California Divorce and Family Law

Divorce the house before the spouse

Splitting up after years of marriage? Divorce your house, then your spouse.

"If you're still linked through the house, than you're not really divorced," says Kelly Lise Murray, a Harvard-trained lawyer and Nashville real estate agent.

That bit of advice goes against the almost universal desire to hang on to the family home, especially by the spouse who ends up with custody of the children. Indeed, the courts almost always give special consideration to the parent who gets the kids: Keep the kids, keep the house.

But Murray, who describes herself as a "divorce real estate advocate," says people tend to underestimate the "ghosts" that go along with keeping the house. The place is often so filled with memories, both good and bad, she says, that "it's not the family home anymore. It's a huge lodestone."

People also tend to underestimate the true cost of homeownership, so much so, according to Murray, that the remaining spouse's ability to afford the place is often drastically overstated.

Even in a friendly divorce, if there really is such a thing, certain key expenses are either forgotten or overlooked. Lawn care, homeowners' association fees, even the basic costs of maintenance and upkeep are among the costs that are rarely considered, either by the courts or the spouses.

Then there's the even bigger issue of hidden debt. Ideally there will have been no secrets between the husband and wife. But money is a major cause of divorce, and in many cases, one spouse has no clue that the other one has rung up big bills that have become undisclosed liens against the property.

"I see it a lot," says Murray, whose goal is to reform divorce law as it pertains to real estate, one state at a time. "It's frequent. And what you don't know during your divorce can hurt you long after the marriage is over."

Fortunately, a major mistake is preventable—but only during your divorce, not afterwards. So Murray's mantra is "more earlier," as in more due diligence and more information from more financial and real estate experts, all much earlier in the divorce process.

In most divorces, the spouses determine what the house is worth, and the one who gives up the place is usually given a credit of some sort for his or her half of the equity the couple has in the place. Typically, the parties split the difference based on an appraisal. So if an appraiser says the house is worth, say, $300,000 and they owe $200,000, the "out spouse"—usually the man—gives up his claim to his $50,000 equity stake for, perhaps, $50,000 in stocks and bonds.

But along with that appraisal, Murray says the "house spouse" should obtain an independent, third-party inspection of the property to determine whether there are any latent defects that could impact its value.

"You wouldn't buy a house without an inspection, so why would you accept one in a divorce without an inspection?" Murray asks. "What if something's wrong or about to go wrong? You can use the inspector's report as a punch list, and either use the marital assets to make the necessary repairs or reduce the value of the property accordingly."

Make sure to ask your inspector to estimate the remaining life of the property's major appliances and systems. If something is on its last legs, you'll want to know in advance so you can adjust for that as well. And while you're at it, order a termite inspection—the damage those little buggers cause is often significant.

The real estate divorce specialist, whose book, "Divorce This House: When Keeping Your House Equals Losing Your Divorce" ($19.95, divorceyourhousetoo.com) was released in December, also wants the spouses to have two title searches, one soon after the divorce process begins and the other shortly before it's finalized.

The first will uncover any unknown liens, encumbrances or clouds on the title that may have been placed by one spouse without the other's knowledge. Often, there is—a second mortgage, perhaps, or maybe a gambling debt that has become a lien on the property. The second will uncover anything placed on the title during the proceedings, such as a lien filed by the out spouse's attorney to cover his fees.

Speaking of one spouse not being totally honest and aboveboard with the other, it might not hurt, either, to request a CLUE report from the company that insures your home or directly from ChoiceTrust.com.

The more people follow these guidelines, Murray believes, the more they will end up selling the once-family home and moving on.

From the Chicago Tribune.

US man wants value of kidney in divorce settlement

New York doctor donated kidney to wife in 2001 and is now demanding an estimated $1.5m, attorney says

When his wife needed a kidney transplant, Dr Richard Batista gave her one of his, attorney Dominic Barbara said.

Now that Dawnell Batista has filed for a divorce, Richard Batista wants his kidney back as part of his settlement demand. Or, Barbara said today, his client wants the value of that kidney: An estimated $1.5m (£993,000).

The case is being heard in Supreme Court in Mineola, New York.

Barbara said his client, a 49-year-old doctor from Ronkonkoma who graduated from Cornell University Medical School in 1995, married Dawnell Batista on August 31 1990. The couple had three children, now ages 14, 11 and 8.

After she had two failed transplants, Barbara said, his client donated a kidney to his wife in an operation that took place at the University of Minnesota Medical Centre on June 18 2001. Richard Batista said his marriage at the time was on the rocks because of the strain of his wife's medical issues.

"My first priority was to save her life," Batista said at a news conference in Garden City. "The second bonus was to turn the marriage around."

Dawnell Batista, 44, of Massapequa, filed for divorce in July 2005, Barbara said.

Neither she nor her attorney, Douglas Rothkopf, of Garden City, could immediately be reached for comment. A receptionist at Rothkopf's office said he was in court.

Medical ethicists agreed that the case is a non-starter. Asked how likely it would be for the doctor to either get his kidney back or get money for it, Arthur Caplan at the University of Pennsylvania's Centre for Bioethics, put it as "somewhere between impossible and completely impossible".

First and foremost, said Robert Veatch, a medical ethicist at Georgetown University's Kennedy Institute of Ethics, "it's illegal for an organ to be exchanged for anything of value". Organs in the US may not be bought or sold. Donating an organ is a gift and legally "when you give something, you can't get it back", he said.

"It's her kidney now and ... taking the kidney out would mean she would have to go on dialysis or it would kill her," Veatch said.

Nor can you assign a subsequent monetary value to an organ, Caplan said. "There's nothing later [you can get] in terms of compensation if you regret your gift," he said.

What's more, no reputable surgeon would perform such a transplant and no court could compel a person to undergo an operation, he said.

From the Guardian.

Windsor, Ont., man claims wife stole winning lottery ticket before divorce filed

A 59-year-old Windsor, Ont., woman is being sued by her 81-year-old husband, who alleges she stole his $3.5-million winning lottery ticket before filing for divorce.

In documents filed with the court, Gerald Moore alleges Patricia Moore conspired with family members to deceive him and claim the prize in early April.

He claims his wife gave the ticket to her daughter from a previous marriage for her to cash.

The lawsuit, which also names the Ontario Lottery and Gaming Corp., claims Patricia Moore manipulated her husband's "medication for the purpose of rendering him physically emotionally and psychologically incapable" of understanding the situation.

The allegations have not been proven in court.

Patricia Moore - who the suit alleges was given $1.5 million of the winnings by her daughter - filed for divorce in August.

From the Canadian Press.

Dividing up real estate during a divorce

When a married couple who own a home decides to part ways, division of the residence and its equity can become one of the most contentious issues among those to be negotiated.

Often, spouses are able reach an agreement on how to divide their property equitably – ultimately saving time, curbing excessive attorney fees and avoiding the pain that comes with a drawn out legal proceeding. But if both parties cannot reach a peaceful arrangement, the court will ultimately decide how the property will be divided, say the experts.

The apportionment of real estate and other property in a divorce is governed by state law, and, consequently, it differs from state to state, says Joe Russo, broker with Docks Only Real Estate, Lake Norman, N.C.

"There is no 'usual' settlement in any divorce," he says. "Different arrangements can be made, depending on what the parties agree to, as in a prenuptial agreement."

When it comes to property division, most states fall within one of two categories: community-property states and equitable-distribution states. In the former, most property earned or acquired during the marriage is shared equally between the two spouses, including a home. In the latter, the court partitions the property in a fair and just manner, depending on the decision of the judge and the laws of the state. Courts in equitable distribution states have much discretion and will examine multiple factors when deciding what is a fair and equitable division of the property, including the length of the marriage, each spouse's earning capacity, the contribution of either spouse in obtaining the home, and each party's health and age.

Other key circumstances, such as the presence of any minor children and when the home was bought, can significantly affect how the home will be divvied up by the court. Typically, if the residence was purchased during the marriage and the husband and wife have no minor children, the judge will partition the property equally between the spouses.

One way this is done is to set off one spouse's interest in the home with other property. For instance, the wife will get the house, while the husband may receive other property worth the equivalent of the home. In many cases, the court may determine it best to force a sale of the home and apportion the proceeds between both parties.

"Usually, both spouses share the equity in the house," says Elinor Robin, Ph.D, a divorce mediator in Boca Raton, Fla. "They may share it at the time of divorce or they may set a time limit – for instance, three years – during which time the home will be sold and the equity shared."

Read more at the New York Daily News.

More couples hiding wealth from each other

Honesty may be the best policy for a successful marriage. But when it comes to divorce, couples are becoming increasingly devious in concealing their wealth from each other.

One fifth of couples who divorced last year tried to conceal their assets or income from their spouse - a figure which has doubled since 2006 - a report has found.

The study - by the accounting firm Grant Thornton, which surveyed 100 family lawyers - found that husbands were much more dishonest when a marriage crumbled.

In cases where assets had been hidden, 88 per cent involved men concealing wealth from their wives. Just two per cent involved women hiding assets. In the remainder of cases, both partners tried to conceal wealth from one another.

Family law experts say a spate of expensive, high-profile divorce cases, such as that of Sir Paul McCartney and his wife, Heather Mills McCartney, is spurring couples to hide their wealth from each other.

John Charman, the insurance magnate, was forced by the courts to pay his ex-wife a record £48 million settlement last year.

The property multi-millionaire Stuart Crossley was involved in a dispute with his wife Susan after she alleged during divorce proceedings that he had failed to tell her about millions in offshore accounts. She later dropped her claim for a financial settlement.

Andrea McLaren, the head of Grant Thornton's matrimonial practice, said: "The number of couples hiding assets from one another has increased by 100 per cent since last year, which is staggering.

"High-profile, big-money cases have scared individuals into trying to hide assets and there is now the perception that women are receiving more favourable settlements than men."

Vanessa Lloyd Platt, a specialist in divorce law, said she had seen a surge in the number of men trying to conceal wealth from their wives.

"Men are seeing these huge settlements and they are terrified," she said. "If they think a marriage might break down, more and more men are panicking and trying to put their capital into trusts and offshore accounts or buy assets in a third party's name so that they are hidden from their wives.

"It is not unheard of for women to lie but, in my experience, men are more likely to be dishonest when it comes to matrimonial disclosure."

The succession of high-profile divorce cases has also seen a surge in the number of couples drawing up pre-nuptial agreements. A survey of law firms found that 67 per cent reported taking on more pre-nuptial work in the past year.

From The Telegraph.

Savings plan distribution in divorce taxed if it's cash

Q: I am going through a divorce in which I will receive a settlement from my soon to be ex-spouse's employee-based pension plan and voluntary savings plan.

I was told I would be taxed on the pension plan distribution if I took the amount as cash and did not roll it over into my retirement plan.

Does this also apply to the voluntary savings plan?

A: Yes, if the voluntary savings plan is a qualified plan, meaning contributions to the account and the earnings made on that money are not taxed until it is withdrawn, then you will be taxed on the amount you take out as cash, says Kathy Ploch, a certified public accountant with Zientek & Co. in Houston.

The normal penalty for taking out premature distributions before the age of 59 1/2 is 10 percent, says Ploch, president-elect of the Houston Society of CPAs.

There is an exception to the penalty for distributions from qualified plans if the distribution is made through a qualified domestic relations order, which is also known as a QDRO, or quadro.

Also, if the voluntary savings plan is a qualified plan, and you take a regular distribution, the tax-deferred earnings and the tax-deferred contributions could be rolled over tax-free, Ploch says.

There are several IRS publications that can give you more information about retirement (publications 590, 575 and 939) and divorce (publications 504 and 555). Go to irs.gov to access them.

However, I caution you not to rely on your own research to make these decisions. Consult with a financial planner or CPA before making final the terms of your divorce and financial settlement. Your age, dependents and health are all factors that must be considered as you plan for a future without your spouse.

Thanks to the Houston Chronicle.

Options exist in case of divorce in family business

Question: My husband and I are the owners of a small, but profitable small business. We've recently agreed to a divorce. How can we divide the assets of our business in a fair manner?

Answer: Problems in the operation of a family-owned business tend to multiply with the introduction of a shareholder's divorce.

Issues such as the direction of the business, the compensation and benefits paid to shareholders, the resolution of day-to-day managerial problems, etc. can destroy the business over time, leaving both parties in worse shape than they would have been had they initially come to terms on how to divide, sell, or otherwise dispose of their similarly owned and controlled business interests.

The following are some options in the event of a family business owner's divorce.

> Sell business to third party. This will have the same general tax consequences whether the sale was driven by a divorce or not. A forced sale is likely to result in a depressed sales price.

> Buyout of a spouse's interest or share. The major challenges with this option include getting the spouses to agree on the method of determining the valuation/sales price of the company, the method and timing of paying the sales price, and determining how the transaction will be characterized for tax purposes.

Fair market value is the price at which an independent buyer and independent seller would willingly agree to enter into a purchase transaction; however, as the buyer and seller in this situation are not independent third parties, and are in essence forced to transact with one another as co-owners, it is often difficult to arrive at an agreed upon fair market value for the transaction.

In such situations, a specialized appraiser, CPA, or CVA is generally hired for purposes of trying to determine fair market value. Separate appraisers are also sometimes engaged by both of the spouses for negotiation purposes or even to give testimony before a court when the divorcing spouses cannot reach a satisfactory valuation. After the price and payment terms have been agreed on, the spouses must address the tax consequences.

> Transfer/redemption of stock. Where the business is operated as a corporation, the regulations allow spouses to transfer assets in a tax-free manner; however, when the family company will be used to redeem stock, there will be a recognition event if there is either redemption or a constructive dividend.

Spouses can agree between themselves as to how the transaction will be taxed. For the agreement to be effective, it must be filed with the applicable tax return for the year that includes the stock redemption.

> Co-existence - continue ownership and operation of the business. Often the only thing divorcing spouses can agree on is that the family business should not be sold at the time of the divorce.

The option of continuing the family business, with powers and duties divided between the divorcing couple, usually should be considered as a long-term solution only where special circumstances are present. Among such circumstances:

(1) a profitable business that can sustain the monetary desires of both of the divorcing spouses;

(2) a desire or need by both spouses to continue their ownership;

(3) where neither spouse is able or willing to buy the interests of the other;

(4) children of the divorcing spouses are active in the business; and

(5) where both spouses are emotionally and mentally capable of co-existing as shareholders, officers, and directors of the company.

Spouses would enter into management agreements to delineate specific duties in the operation of the business and to identify those issues requiring the vote or approval of both spouses. The spouses also may want to prepare employment agreements to address benefits, termination, resignation, covenants not to compete, etc.

Additionally, all owners should enter into buy-sell agreements to specifically address the future transferability of business interests, and the purchase rights on death, among other issues.

> Split up the company. It may be possible to split a family-owned business between the divorcing couple.

The alternatives available to a divorcing couple include dividing the business assets and beginning or continuing separate business lines with separate ownership or dividing the business into different segments and continuing to own and operate separate divisions of the business enterprise.

From the Coloradoan.com.

2,600 Photos to Be Divvied in Divorce

Nancy Goliger and Bruce Berman's photography collection began in 1991 when the Hollywood couple — he is chairman and chief executive of Village Roadshow Pictures, she is executive vice president of creative advertising at Paramount Pictures — commissioned emerging artists to hit the road and take pictures.

“As I was able to afford to, I then began to buy more established, important images that were at the root of photography,” Mr. Berman said.

A selection from the collection — at last count some 2,600 photographs — was exhibited last year at the J. Paul Getty Museum in Los Angeles.

Now, because the couple are divorcing, about 500 works are heading to auction at Christie’s in New York, starting in April. The rest are being given to three Los Angeles museums: the Los Angeles County Museum of Art, the Museum of Contemporary Art and the Getty, whose donors have included the couple.

“It wasn’t until about two or three years ago that I realized I was a collector,” said Mr. Berman, who worked with Rose Shoshana, a Los Angeles dealer, to build the collection.

It has not been determined which images will go to which museum. “I have asked the museums to give me a list of prioritized preferences,” he said. “Nancy and I want to give them what they want and need.”

The task for the Christie’s experts is how best to sell 500 photographs. “People tend to think that selling so many photographs floods the market and depresses prices, but auction history indicates just the opposite happens,” said Joshua Holdeman, international director of Christie’s photography department.

Rather than sell them all at once, however, Christie’s plans to hold three different sales: one limited to works by Diane Arbus, in April; another of images by William Eggleston, scheduled for October; and a third offering a selection of photographers — from Walker Evans and Dorothea Lange to younger artists with less well-known names — planned for  2009.

Together the three sales are estimated to bring $7 million to $10 million. “It’s a truly American collection that goes from the Depression era to artists who are alive and working today,” Mr. Holdeman said.

Among the highlights are “A Family on Their Lawn One Sunday Afternoon in Westchester, N.Y.,” a seminal 1968 Arbus work estimated at $30,000 to $50,000, and “Los Alamos Portfolio,” 80 prints of Eggleston images taken from 1967 to 1974 and considered his most important work, which carries an estimate of $250,000 to $350,000.

The Evans work includes “Interior at Biloxi, Mississippi,” a 1945 photograph of a fisherman’s bedroom estimated at $30,000 to $50,000. “Black Maria,” a 1955 Lange shot of the back of a police van replete with bullet holes, is estimated at $40,000 to $60,000.

“I am surprised that I don’t feel sad,” Mr. Berman said about the collection’s dispersal. “It’s time to move on.”

From the New York Times.

End joint finances in divorce

Question: My ex got the house in our divorce settlement. I was told that he was not required to refinance, so of course the loan is still in my name as well. He makes late payments with depressing regularity. This is reflected on my credit score. Do I have any recourse?

Answer:Sadly, not much. As long as your name is on the loan, the late payments will show up on your credit reports and affect your credit scores. That will remain true until he sells the house, refinances the loan or -- heaven forbid -- loses the house to foreclosure.

The late payments and other black marks remain for seven years from the time they land on your credit reports. So if he keeps this loan for an additional 20 years or so and continually pays late, your credit could be affected for the next 27 years.

And as you probably know, late payments send your credit scores reeling. Someone with great credit can lose 100 points from a single payment that's 30 days overdue.

Sorry to depress you. But your situation shows why it's so important to close joint accounts and refinance jointly held loans before the divorce is final. Now, your only hope is to persuade him to refinance, which will be an uphill battle with his presumably awful scores. Or perhaps he'll meet a nice, financially responsible lady and she'll take over the payments. Got any friends you can introduce to him?

More Q&A from LA Times.

No Prenup? Take These Steps

Turn up the lights, turn down the music and forget about romance.

It's time to face the business side of marriage.

Cold as that may sound, the Census Bureau recently released data that should make even the most blissfully married couples forget pheromones and focus on finances.

According to the Bureau, the length of first marriages has been getting steadily shorter since it started collecting such data in 1955. Of couples married back then, about 70% made it to their 25-year anniversary. Now, fewer than half of couples who were to celebrate their silver anniversary sometime after 2000 actually ended up doing so. The majority of marriages ended, due to divorce, separation or death.

"Even the most optimistic people have to ask themselves, 'What financial shape would I be in if my marriage ended?'" says Marilyn Capelli, a financial adviser in Bloomfield Hills, Mich.

The most effective way for couples to button down their finances is through a prenuptial or postnuptial agreement. But many people are reluctant to even raise the possibility of drafting one because it seems so, well, out of sync with that bit about "till death do us part."

Short of one of those contracts, there are some moves that may help you land on solid financial ground, no matter what happens.

Protect Your Inheritance

If you receive a large gift or inheritance before or during your marriage, keep the assets in your own name. If you deposit them into an account you share with your spouse, they may be divvied up in a divorce. If they remain in your name, you keep them.

Don't Get Tangled in Debt

Spouses with different spending habits should hold credit cards in their own names. That way, any massive debt accumulated by one spouse won't end up being a shared responsibility in a divorce.

Plan Ahead With Care

Couples wealthy enough to worry about estate taxes are typically advised to title assets so that each spouse has an amount equal to the estate tax exemption in his or her name (the exemption is now $2 million per person). Here's why: When kids inherit assets, they can potentially benefit from each parent's exemption and inherit $4 million free of estate taxes. But if one spouse dies with no assets in his or her name, that spouse's exemption may be lost.

But be cautious. "If you came into the marriage with money and you title some of it to your spouse, you lose control over it," says Lisa Osofsky, a planner and accountant at Weiser LLP in New York.

There is a way to avoid this and still preserve the estate-tax exemptions: Create an irrevocable inter-vivos (meaning it goes into effect during your lifetime) QTIP trust. Fund it with the assets you would have titled to your spouse. Name your kids as beneficiaries, and they will inherit the assets upon the death of your spouse. They will be able to apply your spouse's $2 million estate tax exemption to the assets inherited through the trust.

Whether you remain married or not, your spouse will be entitled to income from the trust, "but you still protect the principal," Osofsky says.

Stay Connected

In traditional arrangements, where the husband brings in a paycheck and the wife stays home raising the kids, "it's critical that the woman be involved in the finances, maintain a credit record and stay as updated as possible on whatever career skills she has," Capelli says. "While being committed to our families, people need to keep our awareness alive and the doors open."

From The Street.