Bay Area Divorce Lawyer Blog

Divorce can result in several tax issues, including which parent will claim the child-related tax breaks. Sometimes, but not always, it is the parent that claims the child as a dependent.

Dependency Exemption

For tax purposes, the parent who has custody for the greater part of the year, ie more than 50%, is the parent who can claim that child and is called the custodial parent. The other parent is considered the noncustodial parent.

California courts usually won’t change a spousal support award unless the person who wants to alter the award shows that there’s been a sufficiently significant change in circumstances to warrant the modification. On the other hand, state spousal support law carries with it a strong preference that a person receiving support make reasonable efforts to become self-sufficient. As the state’s Sixth District Court of appeals recently explained, a person looking to reduce or terminate support on the grounds that the recipient hasn’t made such efforts bears the burden of proving that the recipient isn’t living up to his or her earning capacity.

stock-photo-795349-now-hiring-must-have-a-clueHusband and Wife separated in 2001, following roughly 19 years of marriage. They divorced and entered into a marital settlement agreement a year later, through which the couple decided how they would divide their various property and assets. They also agreed that Husband would pay Wife nearly $2,700 per month in spousal support. Those payments were set to continue until either spouse died, Wife remarried, the couple agreed otherwise, or a court ruled that the payments should be modified or terminated. The agreement further stated that each spouse should strive to become self-supporting and that a court could consider that responsibility in altering the payment arrangement at any time.

Husband went back to court in 2013, asking a judge to either reduce or terminate the spousal support payments. He alleged that Wife had turned down a higher paying management position at Macy’s to stay in her sales associate role with the company. Husband also noted that the couple had been married for less than 20 years, and he had already paid support for a decade. He also argued that the spouses had lived above their means during the marriage, and he said the court shouldn’t rely on their standard of living at that time to set the support award.

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Retirement benefits are often among the most significant assets in play when a couple decides to divorce. The question of how to divide those benefits can be a tricky one that implicates both state and federal laws. As California’s Second District Court of Appeals recently explained, state law in California generally dictates that retirement benefits are community property to be split evenly between spouses upon divorce. Federal law, however, mandates that Social Security retirement benefits remain the separate property of the spouse who contributes to the system during the course of the marriage.

retired-and-relaxing-1565780Husband and Wife separated in February 2010, following roughly 16 years of marriage. Husband, who worked as an attorney, contributed to Social Security through deductions from his paychecks during the course of the marriage. Wife, who worked for a state government entity as an employee of local district attorney’s office, participated in a defined-benefit retirement plan (“LACERA”), in which her employer contributed the full amount. The total retirement benefits available to Wife under her LACERA plan were based on the number of years she worked, her age, and her compensation. The plan also barred covered employees from contributing to or receiving Social Security for the time they served in the district attorney’s office, according to the Court.

Husband and Wife eventually entered into a marital settlement agreement, in which they resolved a number of issues related to the divorce. Among other things, the couple agreed that Husband’s Social Security benefits – valued at $228,000 – were separate property and that Wife’s LACERA benefits – valued at about $215,000 – were community property. Wife later asked a trial court to divide the couple’s property in a way that accounted for this disparity. She said the court should either require Husband to reimburse the community for the Social Security contributions and then divide them equally, or allocate her all of the LACERA benefits to equalize the retirement assets. The trial judge declined, finding that federal law prevented the court from considering Husband’s Social Security benefits in dividing the couple’s property.

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Few, if any, parents would wish to punish their children for something they had nothing to do with, and would bristle at such a suggestion. And yet, so many do just that.

This frequently happens in divorces where a parent has had an affair, has spent an inordinate amount of time at work and less at home, or has ceded most of the parenting responsibilities to the other.

These parents when separating or divorcing believe they are entitled to significantly more parenting time because the other parent has squandered his or her right to that time based on these reasons. Why should he or she have the right to now spend so much time with the children they ask? And the reason is because it’s better for children to have a good and healthy relationship with that parent than not.

Annulment is an alternative to divorce in which a court concludes that the marriage is legally invalid. In some cases, courts will grant annulment when the person seeking it has been entered into the marriage under false pretenses. California’s Fourth District Court of Appeals recently considered such a case, stemming from an internet dating experience gone wrong.

rings-1185863-m.jpgHusband and Wife met on an online dating site in May 2008. Husband was living in California at the time, while Wife was living in Russia with her nine-year-old daughter from a prior marriage. The couple communicated through a translation program because Wife spoke little English and Husband didn’t speak any Russian. Husband traveled to Russia to visit Wife in August 2008. The couple decided to marry soon thereafter.

The trouble started a few weeks before the wedding, according to the Court, when Husband noticed some gaps in his communications with Wife. Although she didn’t respond to emails and phone calls during this time, Husband observed that Wife continued to be active on the dating site. He questioned her motives, but Wife assured Husband that she was marrying him for “nothing other than love and devotion,” the Court explained. They married in June 2009 and Wife came to live in California nearly a year later. The relationship broke down almost immediately. Husband claimed that Wife wouldn’t have sex with him and was frivolous with the couple’s money. Wife argued that Husband’s practice of allowing cats in the bed put a damper on their sex life.

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California divorce courts generally consider any property owned by one spouse before a marriage that spouse’s separate property to be kept by the spouse in the event of a divorce. Community property, on the other hand, includes anything that one or both spouses acquire through their efforts during the marriage, and it is typically divided equally between the spouses upon divorce. A recent case from the state’s Fourth District Court of Appeals shows how spouses can change the nature of separate property by specifically granting the other spouse an interest in it.

Husband and Wife were married for roughly 32 years before separating in 2007. Two years earlier, they signed an agreement in which the couple stated that all of the property they owned now and anything they acquired going forward would be considered community property. The spouses were eventually able to resolve many of the issues related to the divorce, but a nine-day trial was also held to consider lingering matters related to property distribution.

Wife argued that the trial court erred in awarding Husband reimbursement for his separate property under Family Code section 2640 because of the agreement to transmute all separate property to community property.

California law operates under a set of guidelines in child support cases that is used to calculate a parent’s support obligations based primarily on each parent’s income and time with the child. The overall aim of the guidelines is to set the support at an amount that attempts to equalize the living standard in both homes. The guidelines calculation is generally presumed to be correct, but there are some circumstances in which a court may choose to order support at an amount lower than the calculated rate. As the Fifth District Court of Appeals recently explained, that includes situations in which the paying parent has an “extraordinarily high income,” and the guideline amount is more than the child needs.

boarder-1536813Mother and Father’s four-year marriage was annulled in 2004, after it was found that Mother was still married to her first husband. They had two daughters:  one born during the marriage, and the other born in 2008. Mother lived in Bakersfield with the children, as well as with a son that she had with her previous Husband and another daughter that Father had from a previous marriage. Father paid Mother more than $17,500 in child support per month for his three children. As a member of the Manuel Band of Mission Indians, Father received annual distributions from the tribe based on its profits from a casino. That money often totaled more than $2 million per year, according to the Court. He wasn’t employed and didn’t have any other sources of income.

Mother went to court in 2012, asking a judge to order Father to pay her at least the guideline child support amount of about $20,000 per month for the couple’s two daughters. The court declined, setting the amount instead at roughly $12,500. It said that the amount “would adequately ensure that the children’s needs will be provided for.” Mother had been receiving nearly this amount from Father for the two kids prior to the ruling, the court said, and failed to show that it wasn’t enough to meet the children’s needs.

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“Dogs are our link to paradise. They don’t know evil or jealousy or discontent. To sit with a dog on a hillside on a glorious afternoon is to be back in Eden, where doing nothing was not boring–it was peace.”
Milan Kundera

It is estimated that about 50% of American marriages end in divorce. It is also estimated that 62% of American households include at least one pet. So, it is reasonable to conclude that many divorces also involve pets.

Do you consider your dog to be a highly adored member of the family? If so, you may be surprised to learn that most family law courts consider your ball-catching canine to be classified as personal property.

Divorces in California almost always include the division of property (assets and debts) between spouses. And sometimes, quite often in fact, the property is a dog. Since most courts consider pets to be personal property just like your toaster or car, judges usually follow the same guidelines they use to determine who gets to keep personal property when couples are dividing things in a divorce. All of this applies equally to cats but for some reason, it is the care and control of dogs more so than cats, that are disputed issues. California’s First District Court of Appeals recently considered a dispute over the family dog.

dog-3-1403648Husband and Wife entered into a stipulated agreement resolving most of the issues related to their divorce. However, they were unable to agree on what to do with Sadie, the family dog. The stalemate led to a two-day trial, after which a judge concluded that the pet was community property. The California Family Code requires community property to be split evenly between spouses. Courts often award the property to one spouse and require that person to compensate the other spouse for his or her interest in the property. Here, the trial judge awarded the dog to Husband, noting that Wife had maintained sole use and possession of the animal since Husband filed for divorce two years earlier.

Wife appealed the decision, arguing that her daughter from another marriage was the dog’s true owner. She said her daughter adopted Sadie and registered the animal with local authorities under her own name. Unfortunately, however, Wife didn’t point to any evidence in the record from the trial court hearing showing that this was actually the case. Moreover, the First District said she didn’t even provide a transcript of the proceedings. A person appealing a divorce decision is not required to provide the transcript of the proceedings, but courts in California typically don’t go and get those records on their own and are likely to presume that the decision was supported by adequate evidence if there is no transcript to review.

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When a divorce involves a business of one or both spouses that is community property, issues of valuation arise, including how and when the business is valued. California’s Second District Court of Appeals recently considered the question of when a business is valued.

business-card-1525590Husband and Wife divorced in April 2012, after entering into a written settlement agreement related to the division of their community property and the payment of spousal support. They weren’t able to agree on one issue, however:  what to do with the small heating and air-conditioning company that the former spouses owned and operated together. Husband managed the company’s day to day work, while Wife was in charge of the business’s marketing and finances.

According to the Court, Husband “frustrated” Wife’s attempts to get information about the business by ousting her from her job, filing for bankruptcy, and refusing to produce financial records or to be deposed about the company’s financial health. He also transferred assets from the business to another business owned by a former employee and managed by Husband. Because of these actions, the trial court eventually decided to value the business based on what it was worth in May 2012 instead of setting the value at the time of a trial on the issue nearly two years later. The court accepted a valuation prepared by business broker and accountant Rodd Feingold, who set the value at about $470,000. Although a separate appraiser – Phillip Sabol – said the company was only worth $47,000, the Court rejected that valuation because it didn’t take into account the business’ goodwill and tangible assets. The court awarded the business to Husband and ordered him to pay Wife half of its value.

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California law imposes what’s called a “fiduciary duty” on spouses, which mandates the highest duty of good faith and fair dealing in their interactions with each other and to not take advantage of each other through fraud or other means.  As the state’s Third District Court of Appeals recently explained, however, the duty no longer exists once the spouses divorce.

old-books-1057004Husband and Wife were divorced in December 2010, after 14 years of marriage. They entered into a marital settlement agreement, under which the former spouses agreed that their individual stock ownership stakes in two different companies (OMI and Lifekind) would be considered each spouse’s separate property. They also pledged to “cooperate” in efforts to sell both companies.

Wife went back to court about a year later, seeking to force Husband to cooperate in selling both companies. She alleged that he had diluted her interest in OMI by obtaining a stock option agreement to give him a majority interest in the company, that he had obstructed the sale of Lifekind and OMI, and that he had breached his fiduciary duties related to the businesses. She asked a trial court to rescind Husband’s stock options deal and to issue sanctions against him for breaching the duty. The trial court ultimately declined, however, finding that Husband didn’t owe Wife an ongoing fiduciary duty after they divorced. The judge also found that the question of whether Husband owed Wife or other company shareholders a separate fiduciary duty based on his positions and ownership interests in the companies was beyond the family court’s jurisdiction.

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