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Recent Blog Posts in January 2010 |
| January 25, 2010 |
| FORM 8332 is required to release DEPENDENCY EXEMPTIONS to Father awarded deduction! |
| Posted By Thurman Arnold |
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Please Note: There have been some important changes to IRS policies for how to claim the dependency exemption since this Blog was first written over two years ago - please click here for the latest information.
TWA - March, 2012
The Tax Court rules that noncustodial father is not entitled to claim dependency exemption because custodial-parent M failed to complete
Form 8332 releasing exemption and disso judgment, which father attached to return, does not contain substantially same information.
This is a really common situation, where a parent wrongfully claims a child or children on their tax return despite the fact the other parent is entitled to it that year according to the terms of a Judgment or Order. It holds that despite the language of a Judgment, without Form 8332 signed and attached to the return, the IRS will not recognize the deduction.
You still have your claims against the other parent, however, but now you have avoidable attorney fees or must waste your own valuable time enforcing your rights.
Click here to download IRS Form 8332
Here's a useful tax decision that outlines the perils of not handling how you will get your spouse to cooperate several months before April 15th.
Thomas v. Commissioner [full text] (1/19/10) TCM 2010-11, No. 17922-08 (Vasquez) 2010 WL 174107. When Arizona resident (F) was divorced from M in 6/94, their disso judgment awarded custody of their 3-year-old daughter (C) to M; F was awarded 30 days of visitation in summer, plus reasonable visitation in C's state of residence. F was also ordered to pay child support of $400/mo through AZ T/CT. Disso judgment further provided that M would claim dependency exemption and child tax credit for tax year 1995 and succeeding odd-numbered years, while F would claim exemption and credit in even-numbered years if he was current in his child-support payments. M was required to execute necessary forms to permit F to claim exemption and credit, but only if F's child-support payments were not in arrears.
In 2006, F was not delinquent in his child-support payments for C, who lived with M in Ohio. On his 2006 federal income tax return, prepared by CPA, F claimed dependency exemption and child care credit, but CPA subsequently notified him that his return was rejected from electronic filing because someone else claimed dependency exemption. CPA then filed F's paper return, to which F attached copy of disso judgment, but not IRS Form 8332 exemption release. IRS sent deficiency notice to F, claiming that he was not entitled to claim either dependency exemption or child tax credit. F then petitioned U.S. Tax Court for relief, but TAX COURT RULES FOR IRS. Tax Ct finds that (1) per IRC §152(e), F, as non-custodial parent, was not entitled to claim dependency exemption unless (a) C received more than half of her support from M and F, (b) M and F were divorced, separated, or living separate and apart for last 6 mos. of 2006, (c) C was in custody of either M or F more than half of 2006, and (d) M, as custodial parent, released dependency exemption and F attached Form 8332 release or document conforming to its substance to his return ; (2) F could meet conditions (a), (b), and (c), but not (d); (3) disso judgment did not qualify as conforming document because it lacked Social Security numbers for M and F, M's signature was not dated, and release of exemption was conditioned on F's being current with child-support payments; (4) F could not claim dependency exemption; and (5) F's being unable to claim dependency exemption meant that he was also ineligible to claim child tax credit. Tax Ct concludes that although it is sympathetic to F's predicament, it is bound by statutes and regs as written.
Thurman W. Arnold, III, C.F.L.S.
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| January 24, 2010 |
| Who OWES CHILD SUPPORT? |
| Posted By Thurman Arnold |
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Q. Who is responsible to pay child support in California?
A. As used in the California Family Code, "child support" is an obligation owing on behalf of a child or an amount owing to a county for reimbursement of public assistance paid on behalf of a child. The concept also includes past due support and arrears, and includes maintenance and education. Parents have an equal responsibility to support their child in the manner suitable to the child's circumstances. Family Code section 3900.
Q. Do grandparents owe child support?
A. Grandparents have no legal duty to support grandchildren, except in cases where they have a right to actual physical custody or court ordered visitation.
Q. What if I wasn't married to the Mother?
A. If you are the biological parent or otherwise become the legal parent of a child, you have a duty of support. However, it does need to be established that you are the bio dad or a legal or de facto parent before support can be ordered. In cases involving unmarried parents, this is typically accomplished through a [VDP Voluntary Declaration of Paternity] per FC section 7573. Often the DCSS (Department of Child Support Services) or other LCSA (local child support agency) files a paternity action to establish support for a mother who has requested support enforcement services or is receiving county aid.
If you are never identified as the bio parent for a child, you will not be found to owe support absent due process. However, you if you know are the parent but fail or refuse to support your child, you may have committed a crime.
Q. What if my parental rights have been terminated by the juvenile or family courts?
A. Parents whose parental rights have been terminated by court degree, or whose children have been adopted out, cease to have a support obligation (although they may continue to owe support for prior periods) as to those child after the date of the decree.
Also, there is no support obligation for an emancipated minor child. But a child who has been emancipated by court order can become unemancipated upon their own application, or upon the county's application, if they are considered indigent and unable to care for themselves.
Q. What if my new spouse owes child support? Is this my responsibility?
A. The community property is liable to pay support debts predating your marriage, but there is a right of reimbursement. Indeed, the community liable for all separate debts of either spouse. However, there is a specific right of reimbursement in qualifying situation as set forth in FC section 915.
Q. Who enforces child support?
A. A parent can enforce it. A guardian can enforce it. The county on behalf of the child can enforce it, and can enforce it on its own behalf to be reimbursed for monies paid to another on behalf of the child.
Q. How are out of state child support orders enforced?
A. These are enforced pursuant to the Uniform Interstate Family Support Act.
Q. What if my parents have been supporting my kids while I was in rehab?
A. You have no obligation to reimburse them absent either (a) an agreement to do so, (b) an existing court order to do so; or (c) the county has provided benefits, in which case the reimbursement is to the county. FC section 3951.
Likewise, you have no obligation to reimburse the other parent absent one of the above.
Thurman W. Arnold III
http://www.ThurmanArnold.com |
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| January 24, 2010 |
| Can CHILD SUPPORT ORDERS be made RETROACTIVE? |
| Posted By Thurman Arnold |
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Q. Can child support orders be made retroactive in a court proceeding?
A. Except when the county has paid benefits, or possibly where a third party has provided necessaries like food, shelter, or clothing for the benefit of a child living with you under certain circumstances, the earliest a support order can be made effective is the date any initial pleading is filed in a court proceeding. FC Section 4009.
However, if you were not served with the papers within 90 days of that initial filing, support can only be ordered retroactive to the date a motion seeking support was filed.
Most judges will order support retroactive to the first or the fifteenth day of the month. This means that if you file for support on April 2nd, your order may only go back to April 15 but if you filed March 27th, your order would become effective on April 1. You should time your filing to maximize retroactivity.
To the extent your partner has contributed monies to your support voluntarily before the order becomes effective, they will usually receive a credit off-set against the support award for the time period in question (i.e., if support commences April 1, they will not likely receive credits for payments made prior to that time). These payments do not need to be paid to you directly for the credit to apply, as where a mortgage or rent payment is made.
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| January 24, 2010 |
| How long does a CHILD SUPPORT OBLIGATION continue? |
| Posted By Thurman Arnold |
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Q. How long does child support last?A. At a minimum, by statute, the duty to support a child that is imposed by FC section 3900 continues as to an unmarried child until the age of 18 years or, if the child remains a full-time high school student and is not yet self-supporting, until age 19 or upon high school graduation, whichever first occurs. FC section 3901.
You will notice that California, unlike some states, does not provide for child support during college. Nonetheless, parents are free to agree, and in such cases courts can order, child support extending beyond age 19. This is something worth considering in any relatively healthy dissolution situation, and is often addressed in collaborative divorce. College expenses are otherwise not part of a child support award.
If an adult child of any age whatever is or becomes incapacitated from earning a living and is without sufficient means, the support duty continues equally as between the parents as long as that condition continues. FC section 3910. This means that the county may provide services if the parents don't, and seek reimbursement from the parents.
T.W. Arnold III
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| January 20, 2010 |
| My ex wife has twice taken the DEPENDENCY EXEMPTION. I am supposed to get alternate years. |
| Posted By Thurman Arnold |
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Q. My ex wife, who is getting child support from me, has twice claimed our daughter on our taxes. We are supposed to alternate each year. I took her back to Court, and the Judge ordered that I get to alternate with her. She keeps filing. What can I do?
A. The cheapist advice I can give you, regarding taxes, is to file first this year - before she does. The IRS tends to disallow the second filing.
You should file a motion asking the Court order to her to sign IRS Form 8332 relating to dependency exemptions - which is all the protection you would need, if signed, to deal with IRS next time. Attach this signed form to your tax return and you are good to go!
Finally, you could take her to Court and obtain an order reimbursing the extra taxes you paid. Prepare your declaration carefully, and include a declaration from your accountant about how the numbers were figured.
There is no form for filing for the Head of Household - you have to separately qualify for that based upon at least 6 month's custodial timeshare during the year.
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| January 20, 2010 |
| How does one begin to become MINDFUL during DIVORCE? |
| Posted By Thurman Arnold |
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Q. What does being mindful require?
A. Mindfulness requires nothing because it exists outside the realm of achievement. It is based within the present moment, and the present moment exists without concern for past or future.
The present moment doesn't care about striving to change anything. It is not in argument with "what is." In the present moment, nothing matters other than the present moment. Here is the present moment as an existing fact, here and now - can we say the same about some remembrance of what happened yesterday, or what we hope or fear will happen tomorrow? Those are "dead things"; they are 'history.'
Yes, we are forced to come to peace with the past, and to come to terms with the future. As timeframes, these concepts remain highly relevant. It is not enough to say "this too will pass" or "in the present moment you cannot be harmed" because not only is this incomprehensible at times, but mindfulness without perspective risks failing to protect the person from destructive harm. We will not disappear in a cloud of bliss.
So what is to be done?
Mindfulness allows
perspective based upon the Truth of our experience, not some trance-talking story about it all.
For purposes of divorce,
mindfulness begins by recognizing what is mindlessness and the forms of thinking and behavior that mindlessness takes.
It is often easier to see the insanity of everything than how things are connected. Sensitivity does not begin by changing anything - the impulse to change things is just more trance (ever notice how so many creatures take on the shapes or colors of other creatures in order to hide or protect?)
Recognition is all that is required, - the rest takes care of itself. How simple is that! But without attempting to see what is not a zombie-like reactivity, there is little space left for desire and intention to sprout and take root. Mindfulness allows for a constant re-dialing back to the simple presence, without demand and even without plan.
But, beware, the mind ('ego') moves nimbly and so quickly. As soon as these words form, are expressed on paper or read, they tend to coalesce into a plan of action - into "a doing" - an activity. And so mindlessness begins again.
This is filled with paradoxes because ultimately the mind cannot grasp it all. Instead, the mind can point to illustrations that cause a felt sense of recognition which usually cannot be explained. Have you ever awakened to the fact that you've been unconscious until that moment? Doesn't this happen every day, all the time? For instance, suddenly you are at the bathroom mirror with a toothbrush in your mouth and you have no idea nor remembrance how you got there? Someone has been talking and that you've not been listening and have no idea what they just said. You've clicked to this page or away from it, and don't recall the clicks in between or the content of what you observed. That you have been distracted by some story of your mind while driving, and now arrive at your destination uncertain who was steering or what route they took? Where did the present go?
Mindfulness is being present at any given moment, in a conscious way. Ultimately it is a practice and a commitment borne of desire, love and patience.
Jon Kabat-Zinn has described mindfulness as "paying attention, in a particular way: on purpose, in the present moment, and nonjudgmentally. Mindfulness is not about thinking, it is about experiencing. It is a form of meditation, and is available in every moment."
This has the power to transform our experience, and rewire our brains.
In the midst of divorce, mindfulness is the only alternative for not unconsciously responding to this, or to that, based upon hurts and fear. What an opportunity for our children! What an opportunity for ourselves that we can set our supposed burdens down, and what promise that maybe in our next relationship will be a more awaken to the seductions of the mind. It is a grand way to start divorce healing. TWA - 10/09
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| January 20, 2010 |
| What should I do before selecting a divorce attorney? |
| Posted By Thurman Arnold |
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Q. What should I ask a family law attorney to see if we are a good fit?
A. Before you step into a lawyers office, you should know something about them. Today this is easy. Go to the California State Bar website. Search the attorney's name. You will learn where they attended undergraduate school and law school; when they were admitted to the Bar, whether they belong to any Bar Sections and stay current with the law, and how long they've been practicing. Not all law schools are created equally.
You will learn whether they have been disciplined. Lawyers can be disciplined for a number of reasons; some go to the essence of that attorney's character and affect their reputation in the community, including with Judges before whom they appear.
Second, ask for a referral. Be sure the reporting person is reliable themselves, not over-conflicted, and that they have a basis for their opinion.
Referrals from long practising mental health professionals are an excellent recommendation.
Referrals from other lawyers is a very good way to choose a lawyer, and if you know an attorney run the names you are considering by him or her. Martindale.comrates lawyers in terms of client satisfaction.
Web sites, like this one, are also a good place to start. They may tell you something about the attitude of the attorney and the style of their practice, or they may be a misleading billboard. Most attorney websites are put together by advertising firms and don't reflect the real personality of the lawyers. Many lawyers pay ghost writers to put up blogs or "articles" on their sites. They subscribe to "newsletters" that they appear to have, but have not, written.
Thurman Arnold has researched and written every word on this site (truly). We don't believe there is another family law website in the country that matches our commitment in making dissolution related information available to people for nothing.
Many lawyers will not charge for an initial consult. The Law Firm of Thurman Arnold III does not charge for initial consults, over the phone or in person, and we usually spend a half hour to an hour with clients when we first meet them. We want to know about you, and it is important that you get to know us.
Remember that lawyers are busy professionals, and time is their stock in trade. It isn't ethical for you to interview lawyers to gather free information or just to validate your opinions.
Asking the attorney their opinion on issues important to you at the initial meeting is not inappropriate or off limits in the slightest.
You are trying to determine several bits of information:
1) Is this attorney actually experienced in ways that are helpful to you?
Family law is complicated because it is not just the lawyer's experience with the law that is important, but it is also their familiarity with professional and life situations similar to your own.
2) What is the attorney's attitude about how divorces should be handled? Does she know how to listen?
Is that attitude consistent with your own goals? For instance, if you intend to lie to your spouse, hide assets, and if you care only about the outcome from your own perspective, you would need to hire a lawyer who tends to practice in a way that accomplishes that goal. If that is who you think you are, you want a divorce gunslinger.
But, beware, these lawyers will treat you the same way as you treat others.
If instead you are like most persons involved in the trauma of divorce, rational one day but distressed and confused and even nasty and reactive the next, you need someone compassionate and ethical to guide you. If you think that being ethical means being soft, examine what it is in your thinking that concludes that.
Conflict resolution is not the same as conflict avoidance. You do need to make sure that your lawyer has the background, ability, experience, and interest in you to manage your case. The best attorneys have some educational background in the family sciences or family studies, and regularly undertake family law continuing education. Such training reflects an unusual commitment to the craft that may distinguish them from the pack. The Law Firm of Thurman Arnold III actually lists our experience, training, and continuing education on this site to evaluate - we challenge other attorneys to do likewise.
3) You need to feel that you and the lawyer you hire are a good fit. If it reliably seems that the two of you can act as an empathetic team, and that you value the same things, you are on the right track.
T.W. Arnold
1/20/2010
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| January 18, 2010 |
| Am I LIABLE for my husband's CHILD SUPPORT ARREARS from his first marriage? |
| Posted By Thurman Arnold |
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Q. Can the property I owned before marriage be taken to pay for my husband's unpaid child support from his first marriage?
A. No matter when child support, or spousal support from a prior marriage for that matter, is ordered or modified your separate property is not liable for the debt and you are entitled to be reimbursed if it comes to be used to pay such debts without your consent. Family Code section 915. Community property, on the other hand, is liable for support debts.
However, there may be a right to reimbursement by the community (of which you own half) as against the other spouse's separate property if any of their separate property existed and was therefore available to pay the debt at the time the community paid the obligation.
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| January 18, 2010 |
| Are my EARNINGS during marriage LIABLE for my spouse's PREMARRIAGE DEBTS? |
| Posted By Thurman Arnold |
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Q. Are my earnings liable for my spouse's debts incurred before marriage? A. Your earnings during marriage are not liable for your spouse's debt incurred before marriage so long as these earnings when received are held in a deposit account which is not also in your spouse's name, and as to which they have no right to withdraw funds.
Once these monies go into the common pot, however, they become available to satisfy debts incurred prior to marriage. Family Code section 911.
You earnings are liable for debts the other spouse incurs after the date of marriage, because the earnings are community property and debts incurred during marriage are community debts.
The only way to avoid this is by way a prenup or post-nup established before the debt is incurred (which agreement may limit or preclude the creation of community property). |
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| January 18, 2010 |
| Am I liable for my husband's BUSINESS DEBTS? |
| Posted By Thurman Arnold |
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Q. My Husband is being sued for a business debt. I am not named in the lawsuit. Am I still liable?
A. You do not need to be named in a lawsuit against your husband to collect a debt incurred by him prior to separation in order to be liable at least to the extent of your interest in the remaining community property. This debt includes any type of claims against him (e.g., a contractor being sued for defective workmanship or a lawyer being sued for malpractice).
However, your separate property cannot be held liable for such a debt, or even for "necessaries of life", unless you are named and joined in the proceedings. You may have reimbursement rights against your Husband or the community in such event.
Please see other blog answers under the "Debt" category for more information.
Thurman W. Arnold III |
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| January 18, 2010 |
| My Wife caused a CAR ACCIDENT. Am I LIABLE too? |
| Posted By Thurman Arnold |
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Q. My Wife caused a car accident. We were underinsured. Am I liable if the wreck occurred before we separated? A. Personal injuries and property damages caused during marriage get a different treatment under the California Family Code.
FC Section 1000 sets up a preference for which funds, community or separate, are used to satisfy the debt. If the liability occurred while the married person was performing an activity for the benefit of the community, like going to work or to the food store, the liability is first applied to the community estate and if that is exhausted, the balance is applied to your wife's separate estate.
On the other hand, if she was going to see her lover, the liability is first applied to her separate estate and then the excess, if any, still due is applied to the community.
In either event, there is still a right of reimbursement from the tortfeasor spouse, but this right expires after 7 years.
A local case decided in the appellate courts in 1996, handled by one of my father's former law partners, dealt with dividing a $150,000 liability owing to the Palm Springs Tramway on account of monies embezzled by the Wife as a ticket taker over a number of years (embezzlement is both an intentional tort and a crime). She spent all the money for the benefit of the community, although her husband did not know of the source of the money at the time. Not surprisingly this led to divorce, and the ruling was that both spouses owed one-half of the $150,000 settlement, but only the wife owed the income taxes and the attorney fees for defending the criminal and civil cases. (Marriage of Bell). Husband had directly benefited from these ill-gotten gains, and he wasn't protected because he did not participate in the theft. |
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| January 18, 2010 |
| Must I pay any of my husband's STUDENT LOAN if we DIVORCE? |
| Posted By Thurman Arnold |
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Q. If my Husband and I divorce, am I stuck with any of his student loan? A. Most likely not.
Upon separation and dissolution of marriage, a spouse's separate loan is assigned pursuant to Family Code section 2627 and 2641. Subject to certain exceptions, the general rule is "[a] loan incurred during marriage for the education or training or a party shall not be included among the liabilities of the community for the purposes of division but shall be assigned for payment by the party."
The exception is the Court's power to divide the education debt differently if it would "unjust" not to, as where the community has "substantially benefited" from the education or the loan. A presumption exists that no such benefit is derived if the is less than 10 years old at the time the divorce is filed but that the community has substantially benefited if the loan is more than 10 years!
If the student loan money was really used to pay for groceries and rent, for instance, the court may equitably divide the it. |
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| January 18, 2010 |
| If my Wife and I are separated, do I have to pay the CREDIT CARDS she ran up after leaving? |
| Posted By Thurman Arnold |
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Q. My Wife and I are separated. Am I liable for her debts she incurs once we split up?
A. If you are a co-signor on, for instance, a credit card account you are also liable to the credit card company. The fact of divorce or separation does not itself alter your obligations with third parties (since they are not allowed to participate in the divorce and they would be prejudiced s if you could unilaterally disavow liability because of divorce).
As between you and spouse, you may or may not be obligated for one-half the debt depending on when the other spouse incurred it - if after separation, generally speaking they owe it. If the debt was incurred before separation, sometimes the debt will be assigned to one party without offset depending upon what it was for and whether they have the use of that property that the debt acquired - for instance, the furniture charged on the credit card or those car lease payments. Family Code section 910(b). Keep in mind, however, that if you move back in together (reconcile) you may lose these protections. The surest way to establish that a separation has in fact occurred is through filing a proceeding or Judgment for Dissolution or Legal Separation, although separations are suspect where parties continue to live under the same roof.
The Court does have the power under Family Code section 2623 to divide post-separation debts for "necessaries of life of either spouse or the necessaries of life of the children of the marriage" as between the parties "according to the parties' respective needs and abilities to pay at the time the debt was incurred." This is a discretionary call for the judge, and generally debt is assigned to the party who incurs it - particularly if that party is already receiving court ordered or even voluntary child or spousal support. If the post-separation debt is not for a "necessary of life" it will assigned to the spouse who incurred the debt.
Once your divorce is final or a decree of legal separation has been entered, each spouse is solely liable for all debts incurred thereafter, including necessaries. A Judgment or Marital Termination Agreement is going to assign the debt existing as of that date as between the parties.
TWA
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| January 18, 2010 |
| Am I LIABLE for my spouse's PREMARITAL DEBT? |
| Posted By Thurman Arnold |
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Q. Am I liable for myspouse's pre-marital debt?
A. Yes, and no. Whether you are liable for debts of your spouse depends on what kind of property exists and is available to satisfy a debt. Community property is liable and therefore available to pay a debt either spouse incurs before marriage and during marriage, regardless which spouse controls that property. Family Code section 910. Community property is all property, real or personal, wherever situated, acquired by a married person during the marriage while domiciled in California. Family Code section 760.
Your separate property is generally not liable for a debt incurred by the other spouse before or during the marriage (your separate property is always liable for your own debts, regardless when incurred). Family Code section 913(b)(1). Separate property is all property you own before marriage and all property you acquire during marriage by gift or inheritance. Family Code section 770. Separate property also includes the rents, profits, and issues from your separate property (i.e., passive separate property increases) and "earnings and accumulations" while you are living apart. An exception to this rule limiting your separate property liability concerns "necessaries of life". Your separate property is liable for these necessaries (food, clothing, shelter, medical) for your spouse even if you are living apart, unless you are living apart under a written agreement that includes a provision for support.
It sometimes happens that a creditor manages to levy against the nondebtor spouse's separate property; if that occurs, the innocent spouse has a reimbursement claim against the community property estate, or, if there is no such estate then against the other spouse's separate property. This reimbursement right must be asserted, as mentioned below, or it evaporates. Also, if you consent to the payment from your separate property you may have made a gift of it for the benefit of the other spouse. Consent would include writing or signing the check to pay the debt from your separate property account. We are not talking here about using separate assets to acquire community property (as in making a mortgage payment); a difficult set of rules apply where property is being "acquired during marriage" which include reimbursement rights.
In order to be mostly protected you need to keep your separate property separate. If you commingle it with the other party's separate property, or with the community, a creditor cannot be expected to know what is yours verses what is both of yours. This separation of finances is always a good idea, and not just for debt purposes. As between you and your spouse if you commingle monies then you may have a right of reimbursement if you can trace the flow of funds.
The rules and consequences differ depending on whether we are talking about you versus a creditor, or you versus the spouse. Q. Is there a time limit on exercising my reimbursement rights?A. You have to seek reimbursement on the earlier date of (a) within 3 years of when you actually know your property was applied to satisfy the other spouse's debt or (b) during a pending dissolution or legal separation proceeding. Family Code section 920(c). Otherwise, reimbursement under these code sections is waived. Depending upon the facts, you may still have a breach of fiduciary duty claim against your spouse that survives up to the point of the dissolution.
Divorce Attorney Thurman W. Arnold III
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| January 17, 2010 |
| Why is the date of PHYSICAL SEPARATION legally important? |
| Posted By Thurman Arnold |
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Q. Why is the idea of 'physical separation' important in California?
A. The idea of "physical separation" is one of the most important concepts to California law. If you think that the presumption that all property acquired during marriage is significant, the notion of physical separation is every bit if not more important. This appears to be one of the best kept secrets of California family law.
Physical separation is the date that the marriage ends, for most practical purposes. The date of physical separation is the date that community property ceases to accumulate. Family Code section 771 states "The earnings and accumulations of a spouse and the minor children living with, or in the custody of, the spouse, while living separate and apart from the other spouse, are the separate property of the spouse."
Once spouses separate, all their earnings and everything that is acquired with those earnings are separate property of each spouse, respectively.
Similarly, upon separation each spouse is no longer liable for the debts of the other spouse. The community estate is liable for a debt incurred by either spouse "during marriage". During marriage "does not include the period during which the spouses are living separate and apart before a judgment of dissolution ... or legal separation...." FC section 910. An exception exists as to "necessaries" except to the extent that the parties are living separate by agreement and whether or not support is stipulated by that agreement.
FC section 4302.
Separation is of critical importance to the expanding interpretation and growing field of the law of fiduciary duties. The duty of confidentiality that arises because of the marital relationship by legislative fiat (Family Code section 721) and which gives rise to major exposure for the conduct of spouses with regard to property and money, ceases at separation - meaning spouses no longer have the expectation and right of relying upon one another as trusted partners. Fiduciary duties continue pursuant to
FC sections 1100 et seq. and
sections 2100 et seq. as to assets that already exist, or can be considered marital opportunities arising after separation, until the time each asset in question is divided by agreement or court adjudication. Fiduciary duties are land mines. A good example of the consequences for breach of fiduciary duty is the Rossi case, where a wife who won the lottery and then filed for divorce the next day claiming she and her husband had already separated. She fails to list the lottery winnings in her paperwork, and refused to disclose it to the husband later claiming, among other things, that she had been a victim of domestic violence. Because the husband had no idea about the lottery winnings, he did not dispute the divorce or wife's asserted date of separation until much later when one day he received a letter intended for the wife by a company offering to buy out the winnings. He called the State Lottery Board, and then filed a motion to set aside the divorce degree and for damages for wife's fraud and breach of fiduciary duty. The court ordered the wife to disgorge all her winnings (100%) and pay them over to the husband.
The separation date is crucial to understanding reimbursement claims relating to payment on joint and separate debts, or in fixing rights to real property. For instance, California law provides that the community has an interest in the appreciation of a residence which is owned, meaning title is held, in one spouse's name alone where principal on a mortgage is being paid down. This is called the Moore-Marsden approach to equitable reimbursement. If the house appreciates after separation, the titled spouse may want to argue that all that appreciation belongs to them. Date of separation becomes important to the date of valuing the real estate and determining the relative principal loan amounts.
It is crucial where businesses are involved, regardless whether they are corporations, mom and pop shops, or sole proprietorships. For instance, what happens when a spouse who controls or who is the business, which was established before or during the marriage, continues to derive income from it after the parties separate? Maybe the business goes up in value. Perhaps it goes down in value through market factors, or maybe even the spouse intentionally drives it into the ground in order to reduce the amount that will be ordered to buy out the other spouse's interest. In all these situations a date of separation determination is crucial.
Another common area where it comes up in with regard to pensions, whether they be defined benefit plans or contributive benefit plans. Whatever accrues to the spouse who holds the pension by way of his post-separation contributions belongs to them.
Date of separation is also critical to determining the length of the marriage for purposes of spousal support or alimony rights. It is a snapshot in time with huge ramifications, including how long a spousal support obligation may continue and when it might be terminated.
It is critical that you hire an attorney who understands how to litigate and present the facts of physical separation.
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| January 17, 2010 |
| What Is a LEGAL SEPARATION in California? |
| Posted By Thurman Arnold |
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Q. What is meant by separation in California?
A. There are two contexts in which the word separation is used in divorce and family law in California: (1) Legal Separation and (2) physical separation. Both are important, but in practice the concept of physical separation has a far huger impact on people's lives.
A Decree of Legal Separation in California is identical for all purposes to a Decree of Dissolution of marriage, with one critical distinction: A judgment for legal separation leaves the marriage (and the marital "bonds") intact. The parties remain married, and so neither can remarry. But for all other purposes, the marriage is effectively dissolved.
There are religious and personal reasons why two people might want to do this, and there are some practical reasons involving most notably health insurance but sometimes job related benefits why two married persons might choose this over divorce.
A decree of legal separation cuts off the creation of community property thereafter, which includes liability for community debts as well. It is possible to divide all property between the parties, to fix all rights and entitlements to spousal support, and to deal with custody, visitation, and child support issues, and yet remain legally married. It requires the consent of both parties, because if either party objects to a legal separation or seeks a dissolution instead, a Judgment of Legal Separation cannot be granted. Even if the parties are in agreement concerning a legal separation, neither is precluded from later seeking to terminate marital status through a subsequent dissolution action. If the parties have reached a legal separation agreement, or if the Court enters a Judgment of Legal Separation, a subsequent action does not undo any of that.
This is a fairly unusual outcome. In my substantial experience, very few parties have been in agreement on this way of resolving their joint affairs and it doesn't usually make sense unless there are unique health, insurance, or religious or familial reasons for not dissolving the marriage.
TWA |
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| January 17, 2010 |
| What are interspousal FIDUCIARY DUTIES? |
| Posted By Thurman Arnold |
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Q. I keep hearing the phrase "interspousal fiduciary duties". What does it mean?
A. Few areas of California divorce and family law is changing as rapidly, or is having as great an impact upon property division and support obligations, as is interspousal fiduciary duties.
Until the mid-1970s lesser "good faith" standards were imposed upon married persons which had consequences to usually only in extreme situations of self-dealing by one spouse or domestic partner. These standards have since morphed into much higher level "confidential duty" and "fiduciary duty" standards.
On January 1, 1994 Family Code section 721 became operative. That was revolutionary, but widely not understand, for the next 10 years. Section 721 has since been revised, extended, and expanded by statutory amendments and judicial decisions, and this continues.
The penalties for violating a fiduciary duty can be severe. Many attorneys, and some judges, are behind the curve in understanding the nuances of the obligations imposed by FC section 721 and related statutes. This ignorance places clients at financial risk in the course of dissolution or legal separation litigation. Indeed, it opens the door to the litigation continuing or re-emerging long after Judgment if breaches of fiduciary duty are discovered or alleged downstream. Having a lawyer who understands this developing area of the law will make or break some litigants, today and for years to come.
Fiduciary duty rules help to balance economic power in marriage and divorce. One reason people roll our eyes when the topic of "divorce" comes up is who doesn't know someone who out cheated, or got cheated by the other spouse, in matters of support or property division? There are lawyers who pander to clients who want to cheat their spouse or domestic partner. Americans share a cultural mythology that these attorneys charge the highest fees and if they can out-cheat the other spouse and their attorney, they deserve them.
The accountability that the law of fiduciary duties add to the dissolution mix is a useful tool for combating marriage fraud by the other spouse. If society favors the party with more money or power over the weaker party, it will become increasingly unglued.
Fiduciary Duties Described
In financial and property transactions with third parties and each other, spouses owe one another important statutory duties that create huge responsibilities and pitfalls. As between themselves, a husband and wife are subject to the general rules governing fiduciary relationships which control the actions of persons occupying confidential relations with each other. "This confidential relationship imposes a duty of the highest good faith and fair dealing on each spouse, and neither shall take any unfair advantage of the other." Family Code section 721(b).
The essence of the "fiduciary relationship" is that the parties are treated under the law as though they do not deal with each other on equal terms because one person (typically the managing spouse) in whom trust and confidence is reposed and who accepts the trust and confidence is in a superior position to exert influence over the dependent party. A presumption of undue influence arises whenever either party benefits from the transaction over the other, however innocuous the circumstances may seem. Breach of fiduciary duty is to some extent a strict liability offense, meaning if it occurs consequences may be set in motion that run the course to an expensive end.
In 2002 Family Code section 721 was amended to expand this confidential fiduciary relationship and impose the same rights and duties as applies to nonmarital business partners under the California Corporations Code, and includes but is not limited to:
(1) Providing each spouse access at all times to any books kept regarding a transaction for the purposes of inspection and copying;
(2) Rendering upon request true and full information of all things affecting any transaction which concerns the community property.
(3) Accounting to the spouse, and holding as trustee, any benefit or profit derived from any transaction by one spouse without the consent of the other spouse which concerns the community property (i.e., all property acquired by a married person during the marriage).
While Section 721 does not mention Registered Domestic Partners, it applies to them as well.
One major consequence is that transactions which benefit only one spouse may be set aside by the other, either before or during a divorce proceedings.
As a practical matter for divorcing couples, this means:
a) If one party has benefited over the other in a transaction involving money or property and thereby gained an advantage during the course of the marriage, the law presumes the advantage was gained through undue influence exerted on the part of the benefited party, and the transaction is presumed invalid and can be set-aside;
b) The burden of convincing a Court that a set-aside should not occur then shifts to the advantaged spouse;
c) All this can occur without regard to good or bad intent on the part of the advantaged spouse (i.e., actually intending to defraud as opposed to merely being sloppy). Either way the law declares the transaction to be the result of "constructive fraud". Once the Court finds constructive fraud the transactions can be set aside, the benefited party can be ordered to pay restitution to the other and to disgorge any profits they alone received, title may be reformed to include both parties' names, or the property may be held in trust for both on a present and go-forward basis rather than in the name of the one alone. If there is an actual fraudulent intent, the remedies to the injured spouse are more severe.
The fact that parties have separated or that a dissolution or legal separation is pending does not end the parties' fiduciary responsibilities. Family Code section 1100(e) continues those same duties "until such time as the assets and liabilities have been divided by the parties or by a court."
Remedies for breach of the fiduciary duty as described in Family Code section 721, and section 1100, include an amount equal to one-half of the value of any asset undisclosed or transferred in breach of fiduciary duty, plus attorneys fees. This includes inadvertent or unintentional violations. Family Code section 1101(g). Where a court comes to believe a spouse acted intentionally to defraud the other spouse, the Court "shall" award 100% of the value of what should have been disclosed, or what should not have been transferred, to the innocent spouse! FC section 1101(h).
If you have a business, or investments in real estate or simply a family residence, and certain transactions have occurred, you may have a problem. If you are a dependent spouse, regardless whether the other party intended to cheat you, you may have important entitlements and remedies.
This is one of the most complicated, emerging areas of California family law. Do not go it alone! In every dissolution and legal separation case, regardless whether either party has an attorney, each party must exchange a Preliminary Declaration of Disclosure, and unless expressly waived, a Final Declaration of Disclosure. If these documents contain errors, misinformation, or are incomplete the consequences can be financially devastating because an entire settlement or judgment may later be set aside. These documents sit as leverage tools and landmines for years to come.
TWA
http://www.ThurmanArnold.com
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| January 17, 2010 |
| I have an attorney but what if I want a SECOND OPINION? |
| Posted By Thurman Arnold. Certified Family Law Specialist |
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Q. I am represented by an attorney. However, I don't have a lot of faith in him anymore and now trial is scheduled in four months. Am I being paranoid in wanting a second opinion about my divorce case?
A. Dissolution proceedings generate great anxiety. The circumstances surrounding the breakup of relationships, division of property and debts, sharing of custody, fears about future economics, and being a stranger to a process that one can only marginally direct or control cause difficulties in evaluating the quality and value of advice that clients receive.
Please don't hesitate to seek a second or even a third opinion about your family law matter.
We all ought to have a healthy skepticism about what professionals tell us, particularly when the subject affects us in an intimate, immediate or lifetime basis. It is not uncommon to become suspicious of one's attorney, or to lose confidence. Indeed, a major tactic which parties use to manipulate each other in high conflict divorces involves promoting distrust of the other's lawyer; a second opinion may become useful in grounding you. Your fears may be well founded, or they may be caused by a lack of understanding (most often a result of poor communication skills on the part of an attorney, or a lack of apparent empathy for your plight). In either case with these warning signs evident and some time left to change horses if that is indeed what you conclude is necessary, failing to investigate this further right now is a recipe for disaster.
Lawyers are not all created equally; some are unquestionably smarter and more poised and articulate than others, and there is a huge variation in the level of skill and commitment that individuals possess or bring to any particular case or specialty topic.
Certified Family Law Specialists are highly likely to understand the legal complexities of modern divorce, and to be familiar and comfortable with current best practices in the mental health sciences as they relate to individual and family dynamics. Most attorneys lack sufficient interest to bother to undertake the fairly grueling training, education, and testing required for certification as a legal specialist. Although certification as a divorce expert does not guarantee the outcome you desire to achieve, it does stack the odds in your favor - hiring a specialist is more likely to pair you with an experienced legal professional who is at the top of the divorce lawyer bio-sphere. If your attorney is not certified, or even if he is and you sense that his advice is not efficient or it is not making sense to you (or others), it is no sin to discreetly step away, take some breaths, and get reliable and independent feedback.
If you are feeling uneasy about the quality of the legal representation you are receiving, don't ignore the signals. Given what is at stake, why not seek a second legal opinion from a qualified attorney? At worse you may find that your anxiety has been dispelled and that the real problem with you and your lawyer involves a lack of communication or a lack of understanding by one or both of you that can be remedied; at best you may avert a developing train crash before your life and finances are thoroughly wrecked.
We don't have crystal balls, but we all possess intuition and common sense. Use yours!
We offer Second Opinions and frank and discreet, expert advice, by telephone and video-conferencing and webcam!
Thurman W. Arnold III, C.F.L.S. |
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| January 07, 2010 |
| My wife she used her INHERITANCE to buy our home. We are getting divorced. |
| Posted By Thurman Arnold, III |
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Q. My wife and I separated in June 2009. When we purchased our home in March of 1998 (married December 1994), she used part of an inheritance from her grandmother to help with the down payment. I have been paying the mortgage since we bought it. Will she get her inheritance back in our divorce? What would I get?
A. Because I need more information and the answer to some questions and then to follow up questions, I can only give you a generalized response.
So long as your wife can trace the portion of her downpayment contribution to the inheritance, she is entitled to a Family Code section 2640 reimbursement in the amount that she proves by this tracing. She is not entitled to interest on grandma's gift to her, however, but only the principal. However, this assumes that the downpayment contribution always remained separate from any other money or bank assets that you had an interest in, or that the community had an interest in: If the inheritance monies were commingled with joint monies or your separate funds between the date she received them and the date they were used as part of the purchase price for the home, then a further tracing is required to establish that what money in the account at that time was her separate and what amount was something else.
Here is Blog that discusses tracing principles in more detail.
You don't report whether you were on title to the residence when escrow closed or at any later time. Whether or not you were on title when the property was purchased, it is presumed to be community property UNLESS you (a) deeded off when escrow closed or deeded off since that time or (b) consented to or are deemed to have consented to your Wife being the sole record title holder if at the close of escrow title issued in her name.
If you were on title at close of escrow and to the present day, the answer is easy - your Wife gets her traced inheritance money first, off the top, from any equity in the home. She does not get interest on the money. The remaining net equity, without other facts, belongs to the community so that each of you is entitled to one-half of what remains.
If you were not on title when escrow closed, and if you cannot rebut by clear and convincing evidence the legal presumption set forth in Evidence Code section 662 (based upon form of taking title in her name alone) that you consented to that outcome, then (a) your Wife still gets her downpayment back and (b) the community estate is entitled to be reimbursed for carrying the mortgage all those years and reducing the principal balance due the mortgage holder. It doesn't matter who paid the mortgage, so long as it was paid from community earnings during the marriage.
There is a very important reimbursement concept under California Law known as Moore-Marsden apportionment. It applies to a common situation where a home is acquired before marriage (or during marriage as separate property), title is in the name of the acquiring spouse alone, and during the marriage and up to separation or divorce and there is or was a mortgage that was paid during the marriage.
Where this occurs the community estate acquires a legal, reimbursable, interest in what would be otherwise be entirely the separate property of the titled spouse IF community funds (earnings of either spouse, for instance, or both) are used to make the mortgage payments. The idea is that joint funds are being used to benefit a separate property interest, i.e., the separate property equity. Many legal scholars consider this to be a breach of fiduciary duty - that whenever one or the other spouse's separate property interests are increased with community funds, or community time, skill, and efforts of either spouse during the marriage, the community is disadvantaged and that this disadvantage violates the statutory duties of the parties that place the party's joint interests above their separate interests.
The formula for apportionment is that the community acquires a pro tanto (dollar for dollar) interest in the ratio that principal payments on the purchase price made with community property bear to payments made with separate property. Hence, any increase in value (appreciation) must be apportioned accordingly between the separate property and the community property estates upon separation or dissolution.
Note that this only applies to separate property owned prior to marriage with a mortgage that was paid during marriage where an equity position has been increased. For instance, if a mortgage exists but it is an interest only, payments during marriage do not reduce principal. Therefore, the separate interest of the owner spouse is not improved because the debt remains exactly the same. As a general rule, the amounts paid for interest, taxes, and insurance on the house are disregarded since that portion does not to contribute to the capital investment.
Also, it assumes that the mortgage was paid with joint (community) funds, or that the funds used were so commingled that the "separatizer" is unable to trace them to a separate property source (meaning they don't have records showing where each payment was made or are unable to provide a recapitalization of the source of the funds). If your husband reduced the mortgage throughout the marriage but he did it with an account that was his separate property then the community would not have this reimbursement right.
The Moore Marsden formula requires a number of bits of information at important points in time to be properly calculated. These include: a) what was the original purchase price; b) what was the original mortgage and downpayment; c) what was the property worth at the date of marriage (DOM); d) what was owed to the lender at that time; e) what was the property worth at the date of separation; f) what was owed at that time; g) what is the property worth on the date of the calculation (i.e., the trial date); h) and what is the principal pay-off at that time?
This is agood example of why family law and divorce cases can become quite expensive. Obtaining these records, particularly if you are the 'out spouse' can be difficult, and sometimes a forensic accountant is the best option for calculating these apportionments. Find a local CPA with family law experience to help you trace the funds. You need an experienced family law attorney for these types of matters as well.
In your case, with a lengthy marriage and little owing, you have significant Moore Marsden entitlements.
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| January 06, 2010 |
| My Husband Is Receiving A PERSONAL INJURY SETTLEMENT. Am I Entitled To Any of It? |
| Posted By Thurman Arnold |
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Q. My Husband is receiving a large settlement for an auto accident he was in. If we divorce, am I entitled to 1/2 of the settlement?
A. Probably not, but maybe.
Personal injury awards in California are community property if the injury occurs before separation no matter when the settlement comes in. Family Code section 780. However, Family Code section 2603 states:
(a) "Community estate personal injury damages" as used in
this section means all money or other property received or to be received by a
person in satisfaction of a judgment for damages for the person's personal
injuries or pursuant to an agreement for the settlement or compromise of a
claim for the damages, if the cause of action for the damages arose during the
marriage but is not separate property as described in Section 781, unless the
money or other property has been commingled with other assets of the community
estate.
(b) Community estate personal injury damages shall be
assigned to the party who suffered the injuries unless the court, after taking
into account the economic condition and needs of each party, the time that has
elapsed since the recovery of the damages or the accrual of the cause of
action, and all other facts of the case, determines that the interests of
justice require another disposition. In such a case, the community estate
personal injury damages shall be assigned to the respective parties in such
proportions as the court determines to be just, except that at least one-half
of the damages shall be assigned to the party who suffered the
injuries.
Hence, the court has discretion to divide community personal injury damages by assigning it all to the injured party. As a practical matter, this is usually what does happen. Still, Family Code section 781 provides certain reimbursement rights to the community for payments made from the community.
Lesson: Don't avoid settling your case just because you think you should get 1/2 of what your spouse recovered. You might get something, but the expense outweighs the risks. Judges are inclined to award PI damages to the injured spouse.
By the way, if the other spouse (here, you) caused the injuries, a different outcome might result. Also, different rules can apply to worker's compensation recoveries.
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