each spouse keeps the assets that are determined to be their separate property.  Property that a spouse owned before marriage or received by inheritance is usually their separate property initially, but it can be commingled with marital property and become at least partially marital property.

Using forensic accounting techniques to trace property can help a spouse show what percentage of property value should be treated as separate property and not divided in divorce.

Assistance During Financial Discovery

Because forensic accountants understand legal proceedings and focus their skills on the analysis of financial documents, they can provide valuable assistance during the discovery process in divorce. Discovery is the fact-finding stage of a legal case, and skilled attorneys know that they can essentially win their case through the strategic use of discovery processes. Through financial discovery, your legal team can gain the information that puts you at an advantage in negotiation and in arguments presented in court.

Business Valuation

When one or both spouses own an interest in a closely-held business, many financial factors associated with the business will have an impact on the divorce. For instance, some or all of the value of the business may be marital property that must be divided. Forensic accounting methods can help establish an accurate value.

In addition, forensic accounting can be used to assess the value of a spouse’s contributions to the business. These determinations can allow the process of dividing marital property to proceed with more confidence all around.

Calculating Cash Flow

When determining how much income a business owner can reasonably be expected to contribute to the support of a spouse or child, it is essential to understand several elements of cash flow connected with the business. Forensic accounting can be used to calculate cash flow that can in turn be used to help establish a fair division of property, ability to provide or need for alimony, and child support obligations.

Expert Testimony in Court

Knowing information is one thing, but proving it in court is often another matter. Forensic accounting uses scientific methods to locate information and calculate conclusions, but it also uses logical chain reasoning to prepare evidence that can stand up to scrutiny in court.

A forensic accountant can prepare specific evidence to be used to demonstrate particular financial facts, but a forensic accountant can also serve as a qualified expert witness to testify to certain truths in accounting. They can explain their analysis of financial information and show why it supports legal arguments made on behalf of a client in divorce.

Holstrom, Block & Parke Understands How to Take Full Advantages of the Benefits of Forensic Accounting in Divorce

As in marriage itself, many of the most ardent arguments in divorce concern financial issues and lack of trust. Forensic accounting techniques can uncover fraud, but they can also be used to confirm the absence of fraud. In either case, use of forensic accounting protects both parties and ensures that divorce terms are fair and reasonable because they are based on accurate financial knowledge.

At Holstrom, Block & Parke, APLC, our team makes excellent use of forensic accounting methods to put our clients in the best position, whether we are negotiating divorce terms out of court or presenting our case to the judge. If you’d like to discuss the ways forensic accounting could be used in your specific situation, just schedule a confidential consultation.

Alimony

How Does Cohabitation or Remarriage Affect Alimony?

If you are paying or receiving alimony in California, you need to understand how payment obligations can be affected by a new relationship. The impact is not always easy to determine, depending on the circumstances. When either partner remarries, California law is pretty straightforward, but cohabitation situations often leave considerable room for interpretation.

An experienced family law attorney can assess how the laws apply in your particular situation. However, we can share some general guidelines to keep in mind.

When a Former Spouse Remarries

If what California law refers to as the “supported party”--the former spouse receiving alimony—gets remarried, then the law is clear. The obligation to pay alimony is terminated, unless the parties have a written agreement that says otherwise.

The “supporting party”—the former spouse that has been paying alimony–does not even need to petition the court for authorization to discontinue support payments. The termination is automatic.

The law is similarly clear when it comes to what happens if the spouse paying alimony remarries. Even if the new marriage increases the paying spouse’s household income, the court cannot consider that added income when assessing alimony amounts or determining whether alimony should be modified. The court also cannot consider the income of a cohabiting partner of the paying spouse. If the payor has a new relationship, that does not affect the support obligations.

Cohabitation of a Supported Spouse Opens the Door to Modification

In some states, spousal support obligations end if a receiving spouse moves in with a new partner. California law is a little more vague on the subject. The lack of a rigid rule can allow an attorney to present persuasive arguments to support your position on the issue.

The California statute addressing the subject says that when a supported party is “cohabiting with a nonmarital partner,” that creates a rebuttable presumption of a decreased need for spousal support. In other words, if a spouse receiving alimony starts living with a new partner, the spouse who is paying support can ask the court to modify or terminate support obligations, and the spouse who has been receiving support has the burden of proving that they still need it. When evidence of cohabitation is presented, the court will presume that the supported spouse doesn’t have as much of a need for support, so it is up to that spouse to prove otherwise.

If the parties have a written agreement requiring support to continue regardless of cohabitation, then that agreement overrides the presumption in the law, and support obligations will continue. But otherwise, there can be a tremendous disagreement about whether the supported spouse is truly cohabiting with a partner and whether the change in living situation has truly decreased the need for support.

What Does Cohabitation Mean?

There is no specific definition of what it means to cohabit with a nonmarital partner. The statute, Section 4323 of the California Family Code, specifies that a partner does not have to profess to be a spouse to be a cohabiting partner. The partners don’t need to pretend or act like they are married. However, courts have generally held that cohabitation requires a shared address and a certain degree of financial interdependence. Regularly spending the night together would probably not be sufficient.

But if you can show that an alimony recipient has been receiving financial support from a new partner and that the partners have been making purchases together, that can be evidence indicating cohabitation and a reduction in the need for alimony. Generally it is the reduction in expenses caused by shared housing, rather than income provided by the new partner, that would constitute a change in circumstances justifying the modification or termination of spousal support.

How to Handle a Request for Modification

Unlike the situation when a supported spouse remarries, termination or reduction of support is not automatic if the receiving spouse is cohabitating with a new partner. The party paying support must file a petition in court to modify support obligations. It will be necessary to present evidence to show a change in circumstances that justified modification. Showing that a supported spouse is cohabitating is part of that change, but it is also important to show why the need for support has decreased.

If you are receiving alimony and your former spouse petitions the court for a reduction or termination of your support payments, you need to prepare evidence to demonstrate why your circumstances still justify alimony. In either situation, it is very helpful to work with an attorney who understands the arguments courts find persuasive.

Holstrom, Block & Parke, APLC Protects Your Interests in Alimony Determinations

Decisions regarding alimony are based on the unique facts and arguments presented in each case. At Holstrom, Block & Parke, APLC, our Certified Family Law Specialists and associates have over 300 years of combined experience helping clients achieve beneficial results in alimony determinations and other family law matters. We invite you to schedule a confidential consultation to learn how we can help you reach your objectives for spousal support.

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