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Will I Have to Pay Alimony on Top Of Child Support In California?

Even in the best of circumstances, divorce creates financial challenges because you are splitting one household into two and doubling expenses. In addition to dividing assets including your retirement savings, you may also be obligated to pay substantial amounts for child support. Do you then have to pay alimony on top of all that?

The answer depends on the circumstances. Working with an experienced attorney is the best way to protect your financial interests during and after the divorce.

Do You Have a Prenuptial or Postnuptial Agreement?

You cannot specify terms in advance regarding obligations for child support, but you can make arrangements regarding the potential for alimony. If you and your spouse executed a valid prenuptial or postnuptial agreement, then the terms of that agreement override the provisions of California law regarding alimony. So the first issue to consider regarding alimony is whether you have an agreement that specifies whether a spouse will pay and if so how much and for how long.

Child Custody and Support are Usually Determined First

Even if one spouse requests alimony right away, courts recognize that spousal and child support are interconnected because they both impact needs and ability to pay. Generally, courts will determine custody first because the amount of time the child spends with each parent affects support amounts. When a child spends equal time with both parents, the parent with greater income may still be required to pay support but it will not be as much as if that parent only had the child with them every other weekend. At the same time, if one parent is spending much more time raising the child, that can make it difficult to earn as much. So custody impacts child support and can impact alimony as well.

Once custody is established, then child support will be calculated based on a formula that takes each spouse’s income into account, as well as a variety of other factors. Then decisions about alimony are based on the consideration of the paying spouse’s income after child support amounts are taken out.

Alimony is Not an Automatic Obligation Like Child Support

Both parents are obligated by California law to support their children financially, so child support is an automatic obligation. Support for a former spouse, on the other hand, is not automatic. If a spouse wants to receive alimony, they must ask for it and show the court why it is justified (unless parties reach their own agreement out of court.) This includes showing why they need support and how the other spouse has the ability to pay support. Generally, the longer a marriage lasted, the more likely it is that one spouse focused on home and family while the other spouse focused on career, which leaves one spouse much better prepared to be self-supporting. In that case, alimony is more likely to be awarded to give the lower-earning spouse time to develop career skills and build earning potential.

If both spouses have relatively equal earning potential and are spending the same amount of time caring for their children, then the court may be less likely to award spousal support. It is important to ensure that your attorney presents persuasive evidence to support your position regarding alimony. If paying alimony would make it difficult for you to provide a home for your children, be sure your attorney understands why and that they are prepared to demonstrate this to the court.

Factors That Impact Alimony in California

Courts consider many factors when determining whether one spouse should pay alimony, and how much and for what length of time. The recipient spouse’s need for support and the paying spouse’s ability to provide support are two of the most important factors. This involves considering each spouse’s earning capacity and special needs, such as medical issues or the fact that their ability to work is limited by the need to care for their children. Other factors include the age and health of each spouse, the length of the marriage, the lifestyle enjoyed during the marriage, the amount of debt and assets held by each spouse, any history of abuse during the marriage, and how the time spent caring for children impacted the career of either spouse.

Work with an Attorney Who Knows How to Protect Your Financial Interests in a California Divorce

The question of whether you will need to pay alimony in addition to child support depends on your circumstances as presented to the court or the arrangements you negotiate out of court. Having experienced legal guidance can make all the difference in the outcome. At Holstrom, Block & Parke, APLC, we put 300+ years of collective experience to work for you to help you achieve the most beneficial outcome in your divorce, including advantageous arrangements regarding spousal support. Contact us today for a confidential consultation to find out how we can protect your interests. 

Did You Know That Your Spouse Could Use Your Child’s California 529 Plan to Hide Assets?

Just when it seems like the financial side of divorce could not get more complicated, new tax rules come out to change the game. In this case, recent changes to the laws regarding California 529 college savings plans offer a new way for one spouse to hide assets from the other spouse in divorce.

If you are not working with an attorney dedicated to keeping up with the latest techniques for uncovering hidden assets in divorce, you could miss out on your fair share of marital assets.

How 529 Plans Work in California

A 529 plan is a type of account you can open to save money for certain education expenses. These plans provide tax benefits. While they are based on federal laws, each state sets slightly different rules for administering these savings plans.

Parents, grandparents and other relatives often set up 529 savings plans to pay for college or other future education expenses for their loved ones. The reason that these plans can be used to hide assets in divorce is that the child is not the owner of the plan. While the child or grandchild is the intended beneficiary of the funds in the account, the child never gains an ownership interest while the funds are in the account. Instead, whoever set up the plan is considered the owner of the plan. 

That person controls contributions made into the plan and they decide how the funds are invested. The person who sets up the plan also controls when and how funds are distributed to the student. In fact, the child who is supposed to be the focus of the account would have no idea how much money is in the account and would not even know the account exists unless the account owner makes that information known.

Money in s 529 Plan Should Be Treated as Community Property

Even if only one parent establishes and makes contributions to their child’s 529 savings plan, the funds in the plan are jointly-owned community property belonging equally to both spouses (unless the account was funded entirely with assets legally held as separate property, which is rare.) Since the money in a 529 account is set aside for a child or grandchild’s education, however, many parents and grandparents view that money as belonging to the student rather than the person who set up the account. When they list their assets in preparation for divorce, they often leave out funds in a student’s 529 plan. While a detail-oriented attorney might ask about college savings plans, in many cases, assets in these plans are overlooked during the process of allocating marital assets. This can cause a spouse to lose out on the full share of community property they should receive in the divorce.

Federal Law Allow Unused Funds in a 529 Plan to Rolled Over into an IRA

One spouse can hide assets in a 529 Plan and later, quietly move those assets into their own personal retirement account. This is because a recent change in federal law allows funds that have not been used for educational expenses to be moved into an IRA, just as long as the 529 account has been open for at least 15 years.

This creates the potential for a spouse to stash money in a child or grandchild’s 529 account, “forget” to mention that money during the divorce proceedings, and then years later keep the money as their own. They don’t even need to pay tax on the earnings.

Sometimes, attorneys forget to ask about college savings accounts. Other times, the accounts are acknowledged in divorce, but no one addresses the issue of what will happen with any excess remaining in the account after qualified educational expenses have been paid. Either way, a spouse can lose out on their fair share of marital property.

Details Matter in a California Divorce, So Work with a Legal Team That is Fully Prepared to Protect Your Interests

With over 300 years of combined experience handling divorce and other family law challenges, the team at Holstrom, Block & Parke, APLC has seen our share of attempts to hide assets. We are always mindful of opportunities where a spouse can miss out because assets are overlooked or undervalued.

You can trust our Certified Family Law Specialists and associates to work effectively to ensure that you receive the right share of community property as well as property that is rightfully your separate property. For a confidential consultation to learn more about locating hidden assets and other challenging aspects of divorce in California, contact our team today. 

Even a Loss Can Be Valuable Community Property in California–Make Sure You Account for Loss Carryforwards in Divorce

When considering assets acquired during the course of marriage, people tend to think of wages they’ve earned, retirement assets accrued, and items purchased over the years. They almost never consider a loss as a potential item of value that should be allocated in divorce. It is the job of a thorough and detail-oriented divorce attorney to consider this possibility and ensure that each spouse receives their fair share.

A loss carryforward can lead to big tax savings, so it is a valuable asset. Let’s take a look at why you need to consider loss carryforwards as part of your divorce settlement.

What is a Loss Carryforward?

When you make money on an investment and then sell that investment, you pay tax on the amount you have gained. You might pay capital gains tax or it could be taxed as income, depending on the investment.

When you lose money on an investment or in your business, you have the opportunity to deduct the loss from your taxable income or gains so that you owe less in state and federal taxes. So in that way, a loss incurred at one time has value for you in the future. Our tax laws allow you to use that loss to offset income in the same year, or to carry it over and use it in future years. When you carry over a loss from one year to the future, that is a loss carryforward. The tax savings make it valuable. Yet this is an “asset” that is often overlooked in divorce. It should be allocated among spouses just like other community property in a California divorce. The same holds true for net operating losses from a business.

Allocating Loss in California Divorce

While we tend to equate loss with debt, they are the complete opposite when you consider tax implications. A loss can be used to decrease the amount of income you pay tax on, and therefore, it saves you money and that makes the loss valuable.

When the loss is associated with property treated as community property under California law, then generally the loss carryforward would be allocated equally between spouses. In some cases, if spouses filed separate tax returns, if the property was acquired before marriage, or if the issues were addressed in a pre- or postnuptial agreement, then one spouse might be entitled to all or a greater share of the loss.

Losses to consider include:

  • Capital losses
  • S Corporation losses
  • Investment interest expense carryforwards
  • Net operating losses

In addition, if there are carryfowards of charitable contributions, those need to be accounted for and allocated as well.

Issues to Consider Regardng Loss Carryforwards in Divorce

Losses can be carried forward on an indefinite basis under current tax laws, and depending on the amount of losses and future income to be offset, these losses can amount to thousands of dollars in tax savings over the course of several years.

However, to understand the value of loss carryforwards and how to fairly allocate the value in a divorce settlement it is vitally important to work with a knowledgeable accountant as well as a financially savvy attorney. Tax issues become very complicated after a divorce when couples can no longer file joint returns, and there are restrictions on the use of loss carryforwards that are important to be aware of when planning for and using these losses.

Consider How the Details Fit into the Big Picture

Losses from investments and businesses, excess charitable contributions, and other tax carryforwards are just a small part of the financial picture that needs to be addressed in a California divorce. All property with potential value, as well as all liabilities, need to be considered. You need to determine which assets and debts are separate and which are marital, and ensure that the marital factors are divided appropriately.

To emerge from the divorce process in the best position to move forward, your attorney needs to be mindful of all the details, but also how to fit those details into the big picture. It takes considerable knowledge and discipline to maintain this focus, but it is necessary to ensure that a spouse receives a fair settlement in divorce.

Holstrom, Block & Parke, APLC Knows How to Protect Your Interests in Divorce

Whether the issue involves loss carryforwards or other items of potential value, you can trust the Certified Family Law Specialists and associates at Holstrom, Block & Parke, APLC to ensure that you receive your rightful share in a California divorce. We pay attention to the details while keeping mindful of the overall scheme so that you will be positioned for move forward after your divorce. Schedule a confidential consultation with our team today to learn more about the ways we protect your interests. 

 

How is Dividing Property in a Community Property State Like California Different Than in an Equitable Distribution State?

The financial worries of people heading into divorce in California cause untold amounts of stress. Uncertainty plays a large role in upping the stress level because no one is quite sure what to expect. While couples are worried about alimony and child support, it is the division of property that causes the most concern. People hear that California is a community property state, and they begin to make many assumptions about how property will be divided here compared with in the way it would be allocated in other jurisdictions.

So what is the difference? And what can you do to protect your interests? Your attorney can provide the most complete answers to these questions, but here is some basic information to consider.

Community Property vs. Equitable Distribution

In theory, the property division plans created in a community property state can be extremely different from those created in an equitable distribution state. In practice, however, there is often not as much difference as you’d imagine.

Community property principles hold that most assets acquired during the marriage are the joint and equal property of both spouses and that they will be divided evenly in divorce. If one spouse earned wages and accrued retirement benefits during 15 years of marriage, half of those wages and retirement benefits belong to the other spouse. If one spouse bought a boat for the other for their 10-year anniversary and put that spouse’s name on the title, that boat is still the joint property of both spouses, and both are entitled to half the value in divorce. 

Property that a spouse owned before marriage or that a spouse received as an inheritance during the marriage is generally that spouse’s separate property and does not get divided in divorce. There are exceptions which we will explore in a moment.

When property is divided according to principles of equitable distribution, instead of a 50/50 division, courts can divide marital property however a judge finds to be “equitable” or fair. This could lead to a situation where one spouse ends up with almost all marital property while the other walks away with only the property they had when the marriage started.

How the Rules are Applied

In an equitable distribution state, even though equitable doesn’t mean equal, courts often start with the proposition that both spouses are entitled to an equal share of marital property. Then they may adjust the allocation to account for factors such as whether one spouse has greater earning potential or committed acts of domestic violence. Many times, the allocation comes out close to 50/50 just as in a community property state.

Some community property states actually follow the principles of equitable distribution. They start with the assumption of a 50/50 split but then make adjustments for “fairness.” California is a strict community property jurisdiction, but even in our state, if a spouse is found to have wastefully dissipated assets or committed domestic violence, that can change the allocation of property so that it is not strictly even. In many cases, the distribution of marital property in divorce is not tremendously different in a community property state than in an equitable distribution state if divorce attorneys make all the right arguments.

Property Classification is Key

In either a community property state or equitable distribution state, the way property is classified often has a much bigger impact on the financial outcome of divorce than how property is divided once it has been classified. Assets that are considered your separate property do not need to be divided under either principle. So that makes it important to work with an attorney who is prepared to help you ensure that your property is classified properly.

Assets that you owned before you got married or that you received via inheritance or gift (from someone other than your spouse) should be treated as your separate property. But if these assets got mingled with marital property or your spouse contributed to the value in some way, then those assets can turn to community property, at least in part. The best way to protect your separate property is to plan ahead and execute a premarital agreement specifying that your property will remain yours. If it’s too late and you’re already contemplating divorce, you can research to trace the history of your property, showing when it was acquired and any steps taken to keep it separate from marital assets. Your attorney can assist with the process and may recommend working with a forensic accountant to help trace the value of your separate property.

Holstrom, Block & Parke, APLC works to Ensure that You Receive the Right Allocation of Property in a California Divorce

When it comes to dividing property in divorce, it is important to pay attention to the details to ensure that all property is accounted for and that it is classified appropriately. You need an attorney willing to take the time to dig deep to get the full picture.

At Holstrom, Block & Parke, APLC, our team has 300+ years of collective experience helping clients achieve the right allocation of community property and protecting their separate property. We invite you to schedule a confidential consultation to discuss how we can work to ensure the most advantageous financial settlement in your divorce.

Does A Father Have A Good Chance Of Getting 50/50 Custody In California?

Custody issues cause more anxiety and pain than almost anything a parent can face in life. The thought of losing time with your child and missing the daily milestones in growth that make childhood so special is a frightening thought.

People will freely share what they know about custody conflicts and resolutions, but it’s important to realize that some of that information is based on rumors that are likely untrue. Information circulating could also be based on old laws or on specific circumstances that do not apply in your case.

All decisions regarding custody are made on a case-by-case basis after evaluating all the applicable factors to determine what serves a child’s best interests. Every family is unique, so every custody determination is unique. There is no simple rule to apply to gauge the likelihood of gaining custody in California.

However, to improve your chances of gaining the custody arrangement you want, it helps to understand the factors that go into the determination and ensure that you inform your attorney about all the factors that weigh in your favor as well as negative issues that the other parent might bring up to use against you.

Understanding Custody

Before you can consider plans for gaining custody, it is important to understand which type of custody you’re looking at. Physical custody is what most people think of as custody. It covers the child’s living arrangements and time spent staying overnight with each parent.

Legal custody is addressed separately. When a parent has legal custody, they have the authority to make decisions about factors that affect the child’s upbringing, such as where they will go to school, which doctor they will see, and whether they will be raised with particular religious beliefs.

Either type of custody can be granted solely to one parent or shared between parents. For instance, parents might share legal custody and decision-making authority while one parent has primary physical custody and the child lives with that parent most of the time.

Joint Custody is not Necessarily Shared 50/50

Parents also need to understand that they can share physical custody without having an exact 50/50 split of parenting time. An attorney can help parents develop a schedule that aligns with their work schedules and the child’s school and activity schedules to create the most beneficial arrangements for the whole family.

Many times, a parent will fight to gain 50/50 custody only to face the reality that their schedule requires them to put the child in daycare for much of the time. Depending on work schedules and family dynamics, it might be better for that parent to have physical custody 35 or 40% of the time instead.

California Law Does Not Favor Mothers or Fathers

At one time, California courts, like those of most other states, tended to favor mothers in custody decisions. Mothers were seen as the natural caretakers of the child, so the assumption was that the child’s best interests would be best served by placing the child with the mother for the majority of the time.

Now the law specifically states that neither mothers nor fathers will be favored in custody decisions. However, the presumption in favor of granting custody to a caretaker still applies.

Parental Roles Matter in Custody Decisions

A father who wants to obtain 50/50 custody in California needs to be sure to have evidence of involvement in the child’s life, including an active role as a daily caretaker. If the father is the one to make breakfast in the morning or read bedtime stories at night, it is important for the court to know this.

The reason a court might share custody 50/50 is not to give the parents equal time with their child but to give the child equal time with parents who provide nurturing support. If one parent works long days and doesn’t make the effort to attend a child’s school events or spend time communicating with and doing things with the child, that parent is less likely to be awarded physical custody than a parent who comes to every soccer game and spends the weekends making smiley-faced pancakes and hosting teddy bear tea parties.

If you are a parent seeking custody, take time to write down the activities you engage in regularly with your child. Search through your phone to find photos of the school band concert or art show. Create a file of evidence showing the ways you support your child so you can demonstrate that it is in your child’s best interests for them to spend as much time with you as possible.

For Help Gaining the Right Custody Arrangements, Rely on Holstrom, Block & Parke

It is impossible to assess the chances of father—or a mother—gaining custody without knowing the details of the situation. It is also impossible for the judge to make the best decision if the court is not given full information about each parent’s situation.

When you work with the Certified Family Law Specialists and associates at Holstrom, Block & Parke, APLC, we ensure that all the factors that weigh in your favor are presented persuasively to demonstrate why your custody goals serve your child’s best interests. For a confidential consultation to discuss custody in your situation, contact our team today.

 

Inheritance and Divorce in CA

California is a community property state that considers any property acquired during a marriage to be marital property. Does this mean that if a family member leaves you an inheritance during your marriage that it becomes marital property? What happens to your inheritance if you and your spouse divorce? At Holstrom Divorce Authority, we can help you understand inheritance and divorce in California and how the law applies to your situation.

Is an Inheritance Separate Property or Marital Property?

California makes property division during a divorce fairly simple. Any property acquired before the marriage is separate property and belongs to the sole spouse. Property acquired during the marriage is community property belonging equally to both spouses.

There are two exceptions to this rule: inherited assets and transmuted assets. If a family member gives you a gift or inheritance, those assets are yours as separate property, whether your inheritance includes cash, stocks, bonds, real estate, or other assets.

An issue of ownership arises if you commingle or transmute your inheritance assets. Commingling could include putting inheritance assets into a joint account, using marital assets to purchase a family home, or investing in stocks, real estate, or a business that you share ownership of with your spouse.

Transmutation is a legal agreement to convert some or all of your inheritance into marital funds. Once you transmute any portion of your separate property, you can’t revoke the agreement and withdraw that property from the marital assets.

Protecting Your Inheritance with a Prenuptial Agreement

If a family member leaves you an inheritance before you are married, you and your spouse can determine in a prenuptial agreement whether any investments procured with your inheritance money will become marital property. You and your soon-to-be spouse can also determine if you agree to share profits from an investment if your spouse helps you manage the investment, and what portion of the investment belongs to your spouse.

If you and your spouse are already married when you inherit money, you can outline similar decisions in a postnuptial agreement. A postnuptial agreement is the same as a prenup, but you and your spouse agree to a postnup’s terms during the marriage. Managing inheritance and divorce in California often requires multiple steps to keep your inheritance separate from marital assets.

Other Ways to Protect an Inheritance in a California Divorce

You have several options to protect your inheritance from a divorce at different stages of your marriage. Before your marriage begins, you have the option to create a prenuptial agreement. You can also avoid commingling assets by creating a separate account or a trust to store your inheritance.

During the marriage, you cannot commingle or transmute funds from your inheritance. Don’t use your separate assets to pay communal debts or to invest in community property. You can set up a separate account or trust and draw up a postnuptial agreement.

Contact an Experienced Divorce Attorney in Southern California

Inheritance and divorce in California are simple concepts if managed correctly. If you’re considering a divorce and inherited property, contact an experienced divorce attorney in Southern California. Call Holstrom Divorce Authority at (844) 237-5791 today.

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