When couples decide to separate, it often takes some time to sort out their finances. Sometimes, they still live together and have a lot of joint expenses. Even when they are not living together, they may still have joint debts such as credit cards, car and other installment payments, and a mortgage.
There are different ways of handling finances after separation. Some couples pool their income during their relationship by depositing all income into one bank account and paying all expenses from that account and continue to do that after they separate. Some people have or obtain separate bank accounts after they decide to separate and reach informal agreements about who will pay which expenses, and whether one of them will contribute to the other’s expenses. In some cases, a formal agreement or court order mandates a specific amount of support and who will pay which debts or expenses. Finally, some people muddle through without any informal or formal agreements or court orders and somehow get expenses and debts paid. So with the various ways of handling finances, at the time of the divorce when the assets and debts are divided, the question arises about sorting out what happened with the finances after separation.
In California, one of the underlying principles in family law is that when people are married or in a registered domestic partnership, they are creating a financial community, sharing their income and their expenses while they are together. So when they separate, any debts or obligations that exist at the time they separate are the responsibility of both of them, not just the person who incurred them.
After they separate, however, they no longer have a joint financial community. The income each earns belongs to the person who earned it and the expenses each incurs after they separate is his or her individual responsibility. But if one person uses his individual income after separation for joint debts from before separation, then he or she is given credit for using his or her own income to pay a community obligation. So for example, if I make credit card payments after I separate totaling $2,000 on the old balance (not new charges after separation), when the assets and debts are divided, I will be given credit for paying down the debt in the amount of $2,000. The same principle applies to joint expenses paid by one spouse after separation, such as payments on a joint insurance policy or payments for an asset that is being shared such as when people live in the same house. These credits are referred to by family lawyers and judges as “Epstein credits”. There are two exceptions to the general rule that credit is given for post-separation payments. One is that if you are using an asset (such as a car), then typically you aren’t given credit for the payments for that asset (such as the monthly loan payment) if the payment is approximately the same as the value of using the asset. The other exception is that if the payments are a substitute for support (e.g. you are paying the mortgage for the house your spouse is living in and not paying cash support), then you would not receive an Epstein credit.
Many people think that if they are not rich, they don’t need an estate plan. Many more people figure that “things will just work out” when they die. The vast majority of people don’t like to think about dying.Many people think that if they are not rich, they don’t need an estate plan. Many more people figure that “things will just work out” when they die. The vast majority of people don’t like to think about dying.
You know at some level, however, that your good health may not last all of your life, and that someday your life will end. You may be concerned about what will happen when you can no longer manage your affairs, or what will happen to the lives of the ones you love, or the organizations you passionately care about, when you are no longer here to make decisions.
You . . . and I . . . and everyone else who has had some success in life, worry about what will happen when we die. You want your family—and perhaps others—to have the assets that came from your hard work over a lifetime. Estate planning is the rational process of facing those worries and concerns, and finding options and effective ways to deal with them. When you do estate planning, you remove a huge load from your mind, and you remove an equally huge burden from the minds of those you love and wish to support into the future. Setting up an estate plan is one of the finest gifts you will ever give to your loved ones.
As part of the dissolution process, all community property assets are subject to division, including retirement assets. There are specific orders that are used to divide retirement assets, known as Qualified Domestic Relations Orders (QDRO). These orders generally define (1) how the community property interest in a spouse’s retirement is calculated, and (2) how the non-employee spouse is going to receive his or her share of that retirement. If the retirement account is a 401(k) or IRA, or other form of defined contribution plan, the non-employee spouse may be able to immediately take his/her share of the retirement asset and move it into an IRA in his/her own name. If the retirement is from a pension, the non-employee spouse may receive his or her share of the retirement on a monthly basis, after the participant spouse retires. QDROs
are utilized even if the employee spouse has already retired and is receiving retirement income.
In California, in the absence of an agreement providing otherwise, child support is calculated by using a “guideline” formula, which takes into consideration the respective incomes of each parent, the percentage of time the child has with each parent, and various other factors that affect an individual’s income or taxes. This formula is based on an assumption that a certain percentage of the family’s total income is spent on the children. When a parent’s share of the family income is higher than his or her share of the time with the children, child support is used to shift income to the other parent. In most cases, the guideline amount is followed by the court; there can be unusual circumstances that warrant a change from the guideline amount.
Because the mathematical formula is complex, attorneys and courts use computer programs, such as DissoMaster and SupporTax, to calculate guideline support. Individuals can use the statewide guideline calculator online, located here: http://www.childsup.ca.gov/Resources/CalculateChildSupport.aspx. Be aware that even small changes in the input numbers can create significant differences in the guideline support amount, and that different programs generate slightly different results. The actual amount of support to be paid in any case is ultimately determined by the judge.
The base monthly support is for living expenses, such as housing, clothing, food, etc., for the time the children are in the care of one parent. If a parent has the children 30% of the time, she or he is expected to pay 30% of these expenses. Child support agreements or orders often have “add-ons” for additional expenses such as uncovered health care expenses or child care.
You have decided to get a divorce and hope to work it out peacefully. How can you prepare for talking to your spouse about an amicable divorce?
1. Educate yourself about the options. You can do your own divorce but often people need professional help to avoid problems. Mediation and Collaborative Practice are two methods where you and the professionals commit to working it out without going to court. Learn more about these methods and whether they are a good fit for you. One good resource is a monthly program in California, “Divorce Options” which describes the different options and some basic information about divorce: http://cpcal.org/DivorceOptions.aspx . In Sonoma County, Divorce Options workshops are held on the second Saturday of each month at the Collaborative Practice Center. The legal self-help publisher Nolo Press has an excellent book, “Divorce Without Court” which provides useful information http://www.nolo.com/products/divorce-without-court-dwct.html. You can also meet with a divorce professional to learn about how these options might work for your particular situation.
2. Choose carefully how to start the conversation with your spouse. The way you initiate the conversation about your divorce is a signal to your spouse about your actual intent to work together. Catching her on the fly as she is leaving for work is not a good plan! Ask your spouse when she can have an important discussion and be willing to listen to her preferences. Agree in advance on how long each of you will set aside so you won’t have to end abruptly. Decide on a location where you both feel safe and won’t be interrupted.
3. Tailor the conversation to you and your spouse’s needs. Think about how each of you makes decisions. Starting an amicable divorce is a decision you and your spouse will make together. How does your spouse like to make decisions? Does he like to do his own research? Pass on some of the links to resources you found and let him explore from there. Does he like to read information someone has compiled for him? Print out chapters from books you have read or articles you find about divorce options. Would he be more open if he suggested how to divorce? Ask him how he would like to do it before you make your own suggestion. Be willing to listen to his concerns and be willing to express your own concerns in a constructive way. At the end of the conversation, describe what you believe the two of you have agreed upon and see if he agrees. Express your appreciation for the willingness to work together and your hope and intentions for the process.
If the recipient of spousal support elects to cohabit with someone with whom he or she is romantically involved, it may affect the recipient’s rights to continue receiving spousal support.
If the recipient of spousal support elects to cohabit with someone with whom he or she is romantically involved, it may affect the recipient’s rights to continue receiving spousal support. Family Code Section 4236 says that there is a presumption of a reduced need for spousal support if a person cohabits. In other words, when the recipient of support cohabits, the law assumes that a portion, if not all, of his or her expenses are reduced as a result of living with another person and that the need for spousal support is significantly less. Regardless of whether or not this is accurate, the recipient of spousal support then has the responsibility to convince a judge that there is still a need for spousal support, despite the cohabitation. This can be established by showing that his or her monthly expenses remain the same and that he or she is not financially advantaged by the cohabitation.
A trust does NOT protect you from creditors. One of the wonderful things about a trust is that it is so very, very easy to deal with after you set it up. There are no formalities to follow, no forms to file, no permission to ask. You DO have to title you assets into your trust. Once this is done, however, you continue to control your assets in trust completely, and you may use them as you wish.
The flip side of this good news is that since trust assets are YOURS, they are subject to your creditors. If you are sued, and the plaintiff gets a judgment against you, he or she can attach your assets even if they are in the trust.
The only way to really protect your assets from creditors is to make them not your assets anymore. This has its own downside. Let’s say you have a creditor, and let’s say you own a rental property. Your creditor can take your property even if it is held in trust. You can avoid that by giving your property to your brother, but then you don’t own it anymore. Maybe your brother will give it back later, or maybe HIS creditors will go after it. Don’t rely on a trust to protect your property from creditors.
In California, you can request that the court issue a Judgment of Dissolution of Marriage (the legal label for a divorce) or a Judgment of Legal Separation. If you request a Dissolution of Marriage (a divorce), the Judgment can include your agreements or the court’s orders about parenting, the division of your assets and debts, support, AND you will be changed from being married to being single. If you request a Legal Separation, the Judgment can also include your agreements or the court’s orders about parenting, the division of your assets and debts, support, BUT you are still married. If you decide at a later point that you want to remarry, you will have to file for a Dissolution of Marriage and obtain a separate Judgment changing you from being married to single even though all of your financial and parenting issues may have already been addressed in the Judgment of Legal Separation.
Why would someone request a Judgment of Legal Separation? Sometimes for religious reasons, someone does not want to obtain a divorce, but wants to separate their financial affairs with a court order. And until recently, some people requested a Legal Separation to be able to stay on their spouse’s health insurance due to insurability problems. However, with the changes in health insurance availability and the new policies of many employers not to continue coverage if there is a Judgment of Legal Separation, this is rarely a reason for a Legal Separation anymore. One final reason is that there is a residential requirement to file for divorce. In order to qualify to file for a divorce, you must have lived in California for at least six months and in the county you are filing in for at least three months. If you have not lived in the county where you want to file for three months (perhaps you recently moved there), you can first file for a legal separation (which has no time restrictions for filing) and then later amend your Petition to file for a dissolution of marriage (divorce) once you have resided in the county for three months.
Does this mean you haven’t “separated” until a Judgment of Dissolution of Marriage or a Judgment of Legal Separation has been filed? No. There is a difference between a Judgment of Legal Separation and the “date of separation” that affects your financial rights, duties and responsibilities.
No. A divorce is not automatic. In order to get a divorce you first have to file a request with the court – a Petition for Dissolution (divorce). The earliest date you can be divorced in California is six months from the date the Petition and other papers are served on your spouse. Service can be accomplished is many ways, including having a person over 18 years of age, other than you, handing the papers to your spouse; service by a registered process server or the Sheriff; or by your spouse signing paperwork that is mailed to him/her. Once service has occurred, then the six month waiting period starts. If you want to be in divorced in a particular year, you have to file and serve papers on your spouse no later than June 30.
If the other issues of the divorce (i.e. property division, support and parenting issues) are not resolved within this six month time frame, you are entitled to request a “bifurcated Judgment.” This is a technical term meaning that your status as a married person is separated from the other issues in your case, and a judgment terminating your status as a married person is obtained and the other issues are decided later. That makes you single again. This does not happen automatically. If you want to terminate your marital status before the other issues of your case are resolved, you must either present an agreement to do this or file a motion to ask the court for a bifurcation. The necessary paperwork has to be filed with the court for this to happen whether by agreement or not.
If you and your spouse or partner reach an agreement about all of the issues in your divorce within the 6 months, then you can submit the agreement and the other required paperwork to the court for the divorce to become official and you will become single when the six month waiting period has elapsed.
All methods of becoming divorced require some affirmative action on your part and a court order that says you are divorced.
You probably believe that you don’t have an estate plan. However, everyone already has an estate plan. It’s not a very good one, but it’s a plan.
The people who write California laws know that too many people never get around to writing even so simple a thing as a handwritten will. Many more than half of the people who die every year, (up to 85% according to some statistics!) have done nothing at all to express an opinion as to how their assets should be distributed or how their spouses, partners or children should be taken care of. If the government had to start from scratch to figure out what to do with each such person, it would take forever.
To avoid chaos when these people die without plans (“intestate” is the word), the state tried to figure out what people would have written if they’d ever gotten around to writing a will or trust. Every state has laws of “Intestate Succession” to determine who will get what when someone dies without a valid will or other estate plan. What these laws do depends on whether the person who dies is married, in a Registered Domestic Partnership, or is single. What the laws do depends on what relatives the person has: children, parents, siblings, etc.
The laws of intestate succession are extremely complicated, and you don’t need to know all of the details. What you should understand is that these laws are geared toward some mythical Everyman. By definition, they won’t be tailored to YOU and YOUR family situation. In my next blog, I’ll explain how it works.
The information in this blog is provided for general informational purposes only and is not intended to be legal advice on your matter. The law changes frequently and varies from jurisdiction to jurisdiction (this blog generally reflects California law). No attorney-client relationship is formed nor should any be implied. Nothing in this blog is intended to substitute for the advice of an attorney. If you require legal advice, please consult with a competent attorney licensed to practice in your jurisdiction. You can contact us at 707-523-0480