MARRIED WOMEN SHOULD UNDERSTAND THEIR FAMILY FINANCES BEFORE DEATH OR DIVORCE PART THEM FROM THEIR MONEY

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I recently read a timely article at bloomberg.com, talking about the difficulties many post divorce women face financially, due to them not having participated in the handling of family finances while they were married.  Back then, their spouses handled the finances, who turned out to be better equipped in dealing with family related financial issues after the divorce was completed. Now, as newly single women, many wives who had left the money matters to the men, wish they hadn’t.

In Rise of ‘Gray’ Divorce Forces Financial Reckoning After 50, Suzanne Woolley writes of how “too many women” let their husbands make the long-term financial decisions, which has left them vulnerable when separation or death strikes.  That’s why it’s so important for any woman, married or not, young or old, to take the time to learn about the finances that affect them and their families, before death or divorce throw ungodly financial surprises upon you.  This is a regular instance with many family law clients. Many women, looking deer-lost in headlights, not having really any clear idea of the true nature of their family finances, seek legal advice related to family financial matters.  Surprise and shock are common responses when discussing the issues surrounding the division of community property. Issues related to income, expenses, assets, and debts might be clouded, personal property and community property commingled, or assets going unaccounted for.

By developing understanding of your financial affairs you will be better prepared to make the big financial decisions that you might have let your spouses make when you were still married.  Understanding family finances better helps to avoid the “nasty surprises” at the end, that your divorce lawyer will have to help you clean up.

Woolley notes some interesting facts relating to women and their investing, citing statistics from a survey found in a report called, “Own Your Worth,” which was released by UBS Global Wealth Management.

  • 56 percent of married women still leave major investing and financial planning decisions to their spouse.  
  • 61 percent of millennial women said they leave investment decisions to their husbands.
  • 54 percent of baby boomer women leave investment decisions to their husbands.
  • Twice as many men as women in the UBS survey said they were highly knowledgeable about investing.
  • Three-quarters of the women surveyed said they don’t know much about investing.

Woolley’s article also cites a stark difference between married women and women who were divorced or widowed regarding the “making (of) major financial decisions” during their marriage  She cites, for example, that:

  • 59 percent of widows and divorcees regret not taking part in long-term financial planning when they were a couple.
  • 85 percent of married women who weren’t active in making long-term financial decisions said their spouse knows more about financial issues than they do.
  • Eighty percent of women said they were content with how financial responsibilities were handled in their marriage.

The report concluded that a majority of married women are still handing over to their spouses important financial decisions that will profoundly affect their futures.  Women and divorcees who now find themselves alone wish they had been more involved in finances while they were married, says the UBS Global Wealth Management Report. Nearly all of them advise other women to get more involved early on and “break the cycle of financial abdication.”

WOMEN SHOULD BREAK THE CYCLE OF FINANCIAL ABDICATION

The UBS report cites “eight out of 10” divorced or widowed women who remarried as finding themselves to be “more active in the financial decision-making in their current relationship.”  Ninety-four percent of widows and divorcees surveyed insist on complete financial transparency with their spouse.

Again, for all women who are trying to make it work financially, you have one financial bottom line, and that is if you haven’t already — get involved now!  Wake up to the economic realities we all face right now in trying to move our families forward in a healthy and prosperous way. When the divorce comes about, you will be prepared in important aspects.  Remember that subsequent marriages have a higher rate of dissolving than do first marriages. So understand the income, expenses, assets and debts formula your family operates under now.

If you are a married woman, be involved with your husband when making all financial decisions.  You’re signature and / or consent is going to be required for most family related financial instruments, so you might as well understand what you are signing, and why.  If a divorcing woman understands her finances, and she can communicate rationally and intelligently with her spouse, come time for the divorce, she can conceivably steer the mediation of the division of the community property and in the long run save her and her family a lot of money and emotional expense.  If she needs an attorney or divorce mediator to help her with the process, she can always hire a family law specialist.

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PROPERTY DIVISION IN DIVORCE IS ABOUT ASSET PRESERVATION

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One of the primary issues a family law specialist deals with in divorce is helping his or her clients resolve their financial issues.  An experienced family law attorney can help you not only divide your property and assets, but your debt and liabilities as well.  A divorce attorney will utilize the best methods to put your entire family in the best financial position possible as you move forward into unfamiliar post-divorce territory.

Sometimes the community possesses complicated financial assets, like investment and retirement accounts or stock options, and a forensic accountant might be brought in to help analyze, value, and divide your property.  A forensic accountant can help unravel the essential financial formulas that might affect not only the division of community assets, but also child support and spousal support.  Forensic accountants can be expensive, however, and they’re not right for all divorces.  In a divorce case, a little common sense can go a long way when it comes to dividing community property.  The key is to think about how you’re going to preserve what you have in this dramatically volatile economic environment we live in.

My belief is that we are in the middle of the greatest economic free fall that we’ve ever experienced in this country during my lifetime.  The United States Congress says that the U.S. dollar has lost 96% percent of its value since its inception in 1913.  Some economists say that we are in the middle of witnessing 90% percent of the global wealth changing hands of ownership.  Whose hands are your wealth going into?  Will you and your family have anything left?

The purchasing power of the U.S. dollar, which is what we live and eat on, is down to an all time low, so low, in fact, that the U.S. Congress is contemplating bringing back the gold standard to back it.  At this time, more than ever, income, expenses, assets, debts, savings, and investments, should all be at the forefront of the minds of family law attorneys helping you divide your community assets in a divorce.  If you as a divorcing spouse aren’t considering your personal state of financial affairs, as it relates to your family’s future financial reality, and the value of the assets that you can take with you in your split, you could be in for some major surprises and disappointment.

TRUE INVESTMENT CAPITAL ONLY COMES FROM SAVINGS

Unemployment in this country is at an all time high.  Even if you have a job, inflation affecting everything you buy probably keeps you from being able to actually save money.  One of the greatest issues for family law attorneys in dealing with divorce is financial disagreement between the spouses, which is compounded by the fact spouses just aren’t saving enough in real value, so they end up fighting each other tooth-and-nail to squeeze every ounce of wealth they can out of whatever community asset they have left.  So be it for inflated assets.  Sets of silverware are being split down the middle because divorcing spouses have not been saving.  They’ve barely considered the true valuation of their assets up to this point in their lives.

Savings are important because they form the cash cushion that gets us through difficult economic times.  We get the best value out of our assets by saving for them first.  A lack of savings is one of the major problems we face not only as individuals but as a country during these economically challenging times.  Economic researcher Chris Martenson, PhD, MBA, says that savings are important nationally because they are utilized for the formation of investment capital; that is, the property, plant and equipment that create actual future wealth.

Same thing applies to spouses in a marriage.  If you are going to want to be able to invest in the “property, plant and equipment” of your future, so you  have some future wealth to be able to preserve for your family, without having a giant debt load attached to it, you’re going to have to save for it first.  True investment capital can only come from savings.

INDIVIDUAL’S SAVINGS RATES AT ALL TIME LOW

According to Martenson, savings rates have plunged to historic lows, “levels last associated with the Great Depression.”  Martenson says the personal American savings rate has steadily declined in America since 1985 to the present.  The decline we have experienced as a country and as individuals has resulted from “a culmination of a multi-decade erosion of savings as a cultural attribute of American citizens,” Martenson says.  Now, many of you are realizing this in your own lives, where you’re having problems making ends meet on a week-to-week basis, with nary the time nor thought given toward investing in yours or your children’s futures.  The truth is, you can barely deal with financing the now.  And you’ve probably got a lot of debt to go with it.

Martenson, a futurist and co-founder at PeakProsperity.com, believes that what a history of persistently declining savings tells us is that there is an “implicit assumption” by the majority of people in this country that unlimited credit will be available in the future, and so we don’t need to save now.  We have assumed a lifestyle where we have largely substituted a “save and spend” mentality, with “a buy it now on credit” mentality.

All debt across all sectors in this country, and personal savings of individuals, shifted in opposite directions in 1985, with the gap widening dramatically ever since.  “Our national tolerance of debt shifted drastically upwards beginning in 1985 right as our national approach to savings was beginning its long decline towards zero,” Martenson says.

The marketing of our financial system has created in us a belief that in order to have a grander and brighter future, we are going to need more money, which equates to greater debt, so we can buy things.  We have become a country of mass consumers fueled by credit availability.  Everything is about beating the Joneses, now, the future be damned, and the Joneses have a lot of credit at their disposal.  The idea has been ingrained in us that low savings plus high debt equals prosperity, or what Chris Martenson calls, “at least a perpetual feature of our future economic landscape.”

THE BOTTOM LINE FOR DIVORCING COUPLES

The bottom line for most Americans has become that of low savings rate and high debt, which is a major problem because it means that most divorcing spouses have a very thin safety cushion to ride out the economic hardship we are experiencing at this time.  This equates to the fact that most people have failed to invest in their families’ futures.  Dealing with the present while preparing for the future has posed a difficult task for most Americans, and, as a result, divorcing spouses have little left to divide.  They’re not alone in this.  A lack of savings is a nationwide problem.

Our bottom financial line to get through these difficult times has to be pretty straight forward from here.  Save as much as possible, now, and get out of debt.  Many financial forecasters predict that a credit freeze is imminent.  Prepare for it.  Know the truth of what’s really going on in the world, and with our banks.  When possible, move those hard-earned savings into assets that will hold or increase in value during this time of the declining U.S. dollar.  The theory behind hard earned savings, and the investment thereof, should include a ‘smart plan’ on how to preserve those assets for future family needs.

 

 

DATES SERVICES RENDERED KEY TO MILITARY/CIVILIAN RETIREMENT AS SEPARATE PROPERTY

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An interesting case was recently decided regarding retirement credits involving military and civilian work.  In reversing the trial court, in this case, California’s Supreme Court held that four (4) years of additional retirement credits, which Husband was eligible for through premarital military service, are his separate property, minus the funds used to reimburse the community for funding the purchase of those credits.  The key to the court opinion in the case of In re Marriage of Green (2013) 56 Cal.4th 1130, 158 Cal.Rptr.3d) was the dates those services were rendered.

The facts of the case were determined as follows:  Prior to the parties being married, Husband served in the U.S. Air Force from July 1982 through May of 1986.  In June of 1989, he began working as a firefighter for a regional fire authority in Dublin, California.  This made him eligible to participate in CalPERS, the California Public Employees’ Retirement System, which in turn made him eligible to purchase up to four years of service credit toward his retirement benefits because of his military service.

Husband married Wife in May of 1992.  In 1997, the regional fire district Husband worked for merged with the Alameda County Fire Department, and Husband continued working for the newly created department.  He also continued his participation with CalPERS.  In August of 2002, Husband exercised his right to purchase four years of credit based on his military service, which he elected to pay through twice-monthly payroll deductions of $92.44, until July 2017.  Those deductions accrued to a total of $11,462 in community funds at the time the couple separated on October 1, 2007.

Wife filed for divorce in March of 2008.  At trial, a major issue for the court was whether it should characterize Husband’s military service credit as community property or separate property.  The trial court determined the credit to be Husband’s separate property, but it also ordered him to pay $6,699 to Wife for half of the community property payroll deductions made to purchase the credit, plus 6% interest thereon.  Wife appealed the trial court’s decision.

California’s First District Appellate Court reversed the trial court’s ruling.  It found that the service credit was community property due to the fact it had been purchased during the marriage using community funds.  The California Supreme Court granted review and reversed the First District.

In reaching its decision, the California Supreme Court considered many cases dealing with facts that differed from those in this case.  In their opinion, the justices noted that the rule to be applied to all these different legal and factual scenarios was derived from Hogoboom & King, California Practice Guide: Family Law as follows:  “Pension and retirement benefits are a form of employment compensation and thus tantamount to ‘earnings.’  As such, regardless of when the benefits ‘vest’ or are received, they are characterized in accordance with the employee’s marital status at the time the services were rendered; i.e., the benefits are community property to the extent attributable to employment during marriage.”

The key to this decision, obviously, is that retirement benefits in California are to be characterized according to the employee spouse’s marital status at the time the underlying services were rendered.

GUGGENHEIM’S DODGERS ORDERED TO REVEAL SECRET $ ARRANGEMENT IN JAMIE’S DIVORCE WITH FRANK

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Former Los Angeles Dodgers owner Jamie McCourt wants California’s family law courts to throw out her $131-million divorce settlement.  That’s why, according to the Los Angeles Times, the new owners of the Dodgers must reveal their financial arrangements with Jamie’s ex-husband/partner, Frank McCourt.  Got that?  We’re pretty sure Frank does too.

According to the Times article earlier this month, Los Angeles Superior Court Judge Scott Gordon denied the Dodgers request to seal a summary of the team’s deal with Frank McCourt.  The judge ordered the document to be made publicly available June 17, unless Guggenheim Baseball Management succeeds in an appeal before then.

Jamie McCourt’s attorney, Bert Fields, believes the financial summary could reveal that the deal was worth more than the Dodgers publicly announced sales price of $2.15 billion.  “It shows Mr. McCourt got value way beyond $2 billion.”  And that somebody totally got ripped off in their settlement negotiations.

In her request to have Judge Gordon throw out her divorce settlement, Jamie alleged that Frank fraudulently misled her about the value of the Dodgers and their assets.  Frank denies this charge.  And he also denies extraterrestrials run the White House.

Last year, Guggenheim paid $2 billion for the Dodgers, while an affiliated entity financed the purchase of the land surrounding Dodger Stadium for $150 million.  The accompanying financial arrangements Guggenheim attempted to seal include data about how Frank and Guggenheim were to share profits from the joint investment venture, which is the crux of this whole magilla.

In court, Guggenheim argued that financial disclosure would harm the Dodgers ability to lure another sports team to the Dodger Stadium site.  (Guggenheim’s ownership has since admitted that it is indeed in talks with the NFL about building a stadium on the stated site.)

Although Staples Center owner AEG still has plans to bring the NFL to South Park, the NFL has made it abundantly clear it has its tiny, greedy, little heart set on Chavez Ravine.  As a side note, the NFL made no mention of all the profits to be made – by everyone, except I guess poor, hungry Jamie – from the Chavez Ravine site.

ATTORNEY FEES AS SANCTIONS VALID WHEN FIDUCIARY DUTY VIOLATED

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So you’re thinking of leaving the spouse, and you think it might be a good idea to take a cash advance from the joint family credit card, just in case.  And you want to put the money in your own bank account, sacking the community with the debt, and not telling him about it.  And you think this is a good idea.  And, well…

Maybe you should think again.  That’s because California’s appellate courts have ruled that a trial court erred by not awarding attorney fees as sanctions under Family Code §1101(g) despite the fact it found during a dissolution trial that Wife had violated her statutory fiduciary duty by taking a $24,000 cash advance on a credit card before separation and transferring the funds to her personal bank account without informing her Husband.

The facts of Marriage of Fossum (2011) 192 CA4th 336, 121 CR3d 195 were that Wife, before separating from Husband, took a $24,000 cash advance using a credit card and transferred the funds into her personal bank account without informing Husband.  After the trial for the couple’s marital dissolution, the trial court ordered Wife to reimburse Husband for half the amount charged, but found that Husband was not entitled to an award of attorney fees even though she had violated her fiduciary duty under Family Code §721.

The appellate court reversed the judgment.  Regarding attorney fees, the court of appeal held that Husband was entitled to an award of attorney fees under section 1101(g) as a result of Wife’s breach of fiduciary duty.  Family Code §1101(g) states that its remedies “shall include, but not be limited to, an award to the other spouse of 50 percent, or an amount equal to 50 percent, of any asset undisclosed or transferred in breach of the fiduciary duty plus attorney’s fees and court costs.”

SEPARATION, TRANSMUTATION OF PROPERTY IN CALIFORNIA MARRIAGE

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Separate property in regards to marriage in California is covered under Family Code § 771.  It states that:  “The earnings and accumulations of a spouse and the minor living with, or in the custody of, the spouse, while living separate and apart from the other spouse are the separate property of the spouse.”

This period can include any time after initial separation but before reconciliation.  There is nothing in the statute to indicate that any property earned during a period when the parties were living ‘separate and apart’ should be characterized as community property.  Additionally, section 771 does not prohibit multiple separation dates when characterizing a community’s property.

If parties possess the intent to separate and end their marriage, California law dictates that any property acquired thereafter by a spouse is his or her separate property.  However, the law is clear in stating that behavior alone cannot transmute property.

California case law dictates that the character of property as separate or community is fixed as of the time it is acquired.  The character cannot be altered unless by some means recognized by law, judicial decree, or the parties’ agreement.  This is what transmutation is all about.

If it is community property when acquired, it remains so throughout the marriage unless the spouses agree to change its nature or the spouse charged with its management makes a gift of it to the other.  Moreover, separate property does not change its character automatically as a result of marriage, or use during marriage.

California has strict requirements as to what is required to transmute property.  It cannot be done by conduct alone.

Family Code § 852 imposes certain requirements on marital transmutations, including that a transmutation “is not valid unless made in writing by an express declaration that is made, joined in, consented to, or accepted by the spouse whose interest in the property is adversely affected.”  Furthermore, section 852 states the requirements for a valid transmutation in California.  A change in character is not valid unless made in writing by an express declaration that is “made, joined in, consented to, or accepted by the spouse whose interest in the property is adversely affected.”

COMMUNITY PROPERTY SEPARATION DATE IN CALIFORNIA

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California is a community property state.  Basically, this means that all property acquired by the two parties of a marriage in California is considered to be community property.

This presumption of community property is based on the premise that each partner to a marriage contributes services of value to the whole, and, with certain limitations and exceptions, both parties share equally in the profits.  So long as a spouse or registered domestic partner is contributing his or her special services to the marital community he or she is entitled to share in its growth and prosperity.

This, in essence, is what the community property system is all about.  And remember that the parties’ respective contribution to the community is what justifies and forms the basis for their joint ownership of the fruits of their respective labors.

California and Washington are the only states in the union that terminate the marital period at the date of separation of the parties, as opposed to the termination of status as a married couple.  This is due to the fact that upon separation, the parties no longer make joint contributions to the community.

Family Code § 771 covers this area:  “…the earnings and accumulations of a spouse and the minor children living with, or in the custody of, the spouse, while living separate and apart from the other spouse are the separate property of the spouse.”  This means that a judgment of dissolution is not necessary to terminate the community.  California case law has defined ‘living separate and apart’ as the parties having come to a parting of their ways with no present intention of resuming their marriage.

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