How Is a Business Interest Valued in a California Divorce?
California Divorce

How Is a Business Interest Valued in a California Divorce?

For those going through a divorce or contemplating one, a common concern is how a business interest will be treated by the court. Sometimes, both spouses own a business together. Other times, however, only one spouse has an ownership interest in a business.

By law, California courts must make a substantially equal division of community-owned property. Therefore, the first step in deciding how to deal with a business ownership interest is to determine whether it is separate or community property. It may even be a little of both. If you are not familiar with basic property law in California divorces, please see our separate blog here.

If the couple started the business together and operated it together, the court will likely decide it is a community-owned asset. However, often, business ownership is not so clear. For example, sometimes, a business was started before the couple married. Other times, although one spouse may be the owner “on paper”, the other may have worked in the business and contributed substantial value to it. In more complicated cases such as these, the court will need to decide issues such as the value of the business at the time of marriage and the present, the value of spousal contributions to the business, and other difficult factual questions.

It is usually necessary, in these cases, to retain a forensic accountant. Forensic accountants are trained in both accounting and investigative techniques. For this reason, they can be invaluable partners in determining the value of a business and in presenting their valuations to a court.

Forensic accountants are experts at detecting irregularities in company records. Their findings can help demonstrate, for instance, if one spouse has altered company records to make it look like a business is more or less profitable than it really is. Ultimately, the accountant will give an expert opinion about the value of the business. One of three methods is typically used:

    • the income approach, which attempts to value future economic benefits;
    • the market approach, which compares the business to others that have recently been sold; and
    • the asset approach, which compares the relative assets of the business to its liabilities.
If the parties do not agree about how to divide a business ownership interest, the court will divide it for them, keeping in mind that their community property must be divided substantially equally. How this takes place is within the court’s discretion. Options available to it include awarding the business to the spouse who plays the greatest role in its operation, awarding it to the other spouse, dividing the stock ownership among the parties, and ordering the sale of the business.

Business ownership interests are among the more difficult issues that arise in family law, and how they are handled can affect the parties for the rest of their lives. The attorneys at The Law Offices of Judy L. Burger have extensive experience in all matters relating to property division, including dealing with business interests and forensic accounting. Make the call today to learn how our attorneys can protect your financial future: (415) 293-8314.
The Intentional Breach of a Spouse's Fiduciary Duty
California Divorce, Marriage

The Intentional Breach of a Spouse’s Fiduciary Duty

A fiduciary duty is one in which one party owes another the highest duty of care. For example, someone serving as an executor of an estate has a duty to handle its property and finances with the utmost care. An executor cannot misappropriate money or steal property belonging to the estate, or he may be liable for damages.

Similarly, California law places a fiduciary duty on each spouse to act in the best interest of the other spouse. California Family Code § 721 explains that spouses have “a duty of the highest good faith and fair dealing” with each other and that “neither shall take any unfair advantage of the other.” This fiduciary duty includes three core components: (1) allowing access to records of financial transactions; (2) providing accurate and complete information about community property transactions; and (3) treating benefits and profits from certain community property transactions fairly and accounting to the other spouse for them.

 In addition, California law provides a duty of full disclosure regarding all community assets. The duty applies during the period of marriage and after the parties separate, until the item is divided by the court or the parties. Indeed, the California laws regarding divorce provide a formal method by which the assets and liabilities of each party are disclosed to the other.

What happens if one spouse does not perform his or her fiduciary duties? The failure to perform these duties is a called a “breach,” and the law sets forth what happens when there is a breach. The consequence that is imposed depends upon the seriousness of the breach and the view of the family court.

Examples of ways that parties may breach their fiduciary duties include hiding assets or transferring assets to try to deprive the other spouse of any interest in them. The law provides several remedies, or consequences, for a breach of spousal fiduciary duties, including the following:

  • A court-ordered accounting and determination of rights of ownership;
  • The placement of the name of a party on the title of an asset;
  • An award of either 50% of an undisclosed or transferred asset or of an amount of money to compensate the injured party for the loss of interest in that asset; and
  • Attorney’s fees and court costs.
In particularly egregious cases, the family court can order the breaching party to give the injured party the whole asset or to pay the injured party its full value . When fraud, oppression, or malice have been adequately proven, the court may award punitive damages, designed to punish the breaching party . It is sometimes necessary to hire a forensic accountant to show that a spouse intentionally breached his or her fiduciary duty. A forensic accountant is trained to trace funds and assets, which can help demonstrate that a spouse intended to hide or misappropriate community assets.

Breach of the spousal fiduciary duty is serious wrongdoing. If you are concerned that your spouse may be attempting to hide or minimize assets, you need an aggressive lawyer who will fight on your behalf. The attorneys at the Law Offices of Judy L. Burger have extensive experience in contested divorce and property proceedings. Call today to learn how our attorneys can protect your property interests as you go through this difficult time: (415) 293-8314.
Who Gets the Family Home in a California Divorce?
California Divorce

Who Gets the Family Home in a California Divorce?

In a divorce, one of the most significant concerns is what will happen with the family home. This is particularly true when minor children are involved.

The family residence is often the largest asset owned by the parties to a divorce, so the financial interest is often significant. In addition, there can be a sentimental attachment to the home. For these reasons, dividing the parties’ interest in the family home can be easier said than done. The first task is to decide who actually owns the house. You can learn more about determining basic ownership interests here.

 It is not always easy to apply property law when dividing the family residence. For instance, what happens if the down payment was made with separate property funds? What if both parties contributed to pay down the mortgage while they were married, but the home is titled in just one name?

When there is a community property interest in the residence, there are three basic ways it can be divided: (1) sell the property outright and apply the profits toward the couple’s community property estate, to be divided; (2) one spouse buys out the other’s interest, assuming the purchasing spouse has adequate funds or credit to do so; and (3) deferred sale.

The first two of these options are fairly straightforward. However, a “deferred sale of home order”, also known as a “Duke” order (named after a significant case on the issue), requires some explanation. Deferred sales are usually considered when the parties have minor children and want the children to be able to stay in the family home until a later date. A custodial parent, in these situations, is given exclusive use and possession of the home on a temporary basis so that the kids can stay there.

 In determining whether to allow a deferred sale, the family court must first consider whether it is economically feasible to do so. The court must balance the relative hardship of the parent and children staying in the home with the hardship placed upon the parent no longer living there. The law requires that certain factors be considered in making these determinations. It also requires that the deferred sale of home order contain an end date, such as the date the youngest minor child attains the age of majority or graduates from high school.

In addition to the disposition of the home, the family court will have to determine whether one party must reimburse the other for “contributions for the acquisition of property”. These reimbursements may be required if one party made the down payment on the family residence out of separate funds. They may also be required if separate funds are used to pay down the principal on the home.

As you can see, many factors impact how the family residence is handled in a divorce. How these issues are presented can significantly affect your outcome. Judy Burger is experienced in complex property division matters and how to present those in family court. Please contact her today at (415) 259-6636.
How Are Stock Options Divided in a California Divorce Proceeding?
California Divorce

How Are Stock Options Divided in a California Divorce Proceeding?

When a couple divorces, it is easy to divide physical items. One of the parties simply takes possession of items such as home furnishings, tools, jewelry, and even cars. Other property is more difficult to evaluate and divide. This is the case with employee stock options.

Stock options are granted by a company to an employee, usually managers and executives. Stock options represent the right of the employee, at some point in the future, to purchase company stock if he or she chooses to do so. Sometimes, a company gives an employee stock options to attract the employee to come to work for it; other times, a company offers stock options to try to keep an employee or to compensate him or her for future work. If and when a stock option “vests”, the employee has the right to buy the company’s stock.

A basic understanding of property rights in California is essential to understanding how family courts deal with stock options. You can learn more about these rights here.

In addition to understanding basic property law, it is important to understand what the term “vest” means in relation to stock options. The date a stock option “vests” is the date upon which an employee has the right to buy the stock. This is known as “exercising” the option right.

The first step in determining how to handle stock options in a divorce is deciding who owns the option. Courts have broad discretion on how this is done. However, two different approaches are typically used, both of which are named after the cases that established them. They are known as the Hug formula and the Nelson formula; they are also known as time rules. In essence, the sooner after the date of separation an option vests, the larger the community interest in them.

Which formula is applied, usually depends on the reason the company offered the stock option in the first place. The Hug formula typically applies to options that were given to the employee to attract him to work. The Nelson formula is usually used when the options were offered to keep an employee or to compensate him for future work. While many people assume that options that vest after the date of separation are separate property, this is simply not true when the Nelson time rule is applied.

Valuing stock options properly requires an attorney who understands all the law and who is experienced in making the strongest arguments for her client. To obtain the counsel of just such an attorney, please contact the Law Offices of Judy L. Burger. We have extensive experience in divorce, child custody, and child support matters. Call today to learn more: (415) 293-8314.
How Is Available Income Determined for Child Support Orders if a Party Is Self-Employed?
Child Support

How Is Available Income Determined for Child Support Orders if a Party Is Self-Employed

California law mandates that one of the predominant factors in setting the amount of child support is the actual income of the parents. As you might imagine, this can be very difficult if one or both of the parents are self-employed.

Because parents have a mutual duty to support their children, the parties to a divorce proceeding must disclose all aspects of their finances. All assets, liabilities, obligations, earnings, accumulations, and expenses must be disclosed. Assets must be disclosed even if they are owned as separate property. By law, self-employment benefits may be considered by a court in determining a parent’s gross annual income.

Full disclosure is critical to allow the family court to make a proper order of support for the children’s needs. A statutory process is in place to ensure that proper disclosures are made through the submission of certain forms. These forms include a Schedule of Assets and Debts, as well as an Income and Expense Declaration.

When a party is self-employed, however, he or she has control over documents that would be used to establish his or her actual income. These documents might include profit and loss statements, loan applications, credit card statements, and reports showing monthly expenses. The danger of nondisclosure is enhanced in these situations because the business owner has power over the creation and retention of these documents.

Forensic accountants may be used when self-employment is an issue in a family law matter. These specialized accountants are trained in both sound accounting practices and investigative skills. They specialize in reviewing financial documents with an eye toward tracing funds and locating missing funds or documents. They also testify in court about their findings, to ensure the proper amount of income is attributed to a self-employed parent.

When the actual income of a self-employed parent is an issue, it is critical to hire an aggressive family lawyer who has significant experience in business matters. Judy Burger comes from a business background and has worked extensively in highly contested divorce cases involving forensic accountants. Call her today at (415) 259-6636 to learn more about how she can help you.
How Is My Child Support Award Affected by My Spouse's Refusal or Inability to Work?
Child Support

How Is My Child Support Award Affected by My Spouse’s Refusal or Inability to Work?

If you are going through a divorce and your spouse does not work or refuses to work, you may be concerned about the adequacy of your child support award. Child support is designed to ensure that the needs of California children are kept front and center, despite the separation or divorce of their parents. The law recognizes that both parents have a duty to contribute to their children’s support. This includes, in some circumstances, charging unemployed or underemployed parents with income earning capacity even though they may not be working at all. This is called imputing income. Section 4058(b) of the California Family Code states that “the Court may, in its discretion, consider the earning capacity of a parent in lieu of the parent’s income, consistent with the best interests of the children”. In making this determination, courts will consider three factors:
  • A parent’s ability to work;
  • The opportunity of a parent to work; and
  • Whether a parent working is consistent with the best interest of the children.
The first factor is whether a parent is able to work. This may be restricted to differing degrees. For example, a parent disabled from working in any job will be considered differently than a parent disabled only from working in his or her chosen field. If the ability to work is only partially restricted, a family court may impute earning capacity to the disabled parent. Similarly, if a parent refuses to work or hasn’t worked for a long time, he or she may be perfectly capable of working, given the motivation to do so. The second factor in determining whether earning capacity will be imputed to a parent is opportunity. In other words, are there available jobs that the unemployed parent is capable of performing? If a parent is able to work and has the opportunity to do so, the final factor is whether it is “consistent with the best interests of the children” for that parent to work. Examples of issues that might make a parent working inconsistent with the children’s best interest include a parent taking care of an infant or special needs child. Ideally, there is no dispute about a party’s true ability to work. However, when this issue is contested, there are a few tools that may be used to obtain an objective determination of a party’s true limitations. The first tool is called an independent medical examination (“IME”). This is a medical examination performed by an independent health care provider to determine the ability of a person to work. A second tool that may be available is the use of a vocational expert to assess the ability of a party to work, as well as the opportunities he or she may have for gainful employment. If you are concerned about your spouse’s refusal or inability to work, or if you believe your spouse is underemployed for the purpose of depressing his or her income, you need an aggressive attorney to evaluate the facts of your case and determine your options. At the Law Offices of Judy L. Burger, we recognize the importance of a proper child support order to the well-being of your children. We specialize in difficult custody and support issues, and we’ll put our experience to work for you. Call us today at (415) 293-8314.
California Divorce

Basic Property Rights Law in California Divorces

Understanding the basic rules of property ownership in California is critical for anyone going through or contemplating a divorce or legal separation. Property may be owned by a spouse separately, meaning that it is his or hers alone, or it may be held as community property, which means that both spouses share it equally. It is important to understand the difference because, generally, a spouse has no right to any portion of the separate property of the other. On the other hand, California law provides for equitable division of community property.

Property acquired before a marriage or after a married couple separates is considered to be separate. In addition, property given to or inherited by a party during a marriage is considered to be separate. In most cases, a person has no right to the separate property of his or her spouse.

California law assumes that property acquired during a marriage is community property, which means that each spouse holds a one-half interest. Both spouses have an ownership right to one-half of community property, regardless of who actually acquired the property. In determining whether property is separate or community, the date of separation is critical. In fact, the date of separation is sometimes hotly contested for this reason. The date of separation is established, by law, as the date on which two things occurred: (1) one spouse subjectively made the decision that the marriage was over; and (2) that spouse took an objective step to implement his or her decision.

With titled assets, such as homes, cars, and boats, a second property law presumption may come into play. The California State Legislature has passed a law that the“owner of the legal title to property is presumed to be the owner of the full beneficial title”. This means that a court will assume that the name of the person on title to property is the full owner of that property. It takes strong evidence to overcome this presumption.

As you might imagine, the community property presumption and the legal title presumption can often be in tension with one another.

There are many nuances in California statutory and case law that impact property division, and the proper presentation of property issues can significantly affect your outcome. Judy Burger is experienced in complex property division matters and how to present those in family court most favorably to her clients. Please contact her today at (415) 259-6636.
Child Custody

Renewing a Family Law Judgment

A money judgment from a family law case does not expire. The judgment is active and valid until all monies have been paid in full. There are reasons, however, to have your family law money judgment renewed. Family law judgments accrue interest at the rate of 10% per year. For example, if you have a judgment for $20,000, the annual interest would be $2,000. After 5 years with no payments, the amount owed would be $30,000. If you were to have the judgment renewed, all of the money owed would become the new principle. In the example above then, the new principle is $30,000. So, the interest added each year thereafter would be $3,000 instead of $2,000. There is a filing fee, and you must renew the judgment within the first ten years after the date of the judgment. The debtor must be served with the new judgment and will have thirty days to file a motion to vacate or modify the renewal. If you received a judgment awarding you money in a family law case and have not received full payment, contact our office today. Judy L. Burger is known for aggressively representing clients in high conflict cases in and around the San Francisco Bay and Sacramento areas. Call today to learn more about how we can help at (415)293-8314 in the San Francisco Bay area or (916)631-1935 in the Sacramento area, or contact us online using our confidential inquiry form.
Child Support

What Are Your Options When A Former Spouse Refuses to Pay?

What are your optionsSometimes family law judgments are even harder to collect than regular debts because of the unpleasant emotions attached to the judgment in the mind of the payer. The anger and bitterness that develops during divorce or custody proceedings often continues, even after the court battle is over. If your former spouse or partner was ordered to pay money directly to you, his or her emotions can blur logic and lead to refusal to pay. If this situation is all too familiar to you, and your best efforts to work out payments have failed, then it is time for you to contact an aggressive family law attorney to help you collect. Clients frequently call on us for help to enforce payment of family law judgments. When we first meet with you, we will gather information about your case and explain your options.  Here are a few things we may recommend, depending on your circumstances:
  1. Using legal discovery methods to gain information about the former spouse’s assets. Before attempting to collect, we’ll need to know what assets he or she has that may be subject to levy or seizure.
  2. Placing a lien on the delinquent payer’s real estate.
  3. Placing a lien on the delinquent payer’s personal property.
  4. Seeking an Earnings Withholding Order to get part of the delinquent payer’s wages directly from his or her employer.
  5. Seeking to levy the delinquent payer’s bank accounts.
These are just a few of the options for collecting money owed on a family law judgment. If you are having difficulty getting your former spouse or partner to pay, contact our office today. Judy L. Burger is known for her tenacious representation of clients in highly contested family law cases in and around the San Francisco Bay and Sacramento areas.  If you need help enforcing a family law judgment, call us today to learn more about how we can help.  Call (415)293-8314 in the San Francisco Bay area or (916)631-1935 in the Sacramento area, or contact us online via our confidential inquiry form.
Child Support

Common Defenses Against Collection of Family Law Judgments

BrokeIf you are the debtor in a family law judgment case who needs to defend against a collection action, your attorney may choose from a variety of options in your defense. One of the tools used to defend collection by way of garnishment is a Claim of Exemption. Your attorney will prepare a document explaining why your wages should be excluded. Certain types of income and property are exempted from garnishment by law. After your attorney files your claim of exemption, the other party has ten days to oppose your claim. Similarly, you can claim an exemption on certain types of property if a judgment creditor is seeking to impose a levy on your real or personal property. The claim of exemption should be prepared by your attorney, who knows which types of income and property are excluded from being subject to a levy. If the other party submits a timely response to your claim of exemption, then the court will schedule a hearing and a judge will make the final decision regarding the exemptions. If you are facing garnishment or levy, or if you are seeking to collect money from a family law judgment, call our office today. Judy L. Burger is known for her aggressive representation of clients in and around the San Francisco Bay and Sacramento areas.  If you are dealing with either side of a family law judgment, call us today to learn more about how we can help.  Call (415)293-8314 in the San Francisco Bay area or (916)631-1935 in the Sacramento area, or contact us online via our confidential inquiry form.