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Divorce (10)

Military Divorces

Military Divorces

A significant number of marriages to military personnel end in divorce. About 7.2 percent of military women reported a divorce in fiscal year 2013, according to Department of Defense (DoD) data. The overall divorce rate among men and women was 3.4 percent. For every 100 troops who were married at the start of the fiscal year, about three or four notified the DoD about a divorce and officially changed their status for purposes of military benefits.

A divorce can be emotionally wrenching, especially when children are involved. Add to this the stress of a family divided by overseas deployments, it’s a situation that needs to be handled with care. Depending on the circumstances, a military divorce might not be any no more complicated than two civilians getting divorced (especially if there are no children and the military spouse has not served for a long time), there are laws that concern only service members and their spouses.

Military Divorce Law

Military divorces are governed by both state and federal laws.

  • Federal laws can impact in which jurisdiction the divorce takes place or how a pension (if there is one) might be apportioned,
  • State laws may spell out how much alimony and child support will be paid.

Active-duty service members can get some protection from divorce proceedings in most cases. Under the Servicemembers Civil Relief Act (SCRA), members of the military can seek postponements while on active duty or for 60 days following active duty (if the judge agrees).  The SCRA does not affect the judge’s decision on the merits of a divorce case, only if a delay will be granted.

Divorce filings and procedures

Before a court can grant a divorce, it must determine if it’s the right court (or jurisdiction) with authority to render a judgment on the case.  For divorces, jurisdiction is normally where the couple lives. For California, the couple must reside in, or a spouse must be stationed in, the state for there to be jurisdiction in a divorce case.

Federal law doesn’t impact the grounds for a divorce. Under California law, a divorce can be contested (there isn’t an agreement to divorce, or all the related issues such as alimony and child support haven’t been resolved) or uncontested (both spouses agree to divorce and agree to resolved related issues).

The spouse on active duty needs to be personally served with a summons and a copy of the divorce action for a California court to have jurisdiction over the case. If the divorce is uncontested, personal service is not required if the active duty spouse signs and files a waiver affidavit acknowledging the divorce action.

Who gets what from whom

State law will govern property distribution (though federal law can come into play if retirement benefits are involved), child custody and support issues.  Under California law, child support and spousal support/alimony awards cannot be more than 60% of a military member’s pay and allowances. California child support guidelines, worksheets and schedules are used to determine the amount of child support to be paid. There also special rules by the military concerning alimony and child support designed to ensure a service member’s family support obligations beyond a divorce or separation.

VA disability benefits will not be directly allocated to the non-service spouse. However, the judge may consider the disability payments when calculating child support, maintenance and property and debt division.

Military pensions, like civilian pensions, are subject to division between spouses in the event of divorce. Under the Uniformed Services Former Spouses’ Protection Act (USFSPA), state courts may treat military retirement pay as either sole or community property. California law states a pension is community property if it was earned during a marriage.

Who gets how much of the pension is up to California law, which divides up the pension either by “reservation of jurisdiction” or “cash out.”

  • Reservation of Jurisdiction: This is the more common way to handle pension plans. Due to a court order, when the military spouse retires the ex-spouse receives a portion of each pension payment. This portion is determined by dividing the number of years the couple lived as husband and wife by the number of years the military spouse served in the military. The result is the community property percentage of the pension plan.
  • Cash-out: This method involves obtaining “actuarial evaluation.” An actuary is hired to review the pension as well as the accumulations on the pension account, and determines the “present value” of the community share of the pension plan. With a cash-out, the military spouse receives the pension in its entirety and the other spouse receives other community property assets of equivalent value.

Payment of the ex-spouse’s share of the retirement pension is paid directly by the Defense Finance and Accounting Service (DFAS) if there was at least ten years of marriage with an overlapping ten years of military service. No matter how long the couple was married, a judge could order direct payments to the ex-spouse who had been married for less than ten years as an offset (the military spouse would make the payment, not DFAS).

In addition to pension benefits, ex-spouses of retired military personnel may also get full medical, commissary and exchange privileges if,

  • The couple was married for at least twenty years,
  • The service member performed at least twenty years of creditable service toward retirement pay, and
  • There was at least a twenty year overlap of the marriage and military service.

Reaching resolution

Given the many issues involved in a military divorce, especially when pension benefits are involved, spouses should retain attorneys to represent their interests. This isn’t just to prepare for a TV style, scorched earth courtroom scene of a divorce, but to help the parties resolve their differences.

If communications have broken down between the couple, it may be easier for attorneys to help their clients understand the facts, laws, issues and benefits of avoiding litigation. Even though a service member may be far from home, because of e-mails, Skype and telephone calls, there can still be communications with an attorney. If issues can’t be worked out, mediation is often successful at resolving difficult divorce issues.

Servicemembers Civil Relief Act (SCRA)

Servicemembers Civil Relief  Act (SCRA) and Family Law

The Servicemembers Civil Relief Act of 2003 (SCRA), formerly known as the Soliders and Sailors Relief Act of 1940, is meant to protect military service members from being taken advantage of while away from home serving their country. The law could affect a family law case significantly.

The idea of the SCRA is to protect service members from legal issues at home so that they can focus on their military tasks at hand. The law allows service members to get a delay in any court proceeding that might affect their rights. When a member of the military is sued in a divorce case and they are stationed in another state or another country, the matter can be delayed for a reasonable time to allow that person to more fully participate in the process.

The SCRA protect all active members of the Army, Navy, Air Force, Marines, Coast Guard, officers of the Public Health Service assigned to the Army or Navy, reservists on active duty, dependents and persons or businesses who may be liable along with the member of the military.

How does the judge learn a party is deployed? When the divorce complaint is filed, the person filing it must swear out an affidavit stating whether or not the other party is serving in the military. If the affidavit states that the person is in the military, the court cannot enter a judgment against the person unless and until the service member appears in court or a lawyer is appointed by the court to represent their interests.

If the service member comes back to learn the legal process is over without any notification because the affidavit was false, the party filling it out could face perjury charges. The party could also request that the order be vacated.

If the service member is not available, delays are available

If the military member makes a request, a 90 day delay in the proceeding is normally automatically granted. If more time is sought, the service member must establish they have tried to get a leave of absence to attend the scheduled hearing but were unsuccessful. If that request isn’t granted, the court needs to appoint an attorney for the service member. The length of the delay that must be “reasonable” which depends on the situation, but it can be no longer than the length of the service member’s duty plus three months.

The SCRA isn’t a tool to dismiss a divorce action, though it may delay it

SCRA does not limit the power of judges to make decisions on the merits of the case and does not empower a member of the military to have a divorce case dismissed or have court order in his/her favor just because they are in the military. A court can stay the proceedings if a party’s military service has a material effect on the ability to defend the divorce case. A judge can also deny a stay if the military service has no material effect on the ability to defend against the litigation.

The good and the bad

This extra time is a double edged sword. It may be very helpful to the military member overseas, but will put off the eventual resolution for the spouse back home.

  • It will delay a judge from issuing orders.
  • If you’re not in the military, these delays can lead to frustration, because the law gives the other parent more time to respond and create legal papers. It also makes the process longer.

There may be advantages to the non-military spouse of a delay, especially if the spouse in the military is close to twenty years of service. If the spouse has only been in the service a short time, the non-military spouse, after a divorce, loses military entitlements, including base housing or a housing allowance, commissary privileges, post exchange privileges and on-base or post medical care.

If there is a long term marriage to a service member with a twenty year career, the spouse may be able to retain rights to future medical care and insurance (just not on base). Under the Uniformed Services Former Spouses’ Protection Act, former spouses can take advantage of full medical, commissary and exchange privileges if,

1) The marriage lasted at least twenty years,

2) The spouse in the service has at least 20 years of creditable service for retirement pay, and

3) The time in the service and the marriage overlap for twenty years. Reduced benefits may be available in limited circumstances when the marriage lasted less than twenty years.

Even if there are delays, decisions can still be made

Judges need to balance the protections of the SCRA and the needs of the family at home. Children’s needs often trump the SCRA’s provisions when orders are written. These can concern outstanding issues concerning children that need immediate attention so that the children at issue can have some stability and predictability.

Balancing the interests of all involved

The SCRA prohibits a service member being defaulted by a judge, which goes to the heart of the law. A default is a decision entered in favor of the party that is in court, against the party who has not appeared. This provision applies in family law cases, including divorce. While a service member is deployed away from the jurisdiction, generally speaking, a judge shouldn’t sign an order in favor of the civilian spouse if the service member parent fails to appear.

If the military member has been defaulted, and he or she had no knowledge of the proceedings, under the SCRA, once the person is released from active duty, there is 90 days to ask a court to open a default judgment that was entered while the person was deployed.

If you’re the civilian spouse and you feel like you’re swimming up against the tide of the SCRA, you still have many advantages. You should have access to the courts. You can still argue the other parent does not have a valid reason for a delay and is abusing the law to get unwarranted delays.

How Military Divorce is Different than Standard Divorce

How Military Divorce is Different than Standard Divorce

Many couples are mistaken when assuming that a military divorce is the same in regards to process and requirements as a standard civilian divorce. This is not the case and couples should educate themselves on the varying differences to ensure they move forward with the process in the most efficient way possible. A California Military divorce creates many issues a couple must properly address or be aware of in order to proceed with obtaining a dissolution.

Military Divorce Protections

Members of the military are afforded certain protections from California divorce law, such as protection from falling into a “default” dissolution status. According to California Family Law a divorce falls into a default status if a party fails to respond to the party who petitions for a divorce. Active military members, on the other hand are essentially given relief from falling into default status and becoming divorced without their knowing or decision.

In the discretion of the California court, under the Soldiers and Sailors Civil Relief Act, 50 UCS section 521, if a person is serving in the Army, Navy, Marine Corps, Air Force, Coast Guard, or in the Nation Guard on active duty, their military divorce process can be stayed or delayed for the entirety of the active service member’s deployment and an additional 60 days thereafter. This protection is automatically awarded to a service member (usually those serving during a time of war) however can be waived if the active duty party wishes to proceed with the divorce.

Military Divorce Residency Requirements and Stipulations

When a couple wishes to file for a military divorce there are residency requirements that must be fulfilled. A military divorce can be filed in one of three jurisdictions: the legal residence of the military member; the legal residence of the spouse; and the state that the service member is stationed in. Typically to obtain a Military Divorce filing in California the following is required:

– You or your spouse must reside in California

– You or your spouse must be stationed in California

Military members are afforded the ability to live or be stationed in another state from which they claim residency. The non-active spouse is not afforded the same privilege.

Serving an Active Military Member with Divorce Papers

Similarly to California divorce laws, the grounds for a couple to file for a divorce are the same. As California is a no fault state, there is no requirement for either party to show or prove fault. Parties must file under one of two ground: irreconcilable differences, meaning the marriage cannot be saved in their opinion, or more rarely is the ground of incurable insanity.

As with standard California state law for civilian service of process, the active duty spouse is required to be served with the summons, as is the responding party. Proper service is usually delivered personally but there are other ways to suffice service of process as identified in the California Code of Civil Procedure. A family law attorney who specializes in military divorce can help either party effectively ensure they meet service requirements properly.

Division of Assets in Military Divorce

In the late 1970s and early 1980s, some state courts started treating military retired pay as “community property,” often awarding a portion of the pay to the previous non-military spouse. One such case from California found its way through the federal courts to the Supreme Court, who ruled in McCarty v. McCarty (1981) that federal law did not allow retired pay to be treated as joint property. In response to this judgment and influential ruling, Congress passed the Uniformed Services Former Spouse Protection Act quickly thereafter, in 1982. This act allowed and currently allows state courts to treat disposable retired pay either as property solely of the member, or as property of the member and his spouse according to the state law and its discretion.

Members of the military have a few unique assets that don’t necessarily apply to civilians specifically, but can be incredibly valuable. Most notably would be the service member’s pension and retirement fund.  In addition to the California laws regarding the division of assets, the federal government has enacted the Uniformed Services Former Spouses’ Protection Act (USFSPA) that governs how military retirement benefits are calculated and divided upon divorce. The USFPA is the governing statute when it comes to the division of military marital assets, and offers payment of the retired party’s pay to the former spouse. This law does not automatically authorize payment to a former spouse and requires the couple to have been married at least ten years or longer while the member of the military was actively serving.

Child Support and Alimony for Military Divorce

Most of the laws regarding a military divorce are similar to a civilian divorce when it comes to child support and the allocation of alimony. However there are a few unique challenges regarding military divorce specifically. For example, a military divorce provides a stipulation stating the child support and alimony payments cannot exceed 60% of the serving member’s pay and allowances. Child support and alimony amounts are determined by the normal California divorce guidelines.

The court is also authorized to impute additional income to a spouse for the value of the benefits they receive which reduce living expenses (e.g. housing). Also, there are nuances with regard to whether the service member’s pay and allowances are taxed, all of which has an effect on the guideline calculations.

How a Family Law Attorney Can Help You with your Military Divorce Matter

In times of emotional stress, matters of dissolution can be complicated, especially for those who have to configure requirements and specific stipulations that surround a military divorce. A California Military divorce may require certain things or afford certain protections that couples may be unaware of. If you have questions regarding residency requirements, how to serve an active military member, the allocation of alimony or child support in a military divorce, or whether or not retired pay will be awarded to a non-military former spouse,

 

 

 

Mortgaging Your Post-Divorce Future

Mortgaging Your Post-Divorce Future

If you’re going through a divorce, many people could get involved and provide you support.  You hire an attorney and you work with the law firm’s staff.  You’ll be able to rely on family and friends. Many people will care about your divorce. One group of people who couldn’t care less are those working for the company holding your mortgage. If you and your spouse are responsible for paying a mortgage, a divorce won’t change that. You can get married and divorced as often as you’d like.  If the two of you signed up for that mortgage, the two of you are responsible for paying it.

If you are getting divorced, mortgage issues need to be addressed. A divorce decree stating your spouse will be responsible for paying off the mortgage has no legal impact on the lender. When the mortgage papers were signed, the two of you agreed to be held jointly responsible for repaying the loan. That means the two of you, or either of you, can be held liable for the loan.

These are your options for addressing this issue…

  1. Retain the Original Mortgage

This option has the most risks.  Often those who don’t retain competent attorneys to help them with the divorce, or try a do it yourself divorce, end up going this route. The parties agree one spouse will live in the property and he or she promises to make payments.  The mortgage isn’t changed. This agreement between the parties may have seemed to make sense at the time. The spouse had a good job and the children, with enough stress in their lives, didn’t want to move. Things can change. Maybe the spouse lost his or her job, or changed his or her mind and decided the other spouse should start paying too.

Both parties could leave the home and rent it, in the hopes the rent will at least pay the mortgage and other expenses (maybe even turn a profit). The demand for rental properties is generally up and this may allow some time for the real estate market to improve. On the down side, you’ll be in business with your ex-spouse and your disagreements may continue. What happens if you can’t agree on who should be a tenant? If repairs and maintenance are needed, who will pay for them?

If either scenario goes sour, this can result in a mortgage default, a foreclosure and wreck your credit rating. It will also keep you tied to the ex-spouse you went to all that trouble to divorce. Maybe you have fallen into this option because the housing market is so bad you can’t sell the house for a reasonable price. Perhaps there aren’t any mortgage companies willing to write a mortgage for either of you individually. Is this situation guaranteed to fail? No, but it does carry the most risks.

  1. Sell the House

On paper, this is the simplest way eliminate the mortgage and all the financial baggage that comes with it.  Sell the house, use the proceeds to pay off the note and split whatever money is left over. When possible, get this done before the divorce is finalized. Hopefully, whatever differences you have with your spouse won’t prevent you from agreeing to a sales price.  Once the home is sold and the mortgage paid, you don’t have to worry about continuing to make mortgage payments, maintaining the house, paying taxes or insurance.

The ability to sell a house for a reasonable price depends on a number of factors, most importantly how desirable your home is and the real estate market where you live.  If your mortgage is “under water” the mortgage holder may or may not agree to a short sale.

  1. One Spouse Keeps the Home and Refinances the Mortgage

This may be a good option if the parties are in good enough financial shape.  The spouse wanting the house buys out the other spouse’s equity share and refinances the mortgage in his or her own name. If you’re the one keeping the home, have your spouse sign a quit claim deed which relinquishes his or her ownership and rights to the property. If you’re not keeping the home, the new mortgage needs to be in the name of the other spouse only. If your name is on it, and your ex-spouse defaults, you may be held responsible for it.

This option assumes the spouse keeping the house has the resources to buy out the other and can qualify for a mortgage on his or her own.

  1. One Spouse Keeps the Home and Assumes the Mortgage

This can be done depending on the type of mortgage, the mortgage holder and the financial shape of the spouse staying in the home. Not all mortgages are assumable, so the first step is to read the mortgage paperwork or contact the mortgage holder.

If it is assumable, the process starts with the spouse keeping the home filling out paperwork. The lender will want to see that past payments have been paid on time and in full and will need proof the spouse will can afford the mortgage payments. The spouse keeping the house needs to sign an assumption agreement and a release of liability. The spouse leaving the home will need to sign a quit claim deed. The lender may ask for a copy of that and the divorce decree. If this is all approved by the lender, it may issue a release of liability to the spouse leaving the house.

This may be the way to go if the mortgage can be assumed and an added benefit is the fees to assume a mortgage should be lower than re-financing and getting a new mortgage.

Mortgages are but one of many financial issues a divorcing couple needs to resolve.  These issues can be difficult to unwind, but it can be done with some research, planning and cooperation by both parties. If you have any questions about financial issues and divorce, contact our office.

The Basics of an Annulment

The Basics of an Annulment

Annulment photo 1An annulment (also known as “nullity of marriage” or “nullity of domestic partnership”) is when the court deems your marriage or domestic partnership as being not legally valid. Unlike a divorce, after an annulment, it’s as if your marriage or domestic partnership never existed because it was essentially never legal.  There are some circumstances where marriage is never considered valid, and there are also quite a few legal reason why a marriage can be annulled.

Situations Where Marriage is Never Valid

  • Bigamy – When a spouse or domestic partner is already married or in a registered domestic partnership.
  • Incest – When the individuals who are married or in a registered domestic partnership are close relatives.

Other Legal Reasons for Annulment

Besides bigamy and incest, there are also quite a few legal reason why a marriage can be considered not legally valid.  They include the following: age, prior existing marriage, unsound mind, fraud, force, and physical incapacity.

Age – If the party filing for the annulment was under 18 years old at the time of the marriage or domestic partnership, they were too young to provide consent.

Unsound Mind – Either party was mentally incapable of being able to fully comprehend the nature of the marriage or domestic partnership.  This includes being severely intoxicated.

Prior Existing Marriage or Domestic Partnership – Different from bigamy, this is a situation where the marriage or domestic partnership took place after the previous spouse or partner’s whereabouts were unknown for 5 years or thought to be dead.

Fraud – Either party entered into the marriage or domestic partnership as a result of fraud. Specifically, the fraud must be something at the core of the relationship, where a person was left being deceived. (E.g., marrying for a green card, or similar situations where a person seriously misrepresents their identity or intentions).

Force – Consent by either party was obtained by force.

Physical incapacity – If either party was physically incapacitated at the time of marriage or domestic partnership. For example, if a male spouse is incapable of consummating the relationship due to impotence.

How Does the Annulment Process Work?

The first action in an annulment is the filing of a Petition for a Nullity of Marriage, accompanied with your declaration, which explains your reasons for annulment, and a Summons form. After you have filed the necessary forms, you will need to have file-stamped copies of these documents served on the other party.

Once the other party has been served, they will have 30 days within which to file their response with the court. After their response has been filed, you will need to set up a court hearing and explain your case to the judge.  The respondent will also have a chance to oppose your request if they wish to do so.

If the other party fails to file their legal response, you can then take the necessary steps to request the court enter default and seek judgment in your favor.

Statute of Limitations for Annulment

While divorces and legal separations do not have a deadline within which to file, annulments do have a statute of limitations.  The statute of limitations for annulments depends on which reason you intend to use for the annulment.

Age – The filing party who was younger than 18 at the time of marriage or domestic partnership must file for an annulment within 4 years after turning 18, but a parent or legal guardian can ask for an annulment if the individual is still under 18.

Unsound Mind – If either party was mentally incapable of being able to fully comprehend the nature of the marriage or domestic partnership, their spouse or partner can file for an annulment at any time before the death of either party.  In this case, a relative or conservator of the party of the unsound mind can also file for them.

Prior Existing Marriage or Domestic Partnership – In this situation, an annulment can be filed by either party as long as both parties to the current marriage or domestic partnership are still alive. Annulment can also be filed by the prior existing spouse or partner.

Fraud – An annulment in this case can only be filed by the deceived party, and he or she must file within 4 years of discovering the fraud.

Force – The party who was forced to give consent must file for an annulment within 4 years of getting married or registering for a domestic partnership.

Physical incapacity – The party who is not physically incapacitated must file for an annulment within 4 years of getting married or registering for a domestic partnership.

The Effects of an Annulment on Children and Paternity

Since marriages and domestic partnerships are considered invalid in the case of annulments, what happens when children are involved?

If two people have a child together and subsequently get an annulment, you must ask the judge to establish paternity.  Once paternity is established, you can also explore your options regarding child support and custody.

Legal and Financial Effects of an Annulment

Once a marriage or domestic partnership has been annulled, it’s as if the marriage or partnership did not exist because it was never valid. Each party to the annulment starts with a clean slate and goes back to their original legal status.

Unlike a divorce, an annulment does not carry the same legal and financial consequences, like the issue of community property. As a result, neither party is entitled to spousal support or survivorship benefits. In rare circumstances, there is an exception.  If either party is considered to have “putative” spouse status, they may have the right to community property and support, but this is typically very difficult to prove.

After an annulment, the court will try to restore each party to his or her original financial state. In other words, if you brought any money, property, or debt with you into the marriage or partnership, you will walk away with the same and vice versa for the other party.

Annulments can be just as complicated as a divorce, and it is recommended that you consult with an experienced family law attorney to assist you through the process.

 

 

 

 

 

What happens to the house following a divorce?

What happens to the house following a divorce?

The home that a married couple purchased and lived in during married life is usually the most significant asset, both financially and emotionally, that a couple must address during a divorce.  How do you decide what to do with the house?  There are many factors and issues that each spouse must evaluate before deciding what will happen with the family home.

Community or Separate Property

The question of who owns the home must be answered before determining what happens with the house.  In California, assets acquired during marriage are considered community property and will be divided equally in a divorce.  If a spouse bought the home prior to the marriage, then the home is presumed to be that spouse’s separate property.  However, the situation can become complicated if the other spouse makes mortgage payments for several years during a longstanding marriage.  The most straightforward situation is when the couple purchased the home during marriage with community property funds and both are on the title.

Options and Factors to Consider

If the home is community property, then there are three main options for what to do with the home:  maintain the current ownership/title; sell the home and split the proceeds; or “buy out” the other spouse.  Because the emotional and financial implications often hinder a couple’s ability to reach an equitable decision regarding the home, an already difficult decision becomes the most contentious aspect of the divorce.  Nonetheless, the home, just like other marital assets, can be part of the spouses’ agreed-upon separation of property and debts.

The financial reality and tax consequences may ultimately lead to a decision that neither spouse prefers.  Because emotional, practical and financial factors all impact the decision, both spouses must understand all the options and the implications before deciding what to do with the house. If the couple is not able to resolve the disposition of the home, then the judge will decide.     

Do we have to sell the house?

No.  If one spouse wants to remain in the house, then there are options.  When the couple has significant assets, the house may be awarded to one spouse and other assets of equal value to the other spouse.  Or, one spouse can “buy-out” the equity of the other spouse, basically purchasing the home from the other.

Who pays the mortgage?

Who pays the mortgage depends upon what the couple decides to do with the house.  If one spouse would like to remain in the home, then that spouse can assume the mortgage (if the bank allows) and the other spouse will be removed from the mortgage.  Another option is for the spouse remaining in the home to refinance the home in his name only.

If assuming the mortgage and refinancing are not options and the spouse living in the home cannot afford the payments, then the other spouse may agree to directly pay the mortgage, especially if there are children involved.   In some instances, if the spouse does not have sufficient income to make the payments, then the amount of the mortgage payment might be added to the alimony or child support payment.  These options can be problematic because if the mortgage payment is not made, creditors can attempt to collect from either party.

Is a quitclaim deed a good option for removing one spouse from title?

If one spouse wants to be removed from title, then a quitclaim deed can be utilized.  However, if both spouses are on the mortgage, a quitclaim deed does not remove that spouse from the mortgage and the bank can still attempt to collect from both spouses.

Is the custodial parent always awarded the house?

When deciding what happens with the family home, a court will always consider the best interests of the children.  However, there is not a presumption that the spouse with physical custody of the children retains the house.   The most practical decision is to give the home to the custodial parent, but the financial implications will be considered to be sure that the mortgage can be paid and that the other spouse is treated equitably.

In certain financial circumstances, the best option is to sell the home.  But, if that is not in the best interests of the children, the judge may determine—after looking at all factors–that a deferred sale is feasible.  In that case, the custodial parent and children may remain in the home for a period of time and defer the sale until a future date.

What if neither spouse can afford the mortgage payments after divorce?

If the couple cannot afford to maintain the mortgage following the divorce, then the home may have to be sold.  Hopefully, the home is worth more than what is owed on the mortgage.  If yes, then the couple can split the proceeds and each spouse proceed with obtaining replacement housing.  If not, then the couple has a difficult decision to make.

If the couple can afford to make-up the difference in what is owed on the mortgage, then they can sell the home, pay-off the mortgage balance and move on with alternative housing.  However, if they cannot afford to make-up the difference, then they will need to consider a short sale, or postponing the sale for a particular period of time.  Postponing the sale can be problematic if the couple cannot agree on who should make the mortgage payments or if the payments are not made.

Are there tax consequences with one spouse paying the mortgage?

Yes, there may be an issue with who may claim the mortgage interest tax deduction if one spouse takes over the mortgage, assumes the mortgage, or purchases the other spouse’s equity in the home.

What happens with the house after separation but before the divorce is finalized?

The period of time between the couple’s decision to separate and the final divorce order can cause complications with many financial aspects of a divorce, including the house and the mortgage payments.  Because this period of time can last several years, one spouse may want to sell the home while the other wants to keep it.  During this time, the court will freeze any such activity relative to the home, meaning neither spouse can sell or refinance without the other spouse’s and court approval.

It is important to note that just because one spouse is staying in the home during this period, it does not necessarily mean the court will award the home to that spouse.

Dividing Property and Debts in a Divorce

Dividing Property and Debts in a Divorce

When facing divorce, often times the most difficult and time consuming task for the couple is determining how to divide the property and debts.  If both spouses are involved and working toward a common equitable goal, then the division can be accomplished jointly and with less complication.  If the parties do agree on the separation of property and assignment of debts, it is very important to note that the division is not final until the judge signs the order.

In a divorce, each spouse retains his or her separate property and debts, while the community property and debts are divided between the spouses.  The first step is to make a list of all the assets, indicating value and whether the asset is separate or community property.  In California, assets and debts that are accumulated during marriage are presumed to be community property.  Separate property is that which the spouse owned before marriage or inherited or acquired by gift during the marriage.  If either spouse acquires property after the separation but prior to the final divorce order, the property is presumed separate property.  Unfortunately, separate property can inadvertently become community property if it is combined or “commingled” with marital property.

Once the asset list is created, how does the couple decide who gets what property?  Because the property should be divided fairly equally between the spouses, the couple has options:  they can assign certain assets to each spouse; sell assets and divide the proceeds; “buy out” the other spouse; or continue to own an asset jointly after marriage.  Owning property together after a divorce is not common, and when it occurs, it usually involves the family home and the desire to maintain stability for the children.  The couple must also assign all debts to each spouse, noting that the separation of debts is not binding on creditors, and therefore, they can attempt to collect the debt against either spouse.

If the spouses cannot agree on the division of property and debts, then the court must decide.  Mediation can be very helpful if the couple is unable to determine an equitable separation of property and debts.  Why would the couple be unable to reach agreement?  Complications may arise if the assets and debts are significant or evoke an emotional response, such as a family-owned business, a valuable retirement plan or pension, or a second home.  It can be very challenging to reach an agreement, especially if the divorce is already contentious.

Because some assets may appreciate or depreciate, be illiquid or difficult to sell, or have tax implications, each spouse should be aware of the financial and tax consequences of owning a particular asset.  If both spouses understand the implications of dividing the assets and debts, then they will be better equipped to amicably reach an agreement.

Trusts can protect your assets in case of divorce

More than just for spoiled rich kids – how trusts can protect your assets in case of divorce

You may think of a trust as something only for the extremely wealthy. Or you may picture spoiled rich kids living the high life on money their parents or grandparents worked for years to acquire and placed in trust for them.

But trusts can do much more than simply pass on family wealth. If properly chosen and constructed, a trust can actually help insure that your money will pass on to your children and grandchildren by protecting it in the event of divorce – whether yours or your child’s.

What is a trust?

A trust is a legal document created to hold any type of property. A trust must have a minimum of three parties:

  • Grantor. Also sometimes referred to as the trustor, the grantor is the person who places assets into the trust.
  • Trustee. The person responsible for enforcing the terms of the trust and making distributions of trust assets. The trustee can be one or more individuals, or it a corporation, such as a bank or trust company that specializes in managing trusts. In some cases it is acceptable for the grantor to also serve as a trustee, but when the goal is asset protection in the event of divorce, it is best that the grantor appoint a third-party.
  • Beneficiary. The beneficiary is the person (or persons) entitled to receive distributions under the trust.

The trust language dictates how its assets should be distributed. Distributions can be either mandatory or discretionary. With mandatory distributions, a certain amount – whether a fixed dollar amount or a percentage of the trust’s assets – must be distributed at the time and manner specified in the trust. With discretionary distributions, the trustee can the amount and timing of any distributions, even if that means making no distributions at all.

Types of trusts

There are several different types of trusts. It is important to note that once assets are placed in a trust, they are owned by the trust, and not the person who transferred them in to trust.

  • Revocable Trust. Often referred to as a living trust, a revocable trust is a trust where the grantor, beneficiary and trustee is almost always the same person. The purpose of a revocable trust is to avoid the grantor’s family have to administer probate at his death, and to have provisions in place for the grantor’s care should he become mentally or physically incapacitated and unable to care for himself. During his lifetime the grantor can take out as much of the trust’s assets as he wishes, and may revoke the trust at any time and have all of its assets transferred back into his name.
  • Irrevocable Self-Settled Trust. A self-settled trust is similar to a revocable trust in that it is funded by the grantor with his own assets. What makes it different is that the grantor does not serve as trustee – that position is granted to an independent third party – and distributions are entirely discretionary.
  • Third-Party Trust. In this type of trust, the grantor creates and funds the trust for the benefit of a third-party. Typically, these are the trusts that parents create for their children, and can be funded either during the parents’ lifetime or at the parents’ death. Distributions are almost always discretionary, although some trusts provide for lump sum payments to be made as the beneficiary reaches certain ages, while others keep the money in trust until the child’s death.

How trusts provide asset protection

Of the three trusts described above, only the self-settled and third-party options have the potential to protect trust assets in the event of divorce. Because the grantor can withdraw assets from the revocable trust as in whatever amounts and as often as he wishes, it provides no asset protection whatsoever in the event of divorce.

Irrevocable Self-Settled Trust

An irrevocable self-settled trust has the potential to protect the grantor’s assets from being eligible for division as marital property in the event of divorce. Because the grantor is only a discretionary beneficiary of the trust and has no control over whether and when distributions are made to him, they will likely not be considered part of the marital estate in the event of a divorce, and thus not eligible for division.

However, it is extremely important to note that the trust could be included as part of the marital estate if its creation violated the fraudulent transfer rule. Under this rule, any transfer to a third-party, including a trust, is considered fraudulent and therefore invalid if it was made to hinder or avoid creditors. If the trust was created shortly before you filed for divorce, for example, your spouse could successfully argue that the transfer was made with the specific intent of keeping the assets from being subject to division during the divorce.

Third-Party Trust

A parent who wants to make sure his child’s inheritance is not subject to division in case of divorce should create a third-party discretionary trust, and name somebody other than the child to serve as trustee. Courts have ruled that because the beneficiary-spouse is only entitled to distributions at the trustee’s discretion, the assets of a third-party trust are not considered part of the marital estate, and are therefore not eligible for division between the spouses in the event of a divorce. This, coupled with the fact that the trust will provide the same protection whether created before or after marriage, makes the creation of a third party trust a smart choice for parents wanting to protect a child’s inheritance in the event of divorce.

It is important to note, however, that in the case of both the self-settled and third-party trusts, any actual distributions made to the beneficiary will be considered marital property and therefore subject to division in the event of divorce, unless the beneficiary places them in an account that is entirely separate from his spouse. Once any distribution is deposited into a shared account, it becomes marital property.

Final Thoughts

Because trusts can be flexibly designed to meet your goals, they are an attractive option to consider when working with your attorney to protect your or your child’s assets in the event of divorce. There may sometimes be tax consequences to creating and funding a trust, so be sure to talk to your attorney about whether any of these options are right for you.

Helping Children Cope and Deal with Divorce

Helping Children Cope and Deal with Divorce

divorce childA divorce, while stressful for adults, can be even more traumatic, sad and confusing for children. Regardless of their age, children may feel uncertain, angry or even guilty at the prospect of mom and dad splitting up. It is possible for parents to make the process and its effects less painful for their children. Helping your children deal with divorce means providing much-needed stability at home and attending to your children’s needs in a reassuring and positive manner. This may not always be smooth or easy. But there are several ways in which you can help your children cope.

Understand that the Divorce Will Have an Impact

The reaction of your children to your divorce often depends on their age, maturity and personality. Their sense of loss and conflicting emotions may manifest in a number of ways that even they may not understand. Expect behavioral changes. Young children who are struggling to deal with the situation often have issues with sleep or tantrums. School-age children may experience depression. It is common for teenagers involved in a divorce to act out or to rebel against their parents or teachers. Kindness, compassion and understanding are essential coping strategies when it comes to children and divorce.

How to Say it Right

It is important to strike an empathetic tone and be honest. Do not talk down to your children. Be straightforward, yet kid-friendly. Your children are entitled to the truth. They should know why you are getting a divorce. Come up with a simple, yet truthful answer. Never stop showing affection. Tell your children that you love them. It is very important that they hear it from you. Letting your children know that your love for them has not changed sends a powerful and positive message to them. You can help alleviate your children’s fear and uncertainty about the future by telling them what you know. Talk to them about where they will go to school and what their schedule will look like. The more information they have, the more comfortable and reassured they are likely to feel.

To Share or Not to Share

One of the difficult parts of communicating with your children during a divorce is deciding what to say and what to withhold. Establishing open communication channels is key during this time, but venting to your children could be a mistake. You do not have to hide the fact that you are going through a difficult time, but going into specific details with your children may put an unnecessary burden on them. While it is healthy for them to talk about their feelings, it is important that you do not express bitterness or anger toward your ex. As difficult as it may be, attempt to foster their relationship with your former spouse. This will reduce the amount of guilt or sadness they may feel over the separation. Let your children know it is natural to feel sad. Encourage your children to share their feelings about the divorce.

Fighting in Front of the Kids

Do not fight in front of the children. If you must have heated conversations, have them when your children are not around. Research shows that the most poorly adjusted children of divorce are those who are exposed to their parents fighting all the time. You do not have to be your ex’s best friend. But it is important that you take your battles away from your children. Stop fighting in front of them. Do not badmouth your ex in front of the children. Do not imply that your ex is not a good parent or that your children should not want to have a relationship with their other parent. Support and foster their relationship so that the children don’t feel guilty or uncertain about what to do or how to act.

Creating Your New Life

After the divorce, you may have to move and your children may even have to change schools. While change is often positive, it can also be very stressful. Many of their routines and habits will have to change. Make sure you help your children establish new routines and traditions. It is especially important during occasions such as birthdays and the holidays to establish traditions that help them cope with their sense of loss. There is nothing wrong in creating a cheerful atmosphere at home just as there is nothing wrong with showing your pain or grief in front of the children.

Post-Divorce Parenting

As difficult as it may be, post-separation parenting requires cooperation between you and your ex. The more guidelines and rules you lay down in the beginning will help you in the future. Discuss, negotiate and agree on who is responsible for the children’s health care, when and where the children will stay, how the holidays will be spent, where they will go to school and how their extra curricular activities and classes may continue. It is also important that they get to keep some of their old connections. Scheduling play dates with their friends would be a good idea and help them feel that their world has not shattered. When you and your ex have these types of details ironed out, it will establish a new normal for your children. They will know where they are supposed to be and who is responsible for them at all times. The unknown can be very stressful. Eliminating doubt and confusion is an important part of post-separation parenting. Security and stability are critical to help your child cope and move on.

Getting Help

There is no one right way to raise your child and even the most concerned parent can make mistakes. If your child is not coping well with the divorce, don’t be afraid to seek professional help. There are programs and professionals available for children of divorce as well as for parents who need support. You are not alone and it is your responsibility to ensure that your children don’t feel alone either. If you need legal advice with regard to issues concerning your divorce, please get in touch with an experienced San Diego family law attorney who will help protect your rights and your family’s best interests.

How to Divide Your Personal Property in a Divorce

How to Divide Your Personal Property in a Divorce

In a divorce, you and your spouse will need to divide up your combined personal property, including household furnishings and automobiles, equally — or as close to equal as possible. If you and your spouse plan to try to divide your property yourselves, here are some tips to get you started.

Steps to Take

The process of dividing your personal property in a divorce can be broken down into a few simple steps.

  • First, make a list of all of the items that you own.
  • Next, figure out which items are community property and which items are separate property. (The items that are categorized as community property will need to be divided, while each spouse will keep his or her separate property.)
  • Then, determine a value for each item that falls under the category of community property.
  • Finally, take turns stating which items you want from the list of community property until each spouse has reached half the value of the list.

Assigning Values to Your Household Items

The category of household items typically includes furniture, kitchen items, books, linens, and so forth. Dividing these items fairly between spouses can problematical, particularly since you have to put a valuation on each individual item or set of items.

Generally, the standard for valuing household belongings is the fair market value if you sold the item “as is” in its current condition. There are several ways to go about determining the fair market value of your belongings.

  • You can confer with your spouse and decide on a valuation for the items together.
  • You can look on Internet sites, such as eBay or Craigslist, to see what others charge for similar household goods.
  • You could also go to second-hand stores, such as Goodwill, and see how comparable items are priced.
  • Alternatively, you may hire an independent appraiser to set values for your household items.

Remember that most items decrease in value significantly after they have been purchased. That bedroom set that you purchased together five years ago for $2,000 is probably not worth a whole lot today, perhaps only a couple hundred dollars.

Tips for Dividing Up Certain Sentimental Items

Some items bring up more emotions than others and can be difficult to value and divide. For example:

  • Wedding gifts. Usually the easiest way for spouses to divide up wedding gifts is to agree to keep the gifts that were given by that spouse’s family or friends.
  • Photos. Often, both parties want to keep the family photos. If you both want the same photos, make copies and split the cost.
  • Other sentimental items. While other sentimental objects, such as your child’s artwork, do not have actual monetary value, deciding who gets what can be very upsetting for most parents. It is often best to simply take turns choosing among the items.

How to Assign a Value to Your Vehicles

Vehicles, as opposed to household goods, are considerably easier to value. This is because there are only a few variables that affect the value of a car, such as the exterior condition, interior condition, mileage, and mechanical condition.

The easiest way to value your vehicle is to refer to the Kelly Blue Book or the National Automobile Dealers Association (N.A.D.A.) Used Car Guide. You can find a version of these guides online at www.kbb.com and www.nadaguides.com, or you can purchase a copy of either guide from booksellers such as Amazon.com. If the guides provide different values, average the amounts and use that as the valuation.

One issue to note is that the Kelly Blue Book and NADA Guide do not take unrepaired mechanical problems into consideration when assigning a value to a vehicle. If you have a car with existing mechanical issues and want to determine the proper valuation, you can take the vehicle to a mechanic who will provide an estimate of what it would cost to repair it. Then, subtract the estimate from the vehicle’s value as stated in the guide before including it in the marital estate.

Items That Are Not Part of the Marital Estate (Separate Property)

Certain items are considered a spouse’s separate property and do not have to be valued or divided up in a divorce. For example, if your spouse received a piece of jewelry in 2010 from her mother that she always wears (say a diamond ring) and you were married in 2011, that ring would not be considered marital property. Rather, it is your spouse’s separate property because it was given to her exclusively, she received it before you were married, and it was kept separate.

In addition, some things that are acquired during the marriage may be considered separate property depending on where the money used to purchase the item came from. For example, if you inherit money during the marriage, then that money is your separate property. Also, whatever you buy with the inherited money becomes your separate property as well. Let’s say you inherit a large sum of money that you use to purchase a piece of undeveloped land in wine country. This would be considered your separate property.

When you are deciding if a particular item is community or separate property, look at the source of the money used to buy the item. (If you have any doubts or questions in this area, an Oceanside divorce attorney can advise you about which of your belongings are marital, and which ones remain separate.)

Disclosing Your Assets

In a divorce, each spouse must disclose all of his or her assets and debts (community and separate) to each other. The key thing to keep in mind is that you should be completely honest and be sure to disclose everything of value that you own. If you conceal anything, it will probably come out sooner or later and the penalties can be serious.

A divorce attorney can help you in determining a fair way to split your belongings. If you are considering divorce and want to learn more about how to value your assets or have any other questions pertaining to divorce, call the Oceanside divorce attorneys of Fischer & Van Thiel today at 760-722-7646.