divorce-date-separation

Date of Separation

When was it, and why does it matter?

When? 

The date on which one or both parties clearly communicate to the other their intent to end the marriage.

There are many details which may be helpful in determining the date of separation, including:

-          Are the spouses still living together?

-          Are they sharing finances?

-          Are they still “working on the marriage?”

-          Have they told anyone they are separating/divorcing?

-          Are they still acting like a married couple in public?

-          Are they still having sexual relations?

-          Has either spouse changed his/her mailing address?

Spouses may not agree on their date of separation.  They may each perceive the situation differently or have a different recollection of events.  When spouses disagree on what the date of separation is, it becomes a matter to be determined later, either by agreement or by a Judge.   

Why?

Sometimes the date of separation doesn’t really matter.  However, the date of separation can be important for a number of reasons:

-          The “length of the marriage” is determined by the date of separation, not the date the divorce becomes final.  The length of the marriage can have an impact on such things as spousal support and social security benefits.

-          After the date of separation,

o   Each spouse’s earnings belong to that spouse.

o   New debts incurred by a spouse belong to that spouse.

o   New deposits into benefit plans may belong to the participant spouse

Before your first appointment with a lawyer, it will be useful to think about your situation and the circumstances which might help determine your date of separation.

It should be noted that people frequently claim that they are “legally separated.” Usually they are mistaken.  The concept of legal separation has nothing to do with the date of separation.  It is a separate and unusual legal concept, and a true “legal separation” requires an order signed by a judge.

deb-ewingDeborah Ewing, Wendy Jones, and Elaine Thompson are all experienced family law attorneys in the Los Angeles area, and are members  of A Better Divorce, a Collaborative Family Law Practice Group.

contract-documents

Documents are King: The Importance of Documents When Considering Divorce

Divorce can be overwhelming.  One of the things people may overlook is the importance of documents.  Verifying the nature and extent of income, assets and debts, reimbursements and credits, and other details of divorce requires documents.  Getting copies of the documents you will need now, will streamline the divorce process and may reduce the cost of divorce later.

What documents?

Key documents include:

  • Income tax returns for the last three to five years, particularly if income varies, or businesses or self-employment are involved.  Include all attachments, W-2s, and 1099s.
  • Paystubs for you and your spouse for at least three months, showing all deductions from pay.
  • Most recent statements for all financial accounts (checking and savings, certificates of deposit, money market and other investment accounts).
  • Most recent statements for all retirement plans for both of you, including pensions, 401(k) and similar retirement savings plans, stock savings plans, IRAs, and annuities.
  • All life insurance policies. 
  • Most recent statements for all mortgages and equity lines.
  • Most recent statements for all credit cards and other outstanding debts, including auto loans.
  • Any documents stored in a safety deposit box.
  • Any documents relating to assets which you acquired prior to marriage or as a result of an inheritance or a gift of substantial value. 
  • Any premarital/prenuptial agreement and any other written agreement between you and your spouse.

Make copies! 

Rather than taking the originals, make copies of the important documents, and leave the originals in place.  Nothing would be worse than your spouse opening the file cabinet only to find it empty!  Whether your divorce proceeds as a collaborative or mediated case, or as a full-blown litigation case, acting in good faith will always serve you well.

Don’t keep the copies in your car trunk.  If the documents disappear, all your efforts would be wasted.  Put your copies in a safe place until you obtain counsel.

Remember, Documents Are King!

deb-ewingDeborah Ewing, Wendy Jones, and Elaine Thompson are all experienced family law attorneys in the Los Angeles area, and are members  of A Better Divorce, a Collaborative Family Law Practice Group.

divorce-rings-contagious

Is Divorce Contagious?

-          Sometimes it seems as though when someone in your neighborhood, family, or social circle gets a divorce, others tend to head down the same path.  Is the grass really greener on the other side?  If divorce is sounding like a tempting option, here are some things you may wish to consider:

o   No two divorces are the same – just as no two couples and no two families are the same.  In a divorce, the differences matter a lot. 

o   “My friend receives/pays $7,500/month in spousal support!”  Maybe so, but that is no indication of what will happen in your case.  Yours and your spouse’s age, financial situation, work history, education, length of marriage, health, and a host of other factors, will influence how spousal support is determined, whether by settlement or in a Court setting.  The details of the amount, duration, and whether support will even be ordered are complicated and will vary widely.  It is impossible to know at the beginning what the outcome will be.

o   “My friends tell me 50/50 custody is the law.”  The phrase “50/50” is often heard in conversation; however, the reality is much more involved. There is no cookie-cutter approach to custody.  The schedule that works for another family may be totally different than what would work for your family.  Such factors as the ages of your children, geographical distance between households, work schedules, special needs, sports and other activities, and the relationships you have with one another will all play a part in determining the best plan.

o   “I heard I get half of everything…right?”  Well, maybe.  The division of your assets and debts is directly affected by the details.  The law on property division is fact-driven and the smallest differences can matter greatly.  Inheritances, separate property before marriage, changes in title, property loans, student loans, when property was acquired and debts arose, gifts to or between spouses, business interests, and many other factors must be considered before the final division is made.

-          Your life after divorce may not be what you’ve envisioned.  Careful consideration of a decision as big as this one is critical.  Just because your friend or relative got a result that looks tempting to you is no guarantee that the same thing outcome happen for you.  

deb-ewingDeborah Ewing, Wendy Jones, and Elaine Thompson are all experienced family law attorneys in the Los Angeles area, and are members  of A Better Divorce, a Collaborative Family Law Practice Group.

life-after-divorce

Life After Divorce

Now what do you do?

The documents are signed, the Judgment is filed with the court, you are officially “divorced.”  Now what?

-          Don’t throw away the Judgment – ever!  Years later, you may need to provide proof of your divorce (including a copy of the Judgment and Notice of Entry of Judgment) for any number of reasons, including remarriage, adoption, home loans, and Social Security benefits.  It is also wise to hold on to copies of the “Disclosure” documents you exchanged with your former spouse, particularly the Schedule of Assets and Debts, and Income and Expense Declaration.  Don’t throw away your tax returns as long as there is an order for support.

-          Is there any unfinished business?  Once the Judgment is filed with the Court, there are a number of tasks that may need to be completed:

o   Close joint bank accounts and credit cards and transfer any funds required by your agreement.

o   Notify insurance companies of the divorce, so that arrangements can be made to separate or establish new policies (auto, life, health).

o   Change title on vehicles and real property.

o   Make sure that the documents necessary to divide pension and other retirement plans and IRAs are prepared and processed now.

o   Make sure to change, if you wish, the beneficiaries on accounts and insurance policies.  See an estate planning attorney to talk about your new plans.

-          Keep records of payments   It is much easier to avoid conflicts and misunderstandings later on if you are able to go back and show records of what happened. Whether you are the person paying or receiving money, this is equally important.

o   You and your former spouse may have agreed to share the children’s medical costs.  If so, develop a system now for requesting reimbursement from the other parent.  Once a month, make copies of any medical, prescription, dental, vision or other agreed-upon costs you have incurred which were not covered by insurance.  Submit copies to the other parent showing what you paid, with a short (polite) cover note requesting reimbursement for their share.  Email is a good method for doing this if you have easy access to a scanner.  Print out the email or copy the note and put it with your receipts.  When you receive reimbursement, make a copy of the payment you receive.  If you are the one paying the reimbursement, keep copies of what you have sent.  If you don’t receive reimbursement on time (usually 30 days), send a brief (polite) follow up.  If you do not request reimbursement and provide copies to your co-parent, you may not be able to recover those funds later.

o   Whether you are the person paying or receiving support, it is very important to keep a record of each payment.  Years from now, you and your former spouse may disagree on the amount that was paid.  If payment is made by check, keep the cancelled checks (or copies of the checks you receive).  If payment is made through a payroll deduction, keep copies of your paystubs or of the checks you receive.  If you must pay or receive cash or a money order, make sure there is a signed receipt showing the purpose of the payment (child or spousal support, reimbursement for medical expense, shared cost of day care, etc.) 

You really are ready to start the next phase of your life.  With a little time devoted to organization and planning now, you can more easily put this behind you and move forward with confidence.

 

deb-ewingDeborah Ewing, Wendy Jones, and Elaine Thompson are all experienced family law attorneys in the Los Angeles area, and are members  of A Better Divorce, a Collaborative Family Law Practice Group.

joint-custody

What is meant by joint legal custody

Family Code ‘3083, with reference to the order of preferred joint legal custody

states as follows:

“In making an order of joint legal custody, the court shall specify the circumstances under which the consent of both parents is required to be obtained in order to exercise legal control of the child and the consequences of the failure to obtain mutual consent. In all other circumstances, either parent acting alone may exercise legal control of the child An order of joint legal custody shall not be construed to permit an action that is inconsistent with the physical custody order unless the action is expressly authorized by the court.”

 

In essence and in substance, that code section states that if no one specifies the particular of what joint legal custody will mean, there is a “default.” The default status provides that either parent may make the decisions with reference to the health, education or welfare of minor child. Either parent could consent to cosmetic surgery for the minor child, change a child’s school, or even change the child’s name.

Any parent who is seeking joint legal custody should consider specifying the areas which require mutual agreement including the following:

1.         Enrollment or termination of attendance in any public or private school.

2.         Participation in regularly occurring extracurricular activities.

3.         Non emergency medical, dental and orthodontic, other than routine exams

4.         Participation in mental health counseling, therapy or treatment.

5.         Change in area of a child=s residence

6.         Issuance of a driver=s license.

7.         Issuance of a passport

8.     Body piercing, tattoos and extraordinary hair cuts

9.         Signing contracts on behalf of the child (for theatrical services. etc.).

10.      Nominated as a guardian ad litem (to litigate on behalf of the minor child)

Legal custody has statutory liabilities to be aware of even if a parent with joint legal custody does not share physical custody. Civil Code ‘1714.1 provides that a parent in custody and control or a minor is liable up to $10,000.00 in damages resulting from acts of the minor which cause death, physical injury or property damage.  Education Code ‘48904 provides for a parent’s liability for a child’s willful misconduct or vandalism of school property up to an amount of $7,500.00.  Penal Code ‘490.5(b) provides that “a parent having custody or control of a minor” is jointly and severely liable with the minor for shoplifting or theft of books from a library.  lf both parents have authorized a minor to acquire a driver’s license, both parents may share some responsibility with reference to that minor in the event the minor has an accident.

Non-custodial parents should be aware of Family Code ‘3025 subsection (1):

“Notwithstanding any other provisions of law, access to records and information pertaining to a minor child, including but not limited to medical, dental and school records, shall not be denied because such parent is not the child’s custodial parent.”

A non-custodial parent has an absolute right to be made aware of and to acquire information regarding the minor child’s medical and school pursuits. The non-custodial parent need not accept a statement from, for example, the child’s physician or school administrator, that “I’m sorry, we cannot give you this information because you do not have legal custody.@

I hope this gives you a better understanding of what a joint legal custody really means.

 

Tara-McGuinnessTara McGuinness is a member of A Better Divorce, a Certified Family Law Specialist and has years of experience helping clients in Torrance / Palos Verdes in all areas of family law including California divorce, prenuptial agreements, trusts and estates. Our firm is conveniently located next to the Del Amo Mall in Torrance, California and is one of the most trusted family law firms in the South Bay community.

Collaborative Divorce

Planning Opportunities

This is the forth in a multi-part series by Christopher M. MooreRead Part 1 (PENALTY-FREE DISTRIBUTIONS FROM RETIREMENT PLANS BEFORE AGE 59½ : A WINDOW OF OPPORTUNITY),  Part 2 (Retirement Plan Interests as Community Property) and Part 3 (Taxation of Retirement Plan Withdrawals)

Planning Opportunities

The two common opportunities for planning afforded by Code §72(t) are those relating to distribution pursuant to a QDRO and periodic distributions from an IRA. Any amount may be distributed in a lump sum directly from a qualified retirement plan (other than an IRA) to the non-employee spouse before age 59½, without imposition of the penalty tax. Where an IRA is involved, the benefits may still be withdrawn as periodic payments under Code 872(t,)(2)(A)(iv).

Where the retirement plan in question is something other than an IRA, therefore, the non-employee spouse may receive part or all of his or her share in a lump sum. if that option is available under the plan, at ordinary Income tax rates, without the imposition of the 10 percent penalty tax. even if the recipient spouse is under age 59½, This can be a source of cash for the purchase of a residence or other assets.

Where the retirement plan in question is an IRA or the plan proceeds have already been rolled into an IRA, the spouse still has the opportunity to receive periodic payments free of the additional tax. These payments will vary depending on the age of the spouse and may require an actuary to calculate them, but there is some flexibility in setting periodic distributions so that greater or lesser amounts may be taken if desired. Once periodic payments are begun, they may apparently be later changed or stopped. Because only periodic payments may be made from IRA’s and lump-sum withdrawals may be made from other retirement plans, any decision as to a lump-sum distribution should be made before rolling the non-participant spouse’s interest into an IRA.

The opportunity to withdraw retirement plan benefits without penalty appears particularly attractive with today’s relatively flat tax rates, which may make it possible to withdraw large amounts from a plan during a particular year at ordinary income tax rates without increasing the tax rates.

The availability of retirement plan funds without penalty increases the options available to the parties and also, of course, creates new arguments for the parties. The spouse who is still working and not receiving benefits from the plan, for example, may argue that the ability to reach retirement plan benefits without penalty should be considered as a basis for reduced support to the non-participant spouse.

The exceptions discussed above will not apply to every case, and in many cases where they do apply, the parties may decide not to take early distributions. Distributions, once taken, are still taxable, and there is a strong inducement to allow assets, whenever possible, to remain in the plan to grow and compound at tax-deferred rates.

Whatever the facts of a particular case, however, if there are retirement plan interests and either spouse is under age 59½ counsel may wish to consider taking advantage of the window of opportunity afforded by the exceptions to the penalty tax on premature distributions found in Code §72(t).

Chris-Moore2Christopher M. Moore is a certified family law specialist, a fellow of the American Academy of Matrimonial Lawyers and a member of A Better Divorce, having specialized in family law for many years. Those years as a litigator have taught him that Collaborative Practice is the best way to resolve a divorce. A collaborative case is always faster, costs less and is less stressful than a conventional case where the parties face court congestion, delays and an adversarial, often hostile, relationship. Click here for more information about Chris and his firm.

Retirement2

Taxation of Retirement Plan Withdrawals

This is the third in a multi-part series by Christopher M. MooreRead Part 1 (PENALTY-FREE DISTRIBUTIONS FROM RETIREMENT PLANS BEFORE AGE 59½ : A WINDOW OF OPPORTUNITY) and Part 2 (Retirement Plan Interests as Community Property)

The rules governing the taxation of retirement plan withdrawals may be summarized as follows:

  1. All such withdrawals are ordinary income for federal and state income tax purposes.
  2. An “additional” or penalty tax of 10 percent applies to distributions from qualified retirement plans to recipients under age 59½. Internal Revenue Code §72(t).
  3. The combined state and federal income tax, taking into account the deductibility of state income tax on the federal return, is approximately 34.8 percent in California. When the 10 percent penalty tax is added, the effective combined rate approaches 45 percent. In cases where the marginal federal tax rate is 33 percent rather than 28 percent, the combined tax rate, including the penalty tax, can approach 50 percent, The penalty tax, which is not deductible on either the federal or state tax return, can make withdrawals before age 59½ prohibitively expensive.

Fortunately, Code §72(t) contains two little-known exceptions to the application of the penalty tax which may provide relief to the party who finds it necessary to make a premature distribution from a retirement plan in connection with a marital dissolution proceeding.

Code §72(5)(1) actually provides five exceptions to the general rule that if any taxpayer receives any amount from a qualified retirement plan, the penalty tax shall be imposed:

  1. Distributions made after the distributee attains age 59½ Code §72(5)(2)(A)(i).
  2. A series of substantially equal periodic payments made at least annually for the life or life expectancy of the distributee. Code §72(t)(2)(A)(iv).
  3. Distributions which do not exceed the allowable deduction for the distributee’s medical expenses under Internal Revenue Code §213. Code §72(t)(2)(B).
  4. Certain distributions from ESOP’s. Code §72(t)(2) (C).
  5. Any distribution to an alternate payee pursuant to a QDRO. This exception, however, does not apply to distributions from an IRA. Subsection (3)(B) of Code §72(t) provides that periodic payments from qualified plans must begin after separation.

Next Week: Planning Opportunities

Chris-Moore2Christopher M. Moore is a certified family law specialist, a fellow of the American Academy of Matrimonial Lawyers and a member of A Better Divorce, having specialized in family law for many years. Those years as a litigator have taught him that Collaborative Practice is the best way to resolve a divorce. A collaborative case is always faster, costs less and is less stressful than a conventional case where the parties face court congestion, delays and an adversarial, often hostile, relationship. Click here for more information about Chris and his firm.

retirement-taxes

Retirement Plan Interests as Community Property

This is the second in a multi-part series byChristopher M. Moore. Read Part 1 (PENALTY-FREE DISTRIBUTIONS FROM RETIREMENT PLANS BEFORE AGE 59½ : A WINDOW OF OPPORTUNITY) here.

Retirement plan interests are community property to the extent that the benefits are earned or accrued during the marriage.There are two judicially-approved ways to divide the community interest in a retirement plan. The first method is to reserve jurisdiction over the plan interest and divide each payment between the spouses based on the respective community and separate interests, as and when each payment is received. The second is to value the plan interest actuarially, award assets of equivalent value to the non-employee spouse, and award the entire plan interest to the employee spouse. In re Marriage of Brown, 15 Cal.3d 838 (1976).

As noted above, REA allows the non-employee spouse to withdraw a portion of the employee spouse’s retirement plan account pursuant to a QDRO.

Next Week: Taxation of Retirement Plan Withdrawals

Chris-Moore2Christopher M. Moore is a certified family law specialist, a fellow of the American Academy of Matrimonial Lawyers and a member of A Better Divorce, having specialized in family law for many years. Those years as a litigator have taught him that Collaborative Practice is the best way to resolve a divorce. A collaborative case is always faster, costs less and is less stressful than a conventional case where the parties face court congestion, delays and an adversarial, often hostile, relationship. Click here for more information about Chris and his firm.

money-retirement

Penalty-Free Distributions from Retirement Plans Before Age 59 1/2: A Window of Opportunity

This is the first in a multi-part series by Christopher M. Moore

It’s an all-too familiar scene. The parties are nearing the end of their dissolution proceeding. The case is settled and the assets are ready to be divided, but there is little cash. The cost of setting up two households in place of one and the payment of spousal support have created a chronic cash shortage. Unpaid bills have accumulated. One spouse needs a new home, another must buy a new car to replace the 1970 gas-guzzler that finally gave up the ghost. Attorneys’ fees and costs must be paid. The sale of the family residence produces some cash, but not enough. There are retirement plan accounts, but the parties are under 59½ and the tax cost of withdrawing the money, particularly after the 10 percent penalty tax is added, are prohibitive.

Is there a way a spouse can tap these retirement plan assets without penalty before age 59½? It appears there may be.

Family law practitioners are familiar with the Retirement Equity Act of 1984 (“REA”), which allows the non-employee spouse to receive part of the employee spouse’s retirement plan interest pursuant to a Qualified Domestic Relations Order (“QDRO”). These benefits can be paid directly to the non-employee spouse or rolled over into an individual retirement account (“IRA”) in the spouse’s name. Benefits received directly by the spouse are taxable as ordinary income. Benefits rolled over into an IRA by the spouse maintain their tax-deferred status until withdrawn.

It is also well known that withdrawals from a qualified retirement plan prior to age 59½ are subject to a 10 percent penalty tax. Internal Revenue Code §72(t). There are two exceptions, however, to the general rule imposing the penalty tax on pre-age 59½ distributions. These exceptions can provide valuable planning opportunities in situations where there are significant retirement plan benefits and the non-employee spouse is under age 59½.

Retirement Plan Interests as Community Property

Retirement plan interests are community property to the extent that the benefits are earned or accrued during the marriage. There are two judicially-approved ways to divide the community interest in a retirement plan. The first method is to reserve jurisdiction over the plan interest and divide each payment between the spouses based on the respective community and separate interests, as and when each payment is received. The second is to value the plan interest actuarially, award assets of equivalent value to the non-employee spouse, and award the entire plan interest to the employee spouse. In re Marriage of Brown, 15 Cal.3d 838 (1976).

As noted above, REA allows the non-employee spouse to withdraw a portion of the employee spouse’s retirement plan account pursuant to a QDRO.

Chris-Moore2Christopher M. Moore is a certified family law specialist, a fellow of the American Academy of Matrimonial Lawyers and a member of A Better Divorce, having specialized in family law for many years. Those years as a litigator have taught him that Collaborative Practice is the best way to resolve a divorce. A collaborative case is always faster, costs less and is less stressful than a conventional case where the parties face court congestion, delays and an adversarial, often hostile, relationship. Click here for more information about Chris and his firm.

the phantom returns

What is Forensic Accounting?

Forensic, according to the Webster’s Dictionary, means

  • “belonging to, used in or suitable to courts of judicature or to public discussion and debate”
  • “pertaining to or employed in legal proceedings or argumentation.”

Accounting, as defined by The Random House Dictionary, is “the system of organizing, maintaining … the financial records of a company or an individual.”

Forensic Accounting, then, is the practice of accounting in support of litigation. A Forensic Accountant provides an accounting analysis suitable to the court that will form the basis for discussion, debate and ultimately judicial decision. A Forensic Accountant utilizes specialized accounting skills to conduct an investigation into the actual earnings and income stream of individuals and businesses. A benefit of employing a Forensic Accountant is for his or her ability to communicate financial information clearly and concisely in a courtroom setting.

After a Forensic Accountant is retained for a marital dissolution case, he or she typically would:

  • Assist the attorney in defining the accounting matters
  • Assist the attorney with discovery requests
  • Summarize and analyze financial data and transactions
  • Prepare reports and declarations
  • Perform complex business valuations under family law rules
  • Attend depositions to support opposing witness examination
  • Assist in settlement negotiations
  • Assess tax aspects of proposed settlements
  • Assess issues for trial
  • Prepare court exhibits for trial
  • Testify as an expert witness in trial, if necessary
  • Support attorney in witness cross examination at trial
  • Review judgment for accuracy of findings

Ron-Anfuso2Ron J. Anfuso, CPA, ABV, CFF, CDFA, FABFA is a Forensic Accountant and expert witness in the Los Angeles area. He has over 19 years experience in the valuation, financial, accounting and tax aspects of marital dissolution matters, which includes conducting business valuations, gross cash flow analyses, and tracings, as well as performing Moore/Marsden and other dissolution-related accounting calculations. He is also a founding member of A Better Divorce, and has prepared over 40 collaborative law cases.