Recently in Community Property Category

Jersey Boy Awarded Half of His Own Life Insurance Policy by California Supreme Court - In re Marriage of Valli

July 2, 2014, by

Celebrities: they're just like us, well sort of anyway. Among other things, that means that they often encounter the same types of issues as regular folks in divorce cases.

microphone-1382165-m.jpgCalifornia is a community property state, in which property acquired by a spouse during the marriage, except for gifts or inheritance, is shared equally between the spouses in the event of divorce. That might seem like a pretty clear-cut rule, but divorcing spouses often resort to the courts to decide disputes over how certain property should be characterized or divided. The California Supreme Court recently took on the issue as it applies to a life insurance policy taken out by one spouse - legendary singer Frankie Valli - for the benefits of the other.

Husband and Wife separated in September 2004 after 20 years of marriage. More than a year before, Husband used money from a joint bank account to purchase a $3.75 million life insurance policy. He named Wife as the sole owner and beneficiary of the policy and paid premiums with funds from the joint bank account.

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Untangling Shared Business Interests in California Divorce Cases - In re Marriage of Greaux and Mermin

June 24, 2014, by

Anyone who has been through a divorce probably already knows that it can be a stressful, complicated, and emotionally and financially draining experience. The legal issues involved may be even more complex in situations where the couple work together running a business. In In re Marriage of Greaux and Mermin, California's First District Court of Appeals explains that the spouse who is ultimately awarded the business has the right to protect it from being devalued by the other spouse. In some cases, that may include seeking a court order to stop the spouse from starting a competing business.

stapling-machine-1440644-m.jpgIn this case Wife filed for divorce in 2009. During the six-day trial that occurred two years later, one of the few remaining disputed and unresolved issues was what to do with the beverage company they owned and jointly operated during the marriage. The company distributed and sold a type of rum.

The business was community property and the judge determined that both spouses brought "unique talents to it." Husband had little education, training, or experience running a business, but the judge said his considerable effort and determination were "crucial" to the business' success. Husband also developed relationships with others in the industry whose experience and personal relationships were very helpful to the business. Wife, on the other hand, had marketing and sales skills also crucial to the business, and her family history in the Caribbean served as the "brand story." The trial judge also noted that Wife had a deep understanding of the rum, its ingredients, and the process for making it, and had qualified as an official industry "taster." She was designated in company investment materials as the "face of the brand."

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The Role of Retirement Benefits in California Divorce Cases - In re Marriage of Green

March 6, 2014, by

Retirement benefits are an important piece of the puzzle in transitioning comfortably to life after work. And often, they are the subject of intense debate in divorce proceedings. In In re Marriage of Green, California's Supreme Court considered what to do with retirement benefit credits made available based on service before the marriage, but paid for with community money.

fire-extinguisher-483491-m.jpgMr. Green began working as a firefighter in 1989 and married his wife, Ms. Green, roughly two years later. He continued to work for the Alameda County Fire Department over the course of the marriage and earned retirement benefits through the California Public Employees' Retirement System (CalPERS). Mr. Green also exercised his option to purchase four additional years of service credit for retirement purposes based on his stint in the U.S. Air Force before joining the Department. Under this option, Mr. Green agreed to pay bi-monthly installments of $92 for 15 years.

The Greens separated in October 2007. At that point, Mr. Green had paid more than $11,400 in payroll deductions toward the additional retirement credit. The payments were scheduled to be completed in July 2017.

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Court: Client List, Bonus Money is Community Property - In re Marriage of Finby

February 20, 2014, by

Bonuses are a common and often significant form of compensation for a number of people who live and work in California, particularly those in certain professional fields. In In re Marriage of Finby, the state's Fourth District Court of Appeals explains that all or some of the money is likely to be deemed community property to be divided among spouses in the event of divorce.

untitled-1237498-m.jpgHusband and Wife married in 1985 and separated 15 years later in February 2010. Wife worked as a financial advisor during the course of the marriage and was employed by UBS before signing a contract with Wachovia in 2009. The company was later purchased by Wells Fargo.

Wife's contract with Wells Fargo provided for a variety of bonuses, including a "transitional bonus" of more than $2.8 million. The bonus was premised on the fact that she had developed a list of clients - referred to as her "book of business" - whose investments were worth more than $192 million at the time and whose accounts were expected to go with her to the new job. Under the terms of the contract, the bonus was conditioned on Wife's staying at Wells Fargo for more than 9 years and maintaining a gross production level of over $1.12 million, as determined on an annual basis. Wife opted to obtain the complete amount of the bonus immediately, however, and signed a loan agreement with her employer under which it agreed to forgive $27,700 each month over the course of 112 months. If Wife stopped working at any time during the period, the company had the right to demand the entire amount remaining on the bonus/loan.

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Herman Cain, Philandering Politicans & Misappropriation of Community Property

December 6, 2011, by

Herman Cain, erstwhile presidential candidate and pizza chain CEO, whose campaign website proclaims that the ultimate source of our greatness as a nation is America's moral foundation, has now come to be known primarily as a serial sexual predator and long-term philandering husband.

Cain claims that the alleged 13-year extramarital affair was platonic and that the money paid to Ginger White, the woman claiming the affair, was to help her out with bills and expenses due to unfortunate financial circumstances. Indeed, claims Cain, she wasn't the only friend he helped in these tough economic times because he is a soft-hearted person when it comes to this stuff.

Setting aside the issue of whether or not marital infidelity is or should be a relevant factor in the characteristics important in political figures, many influential people, political and otherwise, have had extramarital affairs, including but not limited to, Newt Gingrich, Bill Clinton, Larry Craig, Warren Harding, Franklin D. Roosevelt, Martin Luther King - the list is truly quite endless.

There seems little reason to believe that marital infidelity renders a politician unfit for leadership. Richard Nixon, though monogamous, was a thoroughly corrupt president, while Ted Kennedy, however personally dissolute, was an effective senator. I personally find the hypocrisy more problematic than the conduct itself - don't have affairs and simultaneously campaign about sexual morality.

But whether Mr. Cain's actually had an extramarital affair or was merely helping out a deserving friend, the fact is that he transferred assets/income from the marital estate without his wife's knowledge or consent. If Mrs. Cain files for divorce, the fact of her husband's infidelity is irrelevant in a no fault divorce state. However, she would be entitled to reimbursement for her share of the community assets transferred from the marital estate without her consent.

For example if Mr. Cain spent $1,000 per month for two years on Ms. White that would be a total of $24,000 and Mrs. Cain would be entitled to her share of that amount which is $12,000.

Although simple and straightforward in principle, sorting out these sorts of issues in the context of a litigated divorce can become enormously complicated, time consuming, and of course, ridiculously expensive. Paying attorneys and forensic accountants to sort through and review the bank and credit card statements and other evidence of the alleged misdeeds, and then for their legal briefs, documentation, testimony, possibly depositions and court appearances, may well cost two to four times the contested amount in the $12,000 example, and simply not worth doing.

In a Collaborative or mediated divorce however, it is likely to be far less costly and a relatively simple matter to resolve. The spouses and professionals may only need to review the relevant documents and discuss the issue and I suspect, more often than not, reach an agreement that will enable both parties to feel that the issue is resolved in a fair and expeditious way.