HOW DO YOU PREPARE YOUR FAMILY FOR A FINANCIAL RESET?

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Does anybody who’s ever tried keeping their family’s heads above treacherous financial waters have any idea what in the world is going on right now?  Overseas, we’ve got accusations of chemical attacks and fake chemical attacks simultaneously coming out of Syria and England.  We’ve got threats of a major trade war between the United States and China.

Domestically, we’ve got a U.S. dollar that is worth four cents on the dollar, with the value declining as I write this.  The U.S. bond market and stock market, both pegged to the U.S. dollar, are filled with too high prices and too much risk, so they no longer provide a guaranteed safe haven to protect our assets from the declining U.S. dollar.

We have President Trump with his tax cuts, and Central Banks that are talking about raising the interest rates.  Our economy has been stretched to the max.  This last series of programs that were put into action by the Federal Reserve Bank since our last crash in 2008 have failed.  And all of this is happening at the exact same time.  It’s a recipe for disaster, and now someone is talking about a complete financial “reset,” and we have to wonder how that will affect our ability to feed and clothe our families during difficult days to come.

Why is all of this happening right now?  According to Lynette Zang, Chief Marketing Analyst at ITM Trading, ten years of American Central Bank failures means that all of the fiat money assets that were targeted for “‘reflation’ have created tremendous bubbles, and now they’re trying to undo the experiments with our economy.”  They’re trying to undo what?

Zang, who has worked in commercial banking since 1986, says what we have witnessed is a Central Bank rally followed by what appears to be a Central Bank crash — with whatever is to follow.

“The Fed is going to start tapering their stimulus,” the former stock broker and investment banker says.  In other words, print, print, print money is all we know, and now the scant part of that flow that came down to us is being cut off.

Zang says what fuels this whole financial system, which is called a “fiat currency system”, is the constantly compounding debt.  “And interest rates are the tools that they use to speed that up or slow that down,” she says.

Our problem is the world has been anchored at zero percent interest for too long.  “That means they’re out of the tools that they typically would use to do that,” Zang says, “which is why they’re trying to unwind and normalize something that isn’t normal to begin with.”

Our money system is not normal to begin with because it is based on debt.  The best we can do in our present day financial reality is borrow more, of what the Federal Reserve “prints”, so we can buy what we can afford to borrow — at a price, that compounds daily with interest.  And now the Federal Reserve Bank has no more tools to keep it going.  The American financial house of cards is rapidly crashing, and what exactly that means to us, the average person struggling to make a living and raise a family of four, will be up to us.

According to Zang, “they’ve” been calling for a “reset” since 2013, and “they’ve” run out of options.  There’s no purchasing power left in the U.S. dollar.  All the currencies in the world that are tied to the U.S. dollar have eroded over time due to inflation, to near worthlessness.  And that’s what all of our family law community assets are tied into.  It’s all going down the tubes.

“They’re talking about a financial reset,” Zang says, “but it looks more like a planned demolition.”  The Central Banks are in huge trouble.

We, here, in the real world, have no choice but to get our heads around this concept of a new financial reset.  We need to understand what’s going on.  Big changes are happening to us and we’re not being told about it straight forward.  We need to find answers to tough questions.  We need to ask those tough questions.  We need to understand how this financial crisis that is happening, and is apparently going to get much worse, is going to affect us if we’re an average family of four who just happens to be going through the biggest crisis of our lives, and it’s called divorce.

So what is a financial “reset”?  Is it getting rid of the debt, a new currency?  What?
“Transitioning us into the new financial system,” Zang says cryptically.  “Establishing the new financial system they have in mind, which ties into cryptocurrencies and cyberspace.”

If what Zang says is true, then the situation we find ourselves in appears clear enough.  We are going from a debt based financial system to one that is centered around crypto currencies, cyberspace, and digital money controlled by a central governing process.

If we’ve gone to the grocery store lately or tried to buy movie tickets we know our dollar is buying less.  Everything we own seems to be going down in value while everything we need gets too expensive to buy.  We’re forced to settle for less and make difficult choices as to how we’re going to spend our precious remaining financial resources.

The old financial system that started under U.S. President Richard Nixon in 1971 was based on debt.  That debt, and all the compounded interest that has accrued on it, stands today as not payable.  And the interest on that debt continues to add up.

Zang says a “reset” to the financial system begins with a reset of the debt.  She says we have been dealing with nothing but compounding interest, which is “what creates money in the system, and we’re never going to get out of debt.”  It’s the way the system was built and they are going to have to “reset” the debt, so we will be able to continue to function economically as individuals and a nation.  But at what price?

Our currency, the U.S. dollars we spend to buy food, gas, and clothing, are merely debt instruments that don’t pay interest.  Our financial system is based on the foundation of never ending debt.  We’ve reached the end of the line.  Compounding interest will never be paid off.  “It has to reset.”  “The system doesn’t work anymore.”  “It died in 2008.”  “It’s a zombie system.”  “The entire system will crash.”  These are Lynette Zang’s words, not mine.

And the question remains.  What do families have to do to have a chance to survive in a rapidly changing world like this?  The answer is they have to learn the truth of the world that swirls by them while they’re busy making plans, or playing with their cell phones.  Heads of families have to take the time to learn to understand what is truly going on in the economic realm in which they live.  Right now, we in America are living on borrowed time, financially, and most of us don’t even realize it.  We might be aware that something is going on, that bills are becoming difficult to pay, but we don’t really pay attention to finding solution to our ever increasing financial difficulties.

That’s why we’ve got to deal with the true nature of today’s realities, financially and otherwise.  We’ve got to do our homework.  We’ve got to weed out the lies in information we receive and determine who’s telling the truth.  We’ve got to understand that, financially, our dollar may be about to disappear.  That there most probably is some kind of major change coming to our financial system and the currency we will use to live on.  That we’re going to have to understand what that is all about, how it will affect us, so we can figure out how to preserve what assets we have left.  We must learn to understand how a financial “reset” will affect the future of our families.

Where does your family stand on this?

 

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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.

 

 

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.

CHARACTERIZATION AND DIVISION OF PROPERTY; UNDUE INFLUENCE

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In regards to the division of property and assets, an important family law appellate court decision came down last year regarding a husband’s failure to rebut the presumption of undue influence that arose when he refinanced a house in his name alone and refused to convey title to himself and his wife in joint names after she quitclaimed her interest to facilitate a loan.

IRMO Fossum (2011) 192 CA 4th 336, 121 CR3d 195 involved a married couple that purchased a house in 1994, whereby they agreed that Husband would obtain a purchase money loan and take title to the house in his own name, and Wife would execute a quitclaim deed, due to the fact Husband’s credit was better than Wife’s.  Husband had promised to reconvey title to Wife after the close of escrow.  During the marriage, the couple had refinanced the home twice, making a similar agreement each time.  However, after the second refinance, Husband refused to put wife back on the title to the house.

During the parties’ ensuing divorce, Husband also claimed he was entitled to reimbursement for his separate property contribution to the downpayment on the house.  However, the trial court had heard “conflicting testimony as to whether the source of the funds drawn on the parties’ joint bank account came from their joint earnings working in Husband’s construction business in 1994, or was solely the fruit of Husband’s efforts and savings.”  The trial court held that the house was community property, and Husband appealed.

The California Court of Appeals affirmed the judgment with respect to the ruling on the house.  The appellate court determined that the trial court had found Wife’s testimony credible regarding the parties’ arrangements for taking title and that the downpayment came from money they had earned together.  Under California Family Code § 721, a presumption arose that Husband exerted undue influence in having his wife sign a third quitclaim deed on the basis of his promise that he would restore her name to the title, and Wife did not have to otherwise prove fraud or deceit.

DEBTOR COMMUNITY PROPERTY SUBJECT TO BANKRUPTCY AUTOMATIC STAY

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An interesting unpublished case has come down holding that the community property interests of the debtor and the debtor’s spouse are part of the bankrupt’s estate and are subject to an automatic stay.

Now it’s important to remember the California Rules of Court provide that “an opinion of a California Court of Appeal or superior court appellate division that is not certified for publication ordered published must not be cited or relied on by a court or a party in any other action.”  The only exceptions to this rule are when the unpublished opinion “is relevant under the doctrines of law of the case, res judicata, or collateral estoppel” or “is relevant to a criminal or disciplinary action because it states reasons for a decision affecting the same defendant or respondent in another such action.”

*Any violation of the rule against citing or relying upon an unpublished opinion may lead to monetary sanctions and striking of the brief.  All unpublished opinions, such as this one, should be used for educational purposes only, and should not be cited or relied upon except as permitted under the California Rules of Court.

IRMO Prestholt, an unpublished opinion of District 2, Division 7 (filed may 22, 2012), was a 2006 status-only judgment of dissolution that terminated the parties’ 14-year marriage.  In 2007, the trial court ordered Husband, an attorney, to pay to Wife $5,000 per month in spousal support, “subject to retroactive modification,” until further order of the court.  Due to the fact neither party had worked for at least a year, the court also ordered that certain assets would be refinanced or sold.

Husband filed for bankruptcy in 2009.  Wife moved for relief from the automatic stay to allow Husband’s children and spousal support obligation to be determined, to deal with his withdrawal of $50,000 from a 401(k), and to characterize an annuity.  The bankruptcy court authorized Wife to seek a ruling from the superior court on issues relating to the custody, visitation, and support as well as “to adjudicate the nature of her interest in all of property in the Debtor’s bankruptcy estate.”

In 2010, the bankruptcy court approved the sale of Husband and Wife’s home and the distribution of Husband’s homestead exemption.  In the same year, Wife’s superior court trial brief stated the only issues to be resolved were family support and attorney’s fees, arguing Husband’s separate property was within the jurisdiction of the bankruptcy court and the division of community property would be addressed there.

Husband countered that the bankruptcy court order required the superior court to determine Wife’s interest in the property in the bankruptcy estate.  Wife argued the bankruptcy court order permitted her to do so but that she chose instead to relinquish that right to negotiate a settlement with the bankruptcy trustee.

The superior court ruled the bankruptcy court order gave Wife a choice about how to proceed and that she properly elected to negotiate a settlement with the trustee of Husband’s bankruptcy estate that disposed of any claim she may have in the property.  The superior court also ruled that Husband’s post-petition claim against Wife for breach of fiduciary duty could not be pursued because he did not obtain relief from the automatic stay.

Later in 2010, notwithstanding the earlier ruling by the superior court that it was precluded from adjudicating property issues, the superior court entered a judgment that stated, “All community real property was sold through the bankruptcy court” with proceeds to be distributed through the bankruptcy court, “all community debts have been paid through bankruptcy or will be paid through the bankruptcy court”, and “all community personal property was abandoned by the bankruptcy court.”

Husband appealed, and the California appellate court affirmed in part and reversed in part.  According to 11 U.S.C. § 362, filing a bankruptcy petition triggers an automatic stay of actions against the debtor, the creation of an estate, and the appointment of a trustee.  The stay is one of the most important protections in bankruptcy law and its scope is broad and remains in effect “until such property is no longer property of the estate.”

The bankruptcy court has exclusive jurisdiction to determine the scope and applicability of the automatic stay.  But notwithstanding the breadth of the automatic stay, several types of actions and proceedings are exempted.  In family law, the filing of a bankruptcy petition does not stay commencement or continuation of proceedings to establish or modify an order for “domestic support obligations.”

It also does not stay proceedings concerning child custody or visitation.  But proceedings to determine the division of community property that is property of the bankruptcy estate are not exempted from the automatic stay.

Community property interests of the debtor and the debtor’s spouse at the commencement of the bankruptcy case must be transferred to the estate and bankruptcy courts must then look to state property law to determine the separate or community property character of the property and what is and is not to be included in the bankruptcy estate.  Due to the fact property acquired in joint form during marriage is presumed to be community property, all such property not yet divided by the state court at the time of the bankruptcy filing is property of the bankruptcy estate.

The state court is permitted, however, to divide exempt community property interests or property abandoned by the trustee.  But if a dispute about marital property is to proceed in state court, the non-bankrupt spouse must file a motion with the bankruptcy court to lift the stay for cause.  Because state courts have expertise in family law matters, such a petition is frequently granted.

PURCHASE OF MILITARY SERVICE CREDITS DEEMED COMMUNITY PROPERTY

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In a very recent case handed down, entitled IRMO Green (2012)__Cal.App.4th__(CA 1/4 –Opinion filed May 16, 2012, a California appeals court decided that a husband’s use of community funds during the marriage to purchase military service credit in CalPERS makes the service credit community property even though husband’s military service was completed before the parties married.

In the case, Husband served in the U.S. Air Force for four years ending in 1986.  In 1989, Husband began working as a firefighter in Dublin.  The department was a participant in CalPERS.  Husband then married wife in 1992.

In 2002, Husband exercised his right to buy four years of PERS service credits for his military service.  Husband elected to pay for credits through monthly installment payments over fifteen (15) years.   $11,462 was spend in community earnings to purchase the military credits prior to the parties separating in 2007.

The parties litigated the issue regarding how to characterize Husband’s military service credit.  Husband contended that because his right to purchase military service credit arose prior to the parties’ marriage, all four years of the credit were his separate property.  He acknowledged that the money used to pay for the purchase before the parties’ separation was community property but contended the community was entitled to nothing more than reimbursement.

Wife argued the military service credits were community property and urged the court to place them in a separate account for her benefit through PERS.  A court-appointed expert proposed awarding a pro rata share of the purchased service credit to Wife, representing the percentage of payments toward the military service credit made with community funds.

The family law trial court concluded that the military service credit portion of the CalPERS pension was Husband’s separate property and awarded it to him.  Husband was ordered to pay Wife $6,699.54, which represented half of the installment payments made with community funds during the marriage plus interest at six percent.  Wife appealed, and the trial court decision was reversed.

COMMUNITY PROPERTY INTEREST IN MILITARY SERVICE CREDIT

The appellate court agreed that it was error for the trial court to characterize Husband’s military serviced credit as separate property.  The appellate court stated that in determining whether the community has an interest in pension rights, courts look to when a party acquired a property interest in them.  In other words, when did the pension right become more than an “expectancy”?

Although Husband completed his military service before his marriage to Wife, when he left the military he had no property interest whatsoever in the CalPERS retirement plan because he did not begin working for the CalPERS participant until three years later.  Even after Husband started working for a CalPERS participant, his right to a military service credit was simply an “expectancy”.

The appellate court determined that the military service credit was indisputably purchased during the marriage with community funds.  Thus, the contractual right to receive four additional years of retirement credit based on premarital military service was obtained during the marriage and it was stamped a community asset from then on.

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