Recent Posts in Divorce Settlement Agreements Category

Some of you know that my hope for people with family law crises is that they mediate their disputes, rather than litigate them. This is why I am a co-founder of Desert Family Mediation Services (DFMS), serving the southern California inland and desert cites.

At DFMS we are sometimes reminded that people in relationship breakup who hope to employ mediation to resolve their disputes have a broad range of needs and expectations that involve emotional dynamics in widely differing degrees. Often this occurs when one or both parties expresses deep anger or hurt. It is not uncommon that these dynamics include feelings and judgments between the parties and others that are not immediately evident, but which spill into the mediation at some stage. There is no 'one size' that predicts every couple's circumstance or mediation experience, but it is to be expected that strong feelings about many things may be triggered during the process. If this occurs it can be useful in assisting the parties to facilitate their looking at these feelings, and the raw pain that often underlies them.

Otherwise, when for instance people become stuck in angry exchanges or refuse to consider that what is important to the other person may actually be relevant to both since no agreement can be reached without joint assent, the parties risk impasses that may imperil the mediation's success. We like to say that each party holds the key to unlocking the best resolution for both of them. Looking at emotional dynamics and the feeling and reactivity that they engender may be an essential component to the process, but this is quite different from suggesting that people's minds about what the hold to be true will necessary change or dissolve into a cloud of blissful forgiveness: We just find that positions loosen and dialogue is possible when we look at the judgments that relationship wounds accumulate.

Which is not to recognize that in every case it is necessary or even appropriate to review what the parties' feelings were or have become. Some people wishing to mediate have simply realized their marriage or domestic partnership is no longer working and can amicably admit it, and really just want nothing more than reliable help with the legal mechanics of dissolution. In those cases mediators tend to act more as scriveners - that is, the mediator's role is to formalize the party's agreement rather than to guide the parties by helping to resolve conflict. But even in these seemingly simple situations, there is no guarantee that powerful unforeseen or unacknowledged feelings will not come up in ways that cause a party or both parties pain and so make what seemed simple into something much more textured and complex.

It is often not uncommon that when ask the parties whether they feel it may be or become prudent to discuss emotional issues during mediation one participant, but not always both, report that emotional hurts are not seen as something that will likely arise in mediation. This seems to be true especially where one party has checked out of the relationship some time before the decision is made to break up or is openly expressed to the other person. Psychologists call this "decoupling," and decoupling usually results not only in wide differences in each person's experience of the emotional breakup since one party may have what amounts to a 'head-start'. There are those whose views of "fairness" and "equity" are extensively colored by how the relationship ended or personal hurts or violated expectations that were suffered or inflicted along the way. Such situations also frequently include incidents of 'affairs' or other secretive behaviors that can be devastating to the person who is making a late discovery. Not surprisingly this can result in much anger and resentment, something that fuels conflict and disputes and makes unwinding them more challenging.

All cases are underpinned by important feelings about any number of possible subjects, and each contains its own hooks where people can find themselves getting stuck in an instant. When anger gets linked with concepts of "legal rights," it may be near impossible to work through the parties' interests within mediation without addressing these emotions in some meaningful way. This is one reason why Family Court exists, and why it remains the forum of choice for most people for ending relationships no matter how destructive and expensive it can become. People locked in conflict fueled by anger just may not be able to stop the cycle of reactivity.

A mediator early on is rarely able to foresee whether emotional triggers may threaten to derail the process at any point or stage. This is why we raise this issue for your consideration. But agreeing that emotional dynamics, including underlying anger or judgments, should be discussed at all may not be something both parties will easily agree to. There can be considerable fear about this topic. Perhaps understandably, many people already feel they have suffered enough from their own emotions or from the other's. However, since mediating your case is always a voluntary process for each of you (and the mediator too) it can be imperative that both parties be or become willing early on in order to entertain such a dialogue. This is not something that can be forced or imposed upon either.

Moreover, emotional dynamics and what underlies them challenge mediators equally as much as the parties. Mediators are susceptible to making judgments or being pulled into a relationship dynamic, and this can perpetuate the conflict rather than serve to assist in overcoming it.

Partly because of this recognition, together with Retired Judge Gretchen Taylor, I spent a week in early February, 2011, training with a small group of professional mediators and collaborative attorneys, including several from Europe, under the supervision of Gary F. Friedman, Jack Himmelstein, and Norman Fischer in a program entitled "Self-Reflection in Action: Using Our Inner Selves to Help People In Conflict". These gentlemen comprise the "The Center for Understanding in Conflict & The Center for Mediation in Law", based in Mill Valley. Gary is a mediation trainer, lawyer, and mediator based in Northern California; Jack is a former law professor at Columbia University Law School; and Norman is an author and former Zen abbot and practicing monk. We believe this group is at the cutting edge of developing a meaningful strategy for helping people to become unstuck in mediation.

All of the conflict professionals attending this course work regularly with families who are experiencing varying degrees of relationship crisis. Of particular focus was the high conflict divorce, where strong emotional reactions tend to have a major influence on how mediations unfold and upon their potential successes and failures. Often the parties' emotions can strike chords within the mediators themselves based upon their own life experiences, and so our goal in undertaking this work is to better understand not only your emotions but our own so that together we can navigate and move through conflict together successfully. Judgments, which are often unconscious, frequently impede the ability to move from the problem to the solution unless these judgments are investigated to some degree. Feelings always surround judgments, and are usually a reliable indicator that these judgments which are not evident are nonetheless in operation. By investigating these judgments and what lies beneath them to some extent in their own responses to the parties' expressions of conflict, mediators may be successful in moving parties forward when they otherwise appear to be stuck in impasses that threaten to end the process.

Mediation is not therapy. Even if you choose to mediate, or co-mediate, with one our DFMS mental health professionals (or divorce coaches in the case of Collaborative Mediations), the role of these experts is not intended to include therapy.

The process may nonetheless be therapeutic but only always as you invite and allow.

Understanding-based mediation is not intended to pry or force the parties' boundaries open beyond what they may be capable of or ready for. By this Blog I just want to acknowledge a possible role for de-escalating emotional dynamics within mediation by examining emotions and the judgments and pain that underlie them. I hope to introduce the idea that possibly addressing in some fashion the emotions and judgments that are an 'elephant in the room' anyway, and which can overwhelm the mediation process in important ways if not seen, is something that might better be faced head on.

At the commencement of our mediations, or at any other time, whether the dynamics of emotions that may affect your mediation is something that you want to discuss to some extent, are willing to share, or feel safe expressing or hearing about, is something for you each to decide as a set of ground rules that is not static but changes as mediation unfolds. These rules require consent of all parties and the mediator. As your mediators we cannot and will not force it; moreover, such issues are not what mediation is intended or designed to overcome or transform.

But if there are strong emotional dynamics that may impact nuts and bolts as we address your values and interests in the process of settling your matters, this would be a valuable beginning conversation for us to have. 

Q.  My divorce seems like it has stalled.  My wife operates our family business, we own several properties including a commercial building and she collects the rents, she isn't cooperating with me on custody on our kids, and I need money to pay my attorney.  She is controlling this case, and I am getting nowhere.  Any recommendations?

TW Arnold
10/18/10

Q.  I am considering filing for divorce, and am beginning to pencil out what the division of our assets and debts might look like.  What is a good way to go about this?

• Use net value numbers, i.e., equity in homes and automobiles. Secured debt is subtracted from fair market value - it is not divided as unsecured debt would be.  If you take the house, you take 100% of the mortgage.

• Be sure to use realistic fair market value numbers. Don't make your final decisions based on Zillow. If your assumptions are flawed, your balance sheet analysis will be of limited use.

• Use wholesale Kelly Blue Book values for cars or at least make sure whatever yardstick you use is consistent for both parties.

• Obtain accurate and current pay-off information as to debts. Typically that will be the value of the debts on the date they are assigned, as adjusted for Epstein Credits. 

• Don't treat apples and oranges as apples. For instance, list pension assets as a class separate from other assets - the present value of IRA's, 401k's, and other defined contribution plans is always different than the present value of a bank account. These pension accounts are not valued in real dollars but must be discounted, and that may require a pension forensic or CPA.

• Don't include separate property (the other spouse may dispute that characterization). Pure SP doesn't go on the marital balance sheet. 

• Assign the debts, placing those numbers in parentheses to ensure they are subtracted and not added in your running total. Remember that it doesn't matter in whose name a credit card is parked. If a debt was incurred during marriage the general rule as between spouses is that each owes 50-50.

• Separate property debts don't go onto the balance sheet because they don't get evenly divided and if they were listed you may inadvertently charge yourself for half.

• Use total values rather than 1/2 community values. These numbers get divided as one of the last steps.

• Don't include support or support arrears.

• Include Epstein credits.

• Calculate and note Watts' and Jeffries' claims

• List professional practices and businesses but realize you probably have no practical way to put a number on them, would be entirely guessing as to their value, and would probably be wrong anyway. Understand that business are worth more than the sum of their balance sheets or book values.

• If you share this document with your spouse, be sure to write "Confidential Evidence Code section 1152 Materials" on it, which makes them inadmissible as evidence against you. Otherwise you may find yourself stuck with your preliminary numbers when that is not what you intended.

• Realize that if you share this document, no matter how preliminary it is, with your spouse you will be creating in them expectations concerning value or division that they may become stuck on.

• Be careful how you treat negative equity on property. For instance, if you own a car that is worth $15,000 but you owe $25,000 and want that vehicle awarded to you, the other party will not be charged for one-half of the $10,000 in negative equity.  

• Leased vehicles should be identified but have no value. I believe it is a good idea to list everything that you own or owe whether or not it has a value or can be valued at that time, since this list becomes an important road map for you and your lawyer.

• Make a note of alleged breach of fiduciary duty claims, but don't value them.

• Don't include your separate property. Include their separate property if you claim it to be all or partly community, but understand those aren't real numbers until a judge rules.  

• Don't leave the document lying around where someone else might find it.

• If property is held in one spouse's name alone but a mortgage or taxes were paid during marriage, or if it was improved or refinanced during marriage, understand that the community probably has some Moore-Marsden interest in that property but that you will have great difficulty figuring out what that is without expert assistance.

• Similarly, if one spouse owned property (i.e, real estate) prior to marriage and the other was placed on title during the marriage, note to yourself that the property has community and separate property attributes and understand you will need more information or help to value those competing interests.

• Make a note of all separate property contributions you made for the acquisition or improvement of any property. These are called Family Code section 2640 credits.

• List all other reimbursements due to the community. For instance, there are many situations where the community property is used to pay one party's separate obligations (i.e., child support from a previous marriage) and if you know to assert the claim the community may be entitled to a reimbursement.

• List consumer goods like furniture at garage sale prices unless there is something truly special about the items. Nothing is valued at its purchase price or even its replacement cost new.

• Be sure to include loans from parents, work, or family members that were made during the marriage and assign those that relate to your family or work to you.

• Make a note of any gifts to one or the other of you alone that were used to purchase or improve community property, whether they were received before or during the marriage. 

• Look at your bank balances at the date of separation and assign those balances appropriately. If your husband emptied the savings account the day before he walked out, list the amount he took under his column.

This is just a starting point and is valuable as a roadmap to get you thinking about what needs to be done to conclude the divorce. Once you discipline yourself to begin to overcome any paralysis you might feel, the marital balance sheet will speak to you about what is important for you, what the issues are, and will give you some idea of what important paperwork you need to obtain to evaluate your interests now or in the future. Get that paperwork at once. You are going to have to do this exercise anyway once a legal action is filed. 

This the some of the information that you must provide in your Declarations of Disclosure. It is an efficient idea to use those forms from the beginning. These California Judicial Council Forms include:

• The Fl-142 Schedule of Assets and Debts
• The FL-150 Income and Expense Statement
• The FL-160 Property Declaration

Getting started on this early will make any meeting with a family attorney cheaper and far more useful then if you've not even thought about these things.

To the extent you can determine values or ranges of values, add up the net equity in your column for the community property you want or get, and subtract 100% of the debts that are to be assigned to you. Again, chances are there will be categories where you can't put a number on the items. But if you had the numbers, then after totalling the total net to the other party, subtract the two net numbers. One of you will show a higher number. This number will reflect the over-credit amount to that person which needs to be equalized between you. Divide this number by 2, and the person who netted more owes that resulting number to the one who received less. This amount is called an "equalization payment."

This is just one way to do a marital balance sheet. Often times there is no money to pay the equalization payment because all or most of the community is held in the form of personal and real property. An equalization payment is no good to you unless you can collect it.  Perhaps you can get a promissory note secured by a deed of trust on the family residence that is awarded to the wife. That is usually a bad idea - you don't want to become a bank, with all the attendant risks of default and depreciation.

Another option once you have these numbers are pencilled out is to go back and rethink how the property was divided. Maybe you should take those Peter Max lithographs after all. Maybe the residence or that vacant lot must be sold to raise money for the equalization payment. It is frequently seen in Stipulated Judgments or Marital Termination Agreements. It is not common in litigated judgments because courts generally must equalize the division at the time of trial, not in the future. This is why property may be ordered sold to ensure an equal, current division of the estate.

If defined contribution pension plans exist these are a good place to find the money to assure the equalization payment is actually honored. But a 401k with a net asset value of $100,000 might only be worth $80,000 after penalties and ordinary income taxes are charged on it. Pensions can be divided without tax consequences (QDRO's) but if you are owed a $100,000 equalization, creating a new pension in your name and transferring $100,000 from the other party's interest in it is like being handed a check for $80,000. 

• The parties expressly agreed in writing to the contrary [FC §2641(e)]; or
• The contributions were for ordinary living expenses that would be incurred regardless of whether the spouse attended school, stayed home, or worked [Marriage of Watt (1989) 214 CA3d 340, 354].

If the loan is still outstanding at the time of dissolution, the balance is not divided but is instead assigned to the party who was educated or trained, except when the parties expressly agreed in writing to the contrary. [FC §2641(b)(2) (e).]

Nonetheless, the Court may reduce or modify the reimbursement and assignment of educational loans to the extent circumstances render such a disposition unjust, including the following [FC §2641(c)]:

• When the community substantially benefited from the education, training, or loan incurred for the education or training of the party. There is a rebuttable presumption affecting the burden of proof that the community has not substantially benefited from community contributions to the education or training made fewer than 10 years before the commencement of the proceeding. On the other hand, it is presumed that the community substantially benefited from community contributions to the education or training made more than 10 years before the commencement of the proceeding.
• The education or training received by the party is offset by the education or training received by the other party for which community contributions have been made.
• The education or training enables the party receiving the education or training to engage in gainful employment that substantially reduces the need of the party for support that would otherwise be required.

Professional licenses and education are not "property" that can be divided in divorce or legal separation in California.  Reimbursement for community contributions and assignment of loans under FC §2641 is the exclusive remedy of the community or a party for education or training costs and any resulting enhancement of a person's earning capacity.

However, importantly, the Court should consider the effect of the education, training, or enhancement, or the amount reimbursed, on the circumstances of the parties in ordering permanent spousal support pursuant to Family Code section 4320(b). [FC §2641(d).]

Q.     Who is liable for debts that we assign between us in our divorce settlement?

A. After property is divided incident to divorce or legal separation it is no longer community property; it is the separate property of the recipient. This separate property always remains liable to pay your own debts no matter when they were incurred. Even if that debt is assigned to the other spouse in the divorce division, you remain liable on the debt as between you and the creditor.  Family Code section 916(a)(1).

Your separate property and what you receive at the time of the division is not liable for the other spouse's debts, whether incurred before or during marriage, and you are not liable for those debts unless the debt was assigned to you in the settlement.

If your property is nonetheless applied to satisfy your spouse's debts by a creditor, you have a further right of reimbursement against your former spouse, plus interest and possibly attorney fees.