Steps to Take After Divorce
by Robin C. Huggins, Esq.

Once you have received your filed judgment from the court, your divorce is over, but your work is not necessarily over.

If you elect to resume using a previous name, you will need to change your driver's license, vehicle title(s) and registration(s), passport and social security card. 

For information as to changing the name on your driver's license, look at: http://www.dmv.org/ca-california/changing-your-name.php

For information as to changing the name on a Certificate of Title, look at: http://dmv.ca.gov/pubs/brochures/howto/htvr17.htm

For information as to changing the name on a passport, look at:
http://travel.state.gov/passport/correcting/ChangeName/ChangeName_851.html

For information as to changing the name on a social security card, look at:
http://ssa-custhelp.ssa.gov/app/answers/detail/a_id/315/~/change-a-name-on-a-social-security-card.

I suggest that client's make an ongoing checklist as they remember other items that will need name changes.  An example of some of these items are:  auto or other insurances, bank accounts, schools, daycare facilities, credit cards, employers, health care providers, pension and retirement plans, utility bills, and so forth.

Once a divorce is final, you should take care to remove your former spouse from any insurance policies that you will be continuing with.  Be sure to remove any automobiles that your former spouse has been awarded as well.  Verify whether your former spouse is still listed as a beneficiary under any continuing life insurance policies. 

Joint credit cards are often overlooked, so don't make that mistake.  Close all joint credit cards and open new accounts in your own name.  Obtain a credit report about 6 months after doing so, to ensure that there are no outstanding joint credit cards.

Divide your assets right away, according to the terms of the judgment.  Be fair and prompt with your former spouse as the court has continuing jurisdiction over the division of assets and can sanction a party for improper conduct.

Last, but certainly not least…you'd be surprised how many people forget to change their wills, trusts and health care directive after a divorce is final.  Don't be one of those knuckleheads!

If you have a specific question about enforcing a judgment in California, or would like to obtain  a change of name after a divorce is final, please call Robin Huggins, attorney/partner of the Family Law department of Kring & Chung, LLP.  She can be reached at (949)261-7700.

Family Law Corner - Division of a Thrift Savings Plan in Divorce
by Robin Huggins, Esq.

A Thrift Savings Plan ("TSP") is capable of division in a divorce, annulment or legal separation.  It can also be garnished to satisfy a participant's past-due alimony or child support obligations.

A TSP is a retirement savings plan for Federal civilian employees and some uniformed services.  It is a defined contribution plan similar to a 401(k) plan.  Whenever there is a TSP, there is usually another retirement system such as a FERS annuity or military retirement.

TSP will provide some basic information to a spouse or spouse's attorney upon written request.  The information that they can provide is limited to the account balance, any loan balances, and statements.  TSP cannot provide personal identification information for the member such as date of birth or social security number.

A TSP can be divided by presenting TSP with a court order that complies with 5 U.S.C. §§ 8435(c), 8467 and 5 C.F.R. part 1653 subp. A.  TSP can provide a "model order" to assist the preparer in complying with the necessary language.  From a valid order, TSP will pay out the payee's present designated entitlement but will not honor an order for a future payment. 

It is recommended that once a TSP is identified as part of community property, that a court order be issued to freeze the TSP account.  That will prevent or limit post-separation loans or withdrawals.

In the event of a divorce, A member should take steps to file a new designation of beneficiary with TSP to ensure that the beneficiary they want to receive benefits from is the person currently named.  Otherwise, TSP has no option but to pay out to the beneficiary listed, even if that is a former spouse!  That is true even if the former spouse waived any interest in the TSP account. 

To garnish a TSP for unpaid support, TSP must be presented with a writ, order, or similar legal device that properly instructs them as to the amount to be paid and to whom.  TSP can usually provide payment within 60 days of receiving a final order, but additional time will be needed to prepare for that final order.

If you are contemplating divorce, or have additional questions about a TSP Plan incidental to a divorce or legal separation, please call Robin Huggins at (949)261-7700.  Ms. Huggins is a partner in the Family Law Department of Kring & Chung, LLP, and she practices in the Irvine and RSM offices.  Kring & Chung, LLP, also has family law practitioners in their Inland Empire, Sacramento and Las Vegas, Nevada offices. 

Typical scene at family law courthouse: 

Court:  Mr. X, you are hereby ordered to pay child support in the amount of $2,480 for per month for Junior, commencing immediately and continuing until the child emancipates.

Mr. X:  (Gasps audibly)  But your honor, after taxes are deducted, I only bring home $4,025 per month.  How am I supposed to pay my rent?  How can I afford food?

Court:  Not my problem, Mr. X.  Your child support is the first check you write.

Attorneys see this scene played out routinely in family court.  The amounts may change but the shocked, angry faces are all too similar and familiar.

Family Code section 4053 states that a parent's first and principal obligation is to support his or her minor children according to that parent's circumstances and station in life.  That section also states that each parent is mutually responsible for the support of their children. 

Another typical scene at a family law courthouse:

Court:  Mr. Y, you are hereby ordered to pay child support in the amount of $6,400 per month for Junior and Jennifer, commencing immediately and continuing until each child emancipates.

Mr. Y:  What!?  Your Honor!  It doesn't cost $6,400 a month to raise two children!!  She's (pointing at baby-momma) just going to use the support for shopping and lip filler!

Court:  Not my problem, Mr. Y.  The children are entitled to share in the standard of living that you enjoy.

Mr. Y:  I don't mind sharing with my kids, what I care about is her (again pointing at the other party) paying her personal trainer with my support money!

Federal law requires that states establish guidelines for child support in order for those states to receive federal funding for public assistance and enforcement programs.  For this reason, the State of California has established severally court-approved software programs that calculate the appropriate, aka guideline, child support amounts after entering relevant financial and custody information for each parent.

In California, our most commonly subscribed support calculation software appears to be Dissomaster, Xspouse and Supporttax.  Chances are that any family law attorney you consult for your child support questions will utilize one or more of these calculators.  The attorney will start by entering wage information for each party, the custody and visitation timeshare, and depending upon the sophistication of the issue involved, may enter additional information such as other taxable income, mortgage interest deductions, and so forth.  There is an algebraic formula for child support that is set forth in Family Code section 4055(a) if you are a math nut.  I prefer to use the software.

Child support is based upon each parent's annual gross income from all sources (yes "All").  This may include employer-paid expenses such as living expenses, car expenses and so forth.

Furthermore, in relation to the fact that each parent is responsible for supporting a child, the court has the power to impute earnings to a parent that is deemed to be under-employed, order them to seek work and provide proof, order them to participate in a vocational evaluation, and so forth. 

As can be gleaned from the information above, the State of California places the interest and well-being of its children as its top priority.  Family Code section 4053(e).

If you have a need for child support, either an initial order or a modification of a previous order, or if you have an existing order that you believe to be too high or too low, please call the author and schedule a free 30 minute consultation.  Robin Huggins is a partner of Kring & Chung, LLP with a practice limited to all aspects of family law.  She can be reached at (949)261-7700.

Tomorrow is promised to no man, so what happens to a divorce action and property if one party dies during a dissolution proceeding?

The answer depends upon several things, most notably:  1) Did the other party cause the death? and 2) Was the marital status terminated early by bifurcation?

For purposes of this article, I'm going to assume that the death is a result of accidental or natural causes, not criminally expedited.

During a divorce proceeding, either party has the right to ask the court to terminate the marital status before the other issues are finalized.  With the current California budget cuts, a typical divorce in California is taking, on average,1 ½ to 2 years to finalize.  This being the case, a party may wish to remarry before then, or may just want the emotional closure that comes with being pronounced a single person again.  By completing a bifurcation of marital status, the parties' marital status is dissolved early.  

If a party's death occurs after their marital status is dissolved, then the family court maintains jurisdiction over the assets and the decedent's personal representative steps into the shoes of the decedent (figuratively speaking) and continues to process the property division.

If a party's death occurs before their marital status is dissolved, then the property passes according to intestate succession or other governing estate plan, including survivorship and community property rights, and the family court loses jurisdiction over the property which now must be adjudicated by the probate court.

Notwithstanding whether a bifurcation of marital status has been completed in a case, there are several things that a concerned litigant may want to do to ensure that the spouse they are divorcing will not inherit any more than is necessary.

With real estate being as high as it is in California, probably one of the most important things to consider is severing any joint tenancies to properties.  Holding property as joint tenants allows for the surviving spouse to receive the decedent's entire property interest without probate.  By severing the joint tenancy, the parties will no longer hold title as joint tenants, but rather, as tenants in common.  Each party will then be permitted to bequeath their ownership interest to someone else of their choosing.  This can be a double edge sword though, because no one knows whether they will outlive their spouse. 

Another important consideration is creating a "divorce will".  Although the back page of a California Family Law Summons contains automatic restraining orders ("ATROS") which I have already discussed at length in another article, the ATROS do not prevent either party from creating a new will and a new unfunded trust.  The new will, will enable a party to decide an alternate inheritance plan other than their divorcing spouse.  I recommend that parties make the effort to do such while their divorce is pending "just in case".  

The author, Robin Huggins, is a partner of Kring & Chung, LLP, and practices family law exclusively.  If you have questions about an early termination of marital status, severing joint tenancies, or any other family law matter, please call Robin Huggins at (949)261-7700 to schedule a free initial consultation in one of our Orange County offices.

Short answer:  No, at least not in a family law setting.

In a proceeding for the dissolution of marriage or legal separation, there is an opportunity for reimbursement to the community when one of the parties has the sole and exclusive use of an asset while the matter is pending and until a division of the asset is finalized.  The reimbursement would be for the reasonable value of the usage.  The asset is typically a residence, but can also be a car or other asset.  This reimbursement is often referred to as a "right of reimbursement" but that is a misnomer because the reimbursement is discretionary to the Court.  The reimbursement issue derives its name from an appellate decision set forth in In re Marriage of Watts(1985) 171 Cal. App. 3d 366.

The Court has the discretion to consider the totality of the circumstances when determining whether it will or won't order a party to reimburse for Watts charges (aka usage charges).  For instance, a typical scenario may involve a husband that voluntarily vacates the family home in order to move in with his girlfriend, leaving devastated wife and kids to stay in the family home until the divorce is final.  His reasons for allowing wife and kids to remain in the home may be noble, i.e., not wanting to disrupt the children any further as they transition through the divorce.  Let's say the house is a million dollar house, which would easily rent for $6,000 a month.  There is no mortgage on the house.  However, after twelve months of bitter litigation with wife, husband may decide he wants to seek retribution by claiming Watts charges on the house for $6,000 per month (rental value) for 12 months (duration of exclusive use) for a total reimbursement claim of $72,000! 

There are several factors that the Court would consider when deciding whether to award husband the Watts charges.  Factors such as husband's voluntary vacating of home, the fact that there are children, the reasons for the living arrangements, the relative financial circumstances, the zero mortgage, the division of assets, the amount of support husband was paying, whether wife had advance notice of husband's intention to seek Watts charges, whether there was domestic violence, would all be considered by the court.

Robin C. Huggins is a partner of Kring & Chung in the family law department.  Please mention this article by name for a free initial consultation of your family law matter.  You may schedule a telephone or office consultation with Ms. Huggins through her assistant Rebecca at (949)261-7700.

  Overview of the Divorce Process

This article will provide an overview of the divorce process (more properly referred to as “dissolution”).  The general process is the same, whether the divorce is amicable (uncontested) or litigated (contested).  The contested divorce would generally involve more extensive discovery, court appearances, and usually a trial.

The person (aka party) that initiates a divorce proceeding files a petition with the proper court.  This will generally be the court within the state and county within which they have lived for 6 months (state) and 3 months (county).  That party will be referred to during the process as the petitioner. 

The petition and other necessary documents are then served on the other person (aka party).  Service of these documents cannot be done by the petitioner.  Once service of the petition has been completed, the mandatory six-month waiting period in California begins to run, and the party served now has 30 days (by personal service) within which to file a response.  This party will be referred to during the process as the respondent.  If the respondent does not file a response within the 30 day period, the respondent could be defaulted.  Once the petition has been served on the respondent, the court will have jurisdiction over the parties.

Within 60 days of filing the petition, the petitioner must prepare and serve his/her preliminary disclosures on the respondent.  Preliminary disclosures consist of several documents and have the purpose of providing to the other party a full disclosure of all material facts and information pertaining to all assets and debts in existence at that time, whether such assets and/or debts are community or separate property.  This is a requirement set forth in the Family Code (sections 2100, et seq.) in order for that party to comply with their fiduciary duties to the other spouse.  Within 60 days of filing the response, the respondent must prepare and serve their preliminary disclosures.  Both parties are required to comply fully with the disclosure requirements even if they are both aware of all assets and debts in existence.  In the event that either party sought in the future to set aside a judgment, the court might require the parties to provide the financial disclosures in order to assess whether there was a failure to disclose or inadequate disclosures.

Some parties may choose to conduct additional discovery, such as serving form interrogatories, demands for production of documents, taking depositions and so forth.  Whether these discovery methods are elected depends upon the attorney’s judgment based upon the complexities involved, the adequacy of the disclosures, and whether additional information is needed that is not apparent in the disclosures.  In the case of uncontested divorces, the parties may be ready to conduct settlement negotiations after the disclosures have been completed.

Often, during the divorce process, the parties may need court orders to resolve issues until the divorce is ready to finalize.  These would be referred to as temporary orders because they last until further order of the court or until the entry of the final judgment.  The issues usually pertain to child custody and visitation, support, attorney fees allocation, restraining or injunctive orders, and so forth.  Some cases may never see the inside of a court room, other cases may be in court on a regular basis. 

There are only two ways to resolve issues in any legal proceeding – either the parties come to agreements and those agreements are reduced to writing and submitted to the court, or the court makes orders on some or all issues.  There are several mechanisms that can be used to help reduce the amount of court appearances, and thereby help reduce to the overall cost of the divorce process on the parties.  The parties can discuss matters between themselves, the parties and their attorneys can conduct settlement meetings and/or correspondence, the parties can utilize assistance by mediators, outside professionals such as joint experts, private judges or arbitrators, therapists, etc.

Any issues not resolved by the methods discussed above are resolved by trial.  The trial process is instigated by submitting a form to the court that informs the court that a trial is being requested.  Upon receiving this form, the court will schedule a trial setting conference.  Only the attorneys will attend the trial setting conference.  At the trial setting conference, the attorneys will choose dates for the mandatory settlement conference (if requested) and/or the trial date.  Sometimes the attorneys or the court will not schedule a trial date until it is determined that the mandatory settlement conference proves unsuccessful.

A family law trial does not involve juries.  The judge will make final decisions (rulings) on the issues put before him/her.  The trial will usually be the conclusion of the divorce process. 

If you have additional questions concerning the matters discussed in this article or any other issue pertaining to family and matrimonial law, please contact Robin Huggins at (949)261-7700 to schedule an initial consultation.  Robin Huggins is a partner of Kring & Chung, LLP, and practices family law exclusively.

  Family Law Corner - Automatic Restraining Orders

by Robin Huggins, Esq.

In a family law matter, the family law summons contains automatic restraining orders on the 2d page of the summons.  These automatic restraining orders (referred to as ATROS and pronounced at-röse) take effect immediately against the petitioner upon issuance of the summons and take effect immediately against the respondent upon service of the petition on the respondent.  These ATROS should be taken every bit as seriously as any other court-issued restraining order as the court enforces ATROS equally.  In Goold v. Superior Court(2006) 145 Cal. App. 4th 1, the court sanctioned and incarcerated a husband for repeated violations of the ATROS.  In Marriage of McTiernan & Dubrow (2005) 133 Cal. App. 4th 1090, the court awarded the wife one-half of the lost profits from husband's sale of community securities that were sold by husband without written consent or court order.

The ATROS restrain either party from taking several enumerated actions, which are explained in further detail below:

1)  The parties are restrained from removing the minor children from the state of California without the prior written consent of the other party or an order of the court.  I have seen other parties and even other attorneys attempt to argue that "remove" means a relocation rather than an out-of-state visit.  Due to the lack of case law interpreting this specific ATRO, I err on the side of caution in my practice and instruct my clients not to take the children out of the state of California, for any purpose, without first obtaining written consent of the other parent or a court order. 

2)  The parties are restrained from:
                  (a) transferring (example - gifting, selling, bequeathing, etc.).  Note - having a "garage sale" during a divorce and selling anything without the other party's written consent is a very typical "no-no" (yes that is legal jargon);
                  (b) encumbering (example - borrowing against, putting at-risk, or using as collateral).  Note - using a pre-established HELOC during a divorce without the other party's written consent is  "no-no";
                  (c) hypothecating (does anyone really know what this means?  Actually, it means to pledge something as collateral in order to secure a debt.  an example would be taking a wedding ring to a pawn shop);
                  (d) concealing (example - moving to a storage facility without notice and access to other party).  Note - opening up a safety deposit box to protect certain things during a divorce without notifying other other spouse is a "no-no";
                  (e) or in any way disposing of any property (this is general to allow liberal interpretation);
                                    (1) real; or
                                    (2) personal; whether
                                                      (i) community;
                                                      (ii) quasi-community (property outside of California); or
                                                      (iii) separate (yes - even your own separate property!)

                  without the written consent of the other party or an order of the court…except…
                                                                        (A) in the usual course of business (and the party had better be able to prove to the court how their action falls within this category); or
                                                                        (B) for the necessities of life (example - party can sell an asset for fair market value in order to feed your children before a support order is in place if your spouse is not voluntarily supporting party and kids - the key is that it must be sold at "fair market value"), and
                                                                        (C) requiring each party to notify the other party of any proposed extraordinary expenditures at least five business days before incurring those expenditures and to account to the court for all extraordinary expenditures made after service of the summons on that party.  (Pretty self-explanatory).

      However, the ATROS do not prevent the following types of  actions: 

1)  A party may use community funds and that party's separate funds to pay for reasonable attorney's fees and costs in a dissolution or legal separation proceeding but an accounting must be made for such;

2) creation, modification or revocation of a will (I always stress to my clients that they create a "divorce will" while the divorce is pending and then amend their divorce will after the divorce if necessary.  A divorce will can provide some (but not all) protection in the event that the party dies during a dissolution in that at least they can designate someone other than their spouse to inherit their share of community assets;

3) Revocation of a nonprobate transfer, including a revocable trust, pursuant to the instrument, provided that notice of the change is filed and served on the other party before the change takes effect.  A nonprobate transfer means an instrument, other than a will, that makes a transfer of property on death, including a revocable trust, pay on death account in a financial institution, Totten trust, transfer on death registration of personal property, or other instrument of a type described in Section 5000 of the Probate Code.  A nonprobate transfer does not include a provision for the transfer of property on death in an insurance policy or other coverage held for the benefit of the parties and their child or

children for whom support may be ordered, to the extent that the provision is subject to paragraph (3) of subdivision.

4) Elimination of a right of survivorship to property, provided that notice of the change is filed and served on the other party before the change takes effect; 5)  Creation of an unfunded revocable or irrevocable trust.

                  If you are contemplating divorce, or have additional questions about what actions you may take while a divorce or legal separation is pending, please call Robin Huggins at (949)261-7700.  Ms. Huggins is a partner in the Family Law Department of Kring & Chung, LLP, and she practices out of the Irvine and RSM offices.  Kring & Chung, LLP, also has family law practitioners in their Inland Empire and Las Vegas, Nevada offices. 

Unless a minor is under the care and custody of his parent(s), is a ward of the court, or is emancipated, that minor must have an adult designated who is responsible for them.  This can be important for school registration, bill payment, public assistance, and so forth.

In a guardianship proceeding, a person(s) can obtain a court order designating the responsibility of caring for this minor and/or the minor's assets to the guardian(s).  In California, you can only become a legal guardian through a court appointment.  A handshake, a will provision, an informal written agreement between proposed guardian and parent, are not valid in California. 

When a guardian is appointed for a minor, that person(s) must serve as guardian until they are released from their appointment by the court.  This happens upon emancipation of the minor, or earlier if the guardianship is terminated. 

In California, there are two types of guardianship:  1) guardianship of the person; and/or 2) guardianship of the estate (assets).  Once a guardianship of the person is named, that guardian is obligated to provide food, shelter, healthcare, educational oversight, etc., just as a parent would.

A guardianship proceeding is initiated by filing a Petition with the Probate court (yes - Probate!).  The petitioner must give proper notice to all parents and extended family members so that they can appear and be heard if they desire.  At that time, the court will commence an investigation into the background of the proposed guardian(s), will do a home study, and will write a report to the court as to their findings. 

FAQs about Guardianships:

Can I designate someone other than my ex-spouse to be a guardian if I should die?  While a parent is certainly free and able to designate in their will who they would like to care for their children if they die, if there is a living parent, that parent can object to the guardianship and will, absent extraordinary circumstances, be the court's preference.  Extraordinary circumstances would be showing that the parent is unable to care for the child(ren), that parent's assumption of custody would be detrimental to the child(ren).

What happens if more than one person wish to be guardian?  You can consider a joint guardianship or you'd have what is called a "contested proceeding" and you would then have to show the court how and why you are the preferred person for the role.

Do I have to give notice that I am petitioning the court for guardianship?  Yes, unless you truly do not know the whereabouts of any and all individuals (which is highly unlikely). 

If you have a specific question about guardianship in California, or would like to obtain letters of guardianship, please call Robin Huggins, attorney/partner of the Family Law department of Kring & Chung, LLP.  She can be reached at (949)261-7700.

 

  Employee Stock Ownership Plans

A common asset in a marital dissolution proceeding is the Employee Stock Ownership plan (ESOP).  An ESOP is an employment benefit in which the corporate employer makes contributions of either cash or stock to a trust for its participant employees.  The employees are then allocated a pre-determined amount by percentage in direct proportion to the employee participant’s compensation. 

The ESOP contributions are not taxable to the employee/participant until withdrawn by the employee from the ESOP.

There are two main types of pension plans available from corporate employment:  1) Defined Benefit Plan in which the employee is entitled to receive a specific sum upon retirement, either based upon a monthly sum or a percentage of salary; and 2) Defined Contribution Plan in which the employer makes recurring contributions and the employee’s withdrawal entitlement is largely dependent upon performance of the DCP.  DCP’s almost always take the form of Profit Sharing Plans, 401(k) plans, ESOPs and Money Purchased Pension Plans.

When a party to a marital dissolution proceeding is a participant to an ESOP, not only is there a potential community property interest in the ESOP, but if the ESOP pays dividends directly to the participant/party, those dividends can also be income available for support.

In order to properly divide an ESOP or any other DCP or DBP in a divorce, the account should be valued by either an accountant or an actuarial skilled in valuation.  A DCP is not valued the same as a DBP.  If the parties are desirious of awarding the ESOP or other such plan to the employee spouse in exchange for the non-employee spouse receiving other property (called an “in-kind” division), it must be borne in mind that the value on any given statement, does not take into consideration the future tax consequences to the recipient, nor is an account’s value guaranteed in the future.  Thus, pre-tax assets should be valued against other pre-tax assets, and post-tax assets should be valued against other post-tax assets, or adjustments should be made to compensate for the future tax liability. 

If the parties are desirious of dividing the account, a qualified domestic relations order (QDRO – “qua-dro”) will be needed.  A QDRO is a legally binding order that sets forth the non-employee’s interest in the account, usually includes a survivorship provision to protect that non-employee’s interest in the event of the death of the employee spouse, and binds the plan administrator to divide the account as stated in the QDRO.  A QDRO should be prepared by an attorney that is experienced in the drafting of such orders.  Most companies have “model QDRO’s” available in the event of divorce, however blindly following a model QDRO without the drafter knowing the significance of certain provisions can prove disastrous at a later time.

If you are considering a marital dissolution, or have additional questions about dividing ESOPS or other employee benefits in a divorce, please call to schedule a consultation with Robin Huggins at (949)261-7700.

Pension and retirement accounts (401K’s, IRA’s, etc.) are community property to the extent they were earned and/or contributions were made during marriage.  The community interest in these retirement accounts can be divided by either by a domestic relations order or by determining the pension value and equalizing the non-member spouse’s interest with other assets.  The pension value can be determined by a financial professional, such as a CPA, an actuary, a financial planner or other such professional.

California case law has determined that whether a retirement account is “vested” makes no difference to whether the account is a community asset subject to division in a divorce.  Vesting means that at least some of the retirement plan belongs to the employee.  Usually the employee contributions are 100% vested immediately.  Vesting usually applies to the employer contributions and whether the employee is entitled to those contributions if s/he leaves employment.

In order to divide a retirement account in a divorce, and make the division a non-taxable event, the division of this asset must be addressed in the judgment and there may need to be a domestic relations order (depending upon the type of retirement account).  In order to make the plan administrator subject to the domestic relations order, you must first “join” the plan administrator to the divorce action.  IRA’s do not require a DRO, but defined contributions plans and defined benefit plans do require DRO’s.  If the retirement plan is governed by the ERISA statutes, then the DRO must be “qualified” which then makes the order a QDRO rather than a DRO.

The proper division of a retirement account is best left to professionals.  Even family law attorneys will tend to refer the preparation of the QDRO out to an attorney that specializes in dividing retirement accounts.  These QDRO attorneys will typically charge between $500-$1,200 per retirement account, usually giving discounts for multiple accounts.  If you are the non-member spouse, the retention of a QDRO attorney is a worthwhile expense as you would be the party more likely to be harmed by a faulty judgment or processing.

Overview on Evaluating a Small Business in the Family Law Setting

by Robin Huggins

A small business interest is a typical asset to be dealt with in a dissolution (divorce) proceeding, particularly in medium- to high- income-bracket divorces. 

In almost every field of law, a person will encounter the “general law” on an issue or subject, and the general law is typically what a lay-person will learn via ordinary channels (initial consultation, television, neighbors, etc.).  But each “general law” will typically have “exceptions” and those exceptions (I call them red flags) are what lawyers are trained to look for and deal with, as effectively as possible.   That is where a lawyer’s education, skills and experience, will set him or her apart and justify the hourly rate that lawyers charge.

“Generally” speaking, a business interest that is owned by one spouse before marriage is that spouse’s separate property.  The exception to this general rule would be if the operating spouse’s efforts, skills or talent expended during marriage caused the value of that business to increase.  If that were the case, then the community (aka “the marriage”) could acquire an interest in the business.  Even though the business itself would most likely be assigned to the operating spouse, there might have to be a financial pay-out to the non-operating spouse for their share of the community interest.  This is called an apportionment.  Now, of course, an exception to this exception is if a prenuptial agreement or other contract exists that governs the issue.

It is moderately difficult for an operating spouse to enter into an agreement with their business partners that seeks to limit a spouse’s interest in case of divorce, absent a prenuptial agreement, marital agreement or other transmutation agreement because of issues with spousal consent and the fiduciary duties that each spouse owes to the other.

There are three main approaches for determining the value of a business: 1) income-based approach; 2) market-based approach; and 3) asset-based approach. 

Speaking in the most general terms, the income-based approach seeks to determine the value of a business by assessing the present value of its expected future earnings.  The market-based approach is what it sounds like – a business value is determined by comparing it to other similar businesses.  (Think of “comps” in real estate).   This is a typical approach when dealing with a closely held corporation.  The last approach being discussed is the asset-based approach wherein the assets of a business are given a fair market value which is then off-set by liabilities. 

Business appraisals must be conducted by a professional, usually a CPA or forensic accountant.  For cost saving measures, the parties can select a joint appraiser, but usually each party will have their own appraiser, or the court will appoint a “court’s expert.”   Business appraisals can be quite costly, typically running between $5,000-$20,000 or more, so the utilization of a joint expert or a court’s expert can be financially prudent.

The expert will inspect financial documents visit the business and speak with key personnel.  It is an intrusive, but necessary task in order to determine the value that the community has in a business interest.

If you have questions about a business interest as it pertains to the context of a divorce, please consider calling Robin Huggins to schedule a consultation.  (949) 261-7700.  www.orangecountydivorceattorneyandchildcustodylawyer.com 

There are BIG changes coming to family law courtrooms that every litigant needs to be aware of.  And we all have Mr. Elkins to thank (tongue in cheek)...

Taken directly from the published case of Elkins v. Superior Court (2007) 41 Cal.4th 1337, in which "Petitioner Jeffrey Elkins represented himself during a trial conducted in marital dissolution proceedings instituted by his wife, Marilyn Elkins in the Contra Costa Superior Court. A local superior court rule and a trial scheduling order in the family law court provided that in dissolution trials, parties must present their cases by means of written declarations. The testimony of witnesses under direct examination was not allowed except in “unusual circumstances,” although upon request parties were permitted to cross-examine declarants. In addition, parties were required to establish in their pretrial declarations the admissibility of all exhibits they sought to introduce at trial.

Petitioner's pretrial declaration apparently failed to establish the evidentiary foundation for all but two of his exhibits. Accordingly, the court excluded the 34 remaining exhibits. Without the exhibits, and without the ability through oral testimony to present his case or establish a foundation for his exhibits, petitioner rested his case. As the court observed, the trial proceeded “quasi by default,” and the court's disposition of the parties' property claims demonstrated that the court divided the marital property substantially in the manner requested by petitioner's former spouse.

Petitioner challenges the local court rule and trial scheduling order on the grounds that they are inconsistent with the guarantee of due process of law, and that they conflict with various provisions of the Evidence Code and the Code of Civil Procedure. Respondent court counters that the promulgation of the rule and order comes within its power to govern the proceedings before it, and that its rule and order are consistent with constitutional and statutory provisions.

We need not reach petitioner's constitutional claim because, as applied to contested marital dissolution trials, the rule and order are inconsistent with various statutory provisions. ¹ As we explain below, we reach this conclusion because, pursuant to state law, marital dissolution trials proceed under the same general rules of procedure that govern other civil trials. Written testimony in the form of a declaration constitutes hearsay and is subject to statutory provisions governing the introduction of such evidence. Our interpretation of the hearsay rule is consistent with various statutes affording litigants a “day in court,” including the opportunity to present all relevant, competent evidence on material issues, ordinarily through the oral testimony of witnesses testifying in the presence of the trier of fact."

The Elkins holding resulted in a task force being appointed, whose purpose was to study and propose measures to assist courts in improving efficiency and fairness in family law proceedings and ensuring access to justice for all family law litigants.  Our local and well-esteemed family law and appellate specialist, Leslie Ellen Shear, was part of the Elkins panel.  After several years of task-force studies that solicited commentary and recommendations from family law attorneys and litigants state-wide, the results have been memorialized into our new legislation known as AB 939.  AB 939 seeks to dispel or correct the public perception that litigants are not being given an opportunity to "be heard" and thusly, these litigants tend to walk away from their courtroom experience feeling like they were treated unfairly.

The first changes set forth in AB 939 are in effect as of 1/1/2011.  These changes include 1) allowing live testimony at hearings absent a stipulation or finding by the court of "good cause" to rule by declarations; 2) Witness lists must be filed and served along with the filing of an OSC or motion; 3) Declarations must include foundation and hearsay exclusions; 4) Declarations are limited to 10 pages for moving and responding declarations and 5 pages for reply declarations.  Basically, almost every OSC or motion will be treated as a mini-trial on that issue, and though it remains to be seen, the difference between a temporary order and a permanent order may begin to blur under this new AB 939 legislation.  There are additional changes effective July, 2011, and again January, 2012 as well that are not being addressed in this blog.

What this means for litigants is that a self-represented litigant must know and abide by the California Evidence Code during hearings.  They will no longer be cut any slack by our judicial panel that is now handcuffed by Elkins/AB 939.  Even a great many family law attorneys will be required to dust off their Evidence Code's and refresh their recollection on hearsay exceptions. 

Now, more than ever, a litigant should strongly consider hiring a competent family law attorney, rather than try to navigate this storm without a properly trained captain.  Its an old saying, but still relevant, "A man who represents himself has a fool for a client."