When couples decide to separate or divorce, it often takes some time to sort out their finances after separation.
(Learn more about how long will it take to get divorced?)
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 payments, a mortgage, and other installment payments.
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 what 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. For example, I make credit card payments after separating from my spouse. The payments equal $2,000, and it goes toward 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 a shared asset, like a house where you both live. These credits are referred to by family lawyers and judges as “Epstein credits”.
“So credit is given for payments after separation. Are there any exceptions?”
There are two exceptions to the general rule that credit is given for post-separation payments. One exception is that if you are using an asset (such as a car), you typically 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.
This blog post was written by Catherine Conner.
It is not necessary to appear in court if you and your spouse reach an agreement. You can avoid court divorce once an agreement is reached. If you and your spouse reach an agreement, a Marital Settlement Agreement (often abbreviated “MSA”) can be submitted and approved by the court without a personal appearance.
Exactly how can an Marital Settlement Agreement help you avoid court divorce? Marital Settlement Agreements are comprehensive documents that set forth the parties’ agreements pertaining to the dissolution of their marriage, or their legal separation. They can include the following:
Division of Community Property
In California, which is a community property state, assets acquired or purchased during the marriage are considered community property and need to be divided equitably between the parties. This can be accomplished by an in-kind division, where all assets are split evenly, or by selling the assets, with the proceeds being evenly divided. As an alternative, assets can be allocated between the spouses in a manner that results in each receiving assets of comparable value.
Separate assets, such as assets acquired by gift or inheritance, are not treated as community property subject to division and are awarded to the spouse who acquired the asset by gift or inheritance.
Allocation of Debts and Liabilities:
Similar to the division of community assets, any debts or obligations incurred during marriage are the equal responsibility of the parties and need to be divided in a manner that results in each party assuming one half the debt. In cases where the marital debts exceed the value of the marital assets, it is possible to allocate a larger portion of the debt to the higher income spouse.
Child, Spousal and Family Support:
Marital Settlement Agreements should also include provisions regarding the amount of child support to be paid (if there are children of the marriage), as well as provisions for the amount and duration of tax deductible spousal support. When applicable, the agreement may provide for family support, a support option that combines both child and spousal support and is entirely tax deductible by the payor.
Child Custody and Visitation:
When there are children of the marriage, Marital Settlement Agreements should also set forth provisions regarding physical and legal custody of the children, as well as a more detailed parenting plan which delineates how the parties are going to share holidays and school vacations, share information regarding their children, and make decisions moving forward on items materially affecting the health, education and overall welfare of the children.
Although there are many sample Marital Settlement Agreements available, these Agreements can be very complex and it is always advisable to have an experienced family law attorney draft and/or review Marital Settlement Agreements.
Divorce is not usually a quick process.
The earliest date you can terminate your marital status (change from being a married person to being a single person) is six months and one day after the date the Summons is served. However, there may be issues in your case that will take more time to resolve. It may also be that you reach agreements on all issues prior to the end of the six-month period. Resolution depends on many factors, including the amount of information to gather, the emotional state of the participants, and the complexity of the issues to resolve. How quickly a case can be completed can also depend on the dispute resolution process the parties have chosen; for instance, a mediated case might resolve more quickly than a litigated case.
What can I do to speed up the divorce process?
Parties can take some steps that speed up the divorce process, including the following:
- Gather and provide your spouse with as much of the information and documents as necessary to enable both of you to understand the situation;
- Do not use the legal resolution process as a way to attack or get back at the other party;
- Speak clearly, and articulate what is important to you. Be an advocate for yourself in a positive manner;
- Listen to what is important to your spouse. In most cases, resolution is best achieved when each party understands the other’s needs and goals;
- If your emotions are making it difficult for you to work productively toward resolution, seek counseling with an appropriate professional; and
- Listen to the advice of your attorney and other experts.
CLR Attorneys Achieve Super Lawyer Status
We’re proud to announce that two of our attorneys were honored this year as “Super Lawyers” of Northern California:
Actually, Catherine’s been an official “Super Lawyer” since 2005, and Amy’s been one since 2004. Congratulations, attorneys! Keep up the good work!
The Selection Process
There can be a lot of bias in industry awards, but Super Lawyers has a multi-step process for picking the best attorneys out of the bunch – and you should, too.
Their four-step process consists of nominations, independent research, peer evaluation, and a final selection. By including both external evaluations of the attorney and her performance, as well as the opinions of other professionals who work alongside them, Super Lawyers gets a pretty good picture of just how well the professionals measure up. They’re also highly selective – only 5% of all the attorneys in the state are eligible for the title of “Super Lawyer.” See How Super Lawyers Are Chosen or go to “Super Lawyer Selection Process” for more information.
How Do I Choose The Best Attorney For Me?
Maybe you’re searching for your own super attorney but wondering, “How do I choose the best lawyer?” Try using the process above. Talk to other attorneys and ask for recommendations or referrals. Look at the independent awards and merits of each attorney. Finally, narrow down your list and make contact!
The main courthouse here in Santa Rosa is on the list of “Category 5” buildings, which are buildings likely to partially collapse in the event of a substantial earthquake. Just think: if you hire a mediator here at Conner, Lawrence, Rodney, Olhiser & Barrett, LLP for your divorce, you may never have to set foot in a courthouse at all!