How Is the Goodwill of a Business Valued in a California Divorce or Legal Separation?

October 26, 2015 Judy L. Burger Leave a comment

The short answer to this question is that the goodwill of a business may be valued in any way the appraiser chooses. The longer answer is that the business appraiser may use any method that does not include impermissible values and that does include values that can be legitimately deduced from past results.

The goodwill value of a business is something that does not show up on the balance sheet. It is often an intangible aspect of the business that ultimately affects the bottom line. California Business & Professional Code defines goodwill in this way: “The ‘good will’ of a business is the expectation of continued public patronage”. It has also been described as a value that is different than capital stock or property of the business.

There are many different types of business that are valued in divorce cases, and, consequently, there are many different aspects to be considered by business appraisers when it comes to a goodwill value. Among the considerations are the following:

A regular and devoted customer base;
Reputation;
The length of time in business;
The likelihood that the business will continue in the future as in the past; and
The age of the spouse operating the business.

One of the prevalent methods of valuing goodwill is the Excess Earnings Method, which compares the business owner spouse to an employee of comparable experience in the same field. The method then factors in financial details from the performance of the business over a period of time to arrive at a value. The complexity of the method prevents discussion in this forum, but the salient point is that the method uses concrete financial information to arrive at a goodwill valuation.

Another method that has passed judicial muster is the Foster Method, which also uses a comparable salary coupled with financial data of the business. The common thread of these two methods that makes them acceptable to courts is that they are rooted in past performance of the business, and also take into account the likelihood of continued similar results.

The valuation of business goodwill also follows other basic tenets of divorce law. For example, business performance after the parties’ separation may not be used. Similarly, business profitability occurring prior to the marriage of the parties may not be included.

The valuation of a business, that is subject to community property distribution in a divorce, particularly the goodwill component, is a very complicated matter. Its complexity naturally gives rise to intense

California Divorce, Legal Separation

Legal Grounds for a California Divorce or Separation

October 19, 2015 Judy L. Burger Leave a comment

California is a “no fault” divorce state. In fact, it was the first state to enact a no fault basis for divorce in 1969. Prior to this change, California state law listed specific faults that, if committed by one of the parties, would be grounds for divorce. These included things such as adultery, extreme cruelty, habitual intemperance, and a number of others. Following enactment of California’s no fault basis, every other state eventually followed suit.

Under our no fault approach, there are only two grounds for divorce and legal separation in California: 1) irreconcilable differences, and 2) permanent legal incapacity to make decisions. Nearly every divorce is filed on grounds of irreconcilable differences. This allows a party to a marriage to pursue a divorce even if her spouse wants to stay married. According to Merriam Webster, irreconcilable means “so different that agreement is not possible.” In a marriage, then, at least one party must believe that agreement on the differences is not possible. Even if the other party states a willingness to agree on differences, they are still irreconcilable if the party of the first part maintains his position.

In the divorce proceeding, the party filing for divorce simply has to tell the court that the marriage needs to be dissolved because there are irreconcilable differences. While the differences are put into the record, no proof of their existence needs to be established. The court just needs to know that one of the parties considers there to be differences, and that they are irreconcilable. The court does have the authority to evaluate each case to reach a conclusion that reconciliation is not possible. In situations where a judge believes reconciliation is possible, he may continue the proceedings for 30 days to see if the parties will reconcile.

Before a divorce petition may be filed, there are residency requirements that must be fulfilled. At least one of the parties must have been a resident of California for six month, and a resident of the county of filing for the immediately preceding three months. If the requirements are not met, the court may refuse to accept the case or will dismiss it when the defect is discovered.

The breakup of a marriage is a difficult life event for both spouses. The attorneys at The Law Offices of Judy L. Burger have extensive experience in divorce matters. Call today to learn how our attorneys can help you and your family: (415) 298-8314.

California Divorce

Can I Kick My Spouse Out of the House?

October 12, 2015 Judy L. Burger Leave a comment

When marital problems reach the point where living under the same roof becomes unbearable, there are remedies to that problem under California law. In an ideal situation, the parties to the marriage recognize that it’s time for physical separation, and they work out an agreeable solution. Often, however, that does not happen. If a mutually acceptable solution cannot be found, one party or the other may request that the court decide which one may retain possession of the family home during divorce or separation proceedings. This is known as a residence exclusion order or a “kick-out” order.

In other situations, there may be a real threat or possibility of harm to one of the parties. Under those circumstances, a party may approach the court to have the other party excluded from the home. There are two bases for excluding a spouse from the home when a possibility of physical or emotional harm exists: (1) emergency, and (2) non-emergency.

Under emergency conditions, a court may issue an exclusion order based only on the request of the threatened party. This is also known as an ex parte order because it happens without the excluded party having an opportunity to give his side of the story. This approach is necessary when the excluded party might be expected to react violently to the knowledge that the request has been made. For a judge to issue an ex parte exclusion order, the court must find the following:

That the party remaining in the home has a right to possession of the premises;
That the party being excluded has assaulted or threatens to assault the other party or other persons under that party’s care, such as children; and
That physical or emotional harm would result to the requesting party or others under her care if the order is not granted.

Under non-emergency conditions, the party to be excluded from the home is given notice of the request and has the opportunity to appear at the hearing. The standard for an exclusion order to be issued in this situation is a little less than the emergency order. In this case, the court must find that physical or emotional harm would be suffered by the requesting party, or someone under her care, if the order is not granted. The difference from the emergency order is the absence of an imminent threat of physical assault.

The breakup of a marriage is most always a time of strong emotions for both parties. It is unfortunate that sometimes the emotion turns hostile and even violent. When faced with such a challenging time in one’s life, experienced legal counsel and representation is necessary. The attorneys at The Law Offices of Judy L. Burger have extensive experience in divorce matters, including emergency and non-emergency exclusion actions. Make the call today to learn how our attorneys can protect you and your family: (415) 298-8314.

California Divorce

What is a Certified Family Law Specialist?

October 5, 2015 Judy L. Burger Leave a comment

A Certified Family Law Specialist is, first and foremost, a licensed attorney. There are many attorneys who handle divorce and related family matters, but they may also handle other legal needs such as wills, estates, and personal injuries. A CFLS is an attorney who typically handles only family law cases. Why worry about whether the attorney you hire is certified? A good way to think about that question is to consider the experience she brings to the table. She has many years of extensive practice experience in Family Law.

The certification process is extensive and requires demonstration of education, knowledge, and skills that go far beyond that which would normally be self-possessed by a run of the mill divorce lawyer. Certification processes for various professions assemble the universe of knowledge for the profession and then test practitioners against that knowledge. After doing that, the governing body requires continuing education in order to maintain the certification.

I exceeded many of the minimal requirements in order to become a Certified Family Law Specialist. In addition to the requirements listed below, I was recommended to the Board of Certification by Family Law Judges and Leading Family Law Attorneys.

To be certified as a family law specialist in California, a lawyer must meet several requirements.

Passage of an examination that tests knowledge of the substantive law and procedures of a legal specialty;
Demonstrate that she has been substantially involved in the practice of family law for the preceding five years;
Been principal counsel in 20 contested family law hearings involving specific issues enumerated by the State Bar of California;
Been principal counsel in five family law hearings or trials that lasted for three hours or more;
Been principal counsel in a minimum of 30 negotiated family law judgments or settlements;
Been principal counsel in 30 stipulated temporary family law orders;
Been principal counsel and principal author of briefs in three California family law appeals in which an opinion was filed; and
Completion of 45 hours of education in various specific areas of family law.

The standards for certification are overseen and administered by the State Bar’s Board of Legal Specialization. The Board is supported by 11 advisory commissions, one for each area of specialist recognition. One of the important roles of the commissions is the recommendation of revisions to certification standards to reflect the current practice of law in each area. Another is the development and grading of the legal specialist examination.

Cumulatively, the requirements for certification ensure that a Certified Family Law Specialist is an expert in her field. Judy Burger is a Certified Family Law Specialist and an expert in that field. Please contact The Law Offices of Judy L. Burger at (415) 259-6636 or visit online to learn more about how she can help you.

California Divorce, Spousal Support

Vocational Evaluation: A Valuable Tool for Reentering the Workforce

September 21, 2015 Judy L. Burger Leave a comment

Spousal or partner support is one of the most critical issues in a legal separation or divorce proceeding. Many factors are considered in determining the propriety and amount of permanent and long-term support orders. Some of those factors, such as earning capacity and ability to pay, are directly affected by the parties’ skills and opportunities to obtain gainful employment. Unfortunately, evidence bearing on issues such as these can be difficult to obtain, especially if a party is inclined not to work in an attempt to deflate his or her income.

Enter the vocational expert. The California Family Code gives family court judges the power to order parties to undergo an examination by a professional known as a vocational expert, referred to in the law as a vocational training counselor. The law requires that these professionals have several minimum qualifications:

A master’s degree in a field of behavioral science;
The ability to assess career potential using inventories;
The ability to interview clients and assess their marketable skills;
Knowledge of factors relating to the geographic job market; and
Knowledge of the requirements of educational and training programs.

Vocational experts need to know the mechanics of returning parties to gainful employment or to more lucrative employment. However, they should also be skilled at addressing human factors, such as the emotional and self-confidence issues that may arise due to being out of work for some period of time.

The mechanical portion of the vocational expert’s job consists of the following:

Evaluating the person’s skills, interests, and limitations;
Researching the labor market to determine opportunities and the likely earning potential of the party; and
Drafting a report summarizing these findings and making recommendations for how to help move the person in the direction of being self-supporting, if they are not already functioning at that level.

In addition to these functional tasks, the vocational evaluator can be helpful in easing the emotional burden on the person being evaluated, by explaining the process of imputing income and by helping to develop a career plan. The career plan may then be used by others, such as job coaches or career professionals, to achieve the goals of the evaluated party.

One of the outcomes of the vocational evaluation is that the evaluator can provide an opinion about the party’s earning capacity. This amount may then be imputed as income for the purpose of calculating spousal or partner support.

As you might imagine, the vocational expert report can have a significant impact on the support award in a case. You want an attorney with substantial experience in Northern California, who will represent you aggressively. Please contact the Law Offices of Judy Burger at (415) 259-6636 to learn more.

Legal Separation

What Is the Difference Between Divorce and Legal Separation in California?

September 14, 2015 Judy L. Burger Leave a comment

Often, our clients ask about the difference between divorce and legal separation. The essential difference is that divorce is a final action, but a legal separation is not. In a separation, the parties remain married.

This begs the question: Why obtain a separation if you are still married? There are several reasons that legal separation may be an attractive option, including more beneficial residency requirements, the possible retention of certain benefits, and its immediate effect.

One reason a person may wish to pursue a legal separation rather than a divorce is because of the restrictive residency requirements placed on divorce. California law requires that, before a divorce petition may be filed, at least one of the parties must have lived in the state for at least six months; in addition, the person filing the petition must have lived in the county of filing for at least three months.

There are no state or county residency prerequisites for a legal separation. Therefore, a person who wishes to take immediate action may file for a legal separation, then amend the petition to request a divorce after the residency requirements were met. This option would be particularly helpful for someone who wants to obtain quick court rulings on matters such as property division; child, spousal, or domestic partner support; or child visitation. These things may all be adjudicated in a legal separation proceeding, just as they may in an action for a divorce.

Legal separation may also be a valuable option because it sometimes allows the parties to retain benefits that they might lose in a divorce. Some examples of these of benefits are as follows:

Allowing the parties to stay within religious restrictions against divorce;
Allowing the parties to keep health care or other insurance coverage that would be lost due to a divorce;
Permitting one of the parties to retain immigration status; and
Enabling the parties to obtain the requisite 10 years of marriage to qualify for Social Security spousal survivor benefits.

Legal separation also has some common-sense advantage for those who are not sure they wish to pursue the finality of a judgment of divorce. That is because legal separations can allow the parties to separate on a trial basis, giving them both the ability to see how they will do financially and emotionally before pursuing a legal end to their marriage.

The financial and other matters involved in legal separations and divorces can be very complex. For example, whether insurance coverage may be lost due to divorce or separation must be determined in each individual case. For this reason, it is critical to consult with an experienced family lawyer who can explain the potential impact of each avenue before a decision is made.

Judy L. Burger pairs her extensive family law experience with compassion and respect. If you would like more information about how California law would impact your situation, please contact her online or call (415) 293-8314.

California Divorce, Debt

Do I Have a Claim Against a Spouse I Supported During Educational Endeavors?

August 31, 2015 Judy L. Burger

A common question when divorce or legal separation is being contemplated is whether a professional license or college degree can somehow be split among the parties. This question is particularly common when one spouse worked to enable the other spouse to go to college or to obtain an advanced degree. While neither a degree nor a license is property subject to division, under California law, the marital community may be entitled to reimbursements for payments made toward education or training. Of course, no reimbursement will be ordered if the parties agreed in writing, such as in a prenuptial agreement, that none would be made.

Several issues are presented when one of the parties to a marriage receives education or training during the marriage or when the couple pays back student loans during the marriage, including the following:

Whether the community should be reimbursed for the use of community funds;
How any outstanding loan should be allocated; and
What the impact of the education or training should be on spousal support.

The first issue is whether the community has a claim of reimbursement from the spouse or partner who received the training or education. If educational expenses were paid out of community funds, reimbursement, with interest, will be ordered if the education “substantially enhances the earning capacity of the party”. If circumstances would render reimbursement unjust, it may be reduced or modified. Those circumstances include the following:

When the marital community has substantially benefitted from the education;
When the other party also received education or training using community funds, which offsets the education in question; and
When the need for a spousal support award is substantially reduced because the education or training enhanced the party’s ability to “engage in gainful employment”.

The second issue is how any unpaid student loans will be allocated. Generally, the law provides that outstanding loans shall not be classified as community debt but shall be allocated to the party who received the education or training. Of course, to the extent this is done, it may offset a portion of the community’s right to reimbursement. See our separate blog here for a general discussion of community debt.

The final issue is the extent to which a spousal or partner support award should be impacted by the additional education or training. The California Family Code provides that several factors are considered in rendering such an award. These include each party’s earning capacity, as well as the extent to which one party contributed to the education or training of the other. An experienced family attorney will recognize these implications to the attainment of a degree or license and will position her client favorably in obtaining a support award.

As you might imagine, how these matters are presented to a court can make a significant difference in both the issue of reimbursements and in a spousal or partner support order. Judy L. Burger has the experience you need to identify and present issues in family court. Contact her today at (415) 259-6636 to learn more.

California Divorce

How Are Forensic Accountants Used in California Divorce Proceedings?

August 24, 2015 Judy L. Burger

What is a forensic accountant, and when should one be used in divorce or legal separation proceedings? A forensic accountant is a hybrid of an investigator and an accountant. The typical forensic accountant holds a traditional accounting degree, which provides core knowledge in the area of accounting, as well as investigations training, which enables the performance of effective, enhanced investigations. Forensic accounting can be critical in locating, classifying, and valuing assets and debts.

Divorce and separation proceedings provide for the winding up, so to speak, of a couple’s marriage. In these proceedings, all assets and debts are identified and divided, and provisions are often made for spousal or partner support, as well as child support. For the winding up to be fair and equitable, all assets and debts must be identified. This can be difficult in any case, as our economy becomes more diversified and global. A forensic accountant may be used in complex matters, such as helping to identify and value retirement plans, stock options, trusts, deferred compensation plans, and business interests.

Additional challenges will be present if one spouse is intentionally untruthful in an attempt to understate income or overstate debt, such as in the following examples:

Attempting to show less income or fewer assets;
Hiding income or cash streams;
Transferring or hiding assets;
Padding business payroll; and
Creating fictitious debts or overstating debts.

In cases such as these, the use of a forensic accountant is essential to ensure that you receive proper treatment with regard to support awards and property division. These specialized accountants are experts in tracing funds, and they exercise great discretion in determining where to look for hidden assets and overstated debt. After all, if a court doesn’t know about an asset, it can’t divide it. What’s more, a forensic accountant will present his findings in court, with the assistance of your experienced attorney.

Judy L. Burger’s experience as an aggressive family lawyer is paired with an extensive business background, an invaluable combination in contested divorce and separation proceedings. If you need the assistance of a lawyer who is not afraid to fight in court and who understands complicated financial issues, call her today at (415) 293-8314 or visit her online.

California Divorce

Watts and Jeffries Credits: What Are They and What Do They Mean for Me?

August 10, 2015 Judy L. Burger

Often, while divorce or legal separation proceedings are pending, one party stays in the family home. The parties sometimes choose to do this to ease the transition for their minor children or to keep their overall expenses down until their final order is entered. Other times, the court will order that one party may stay in the home. Either way, significant financial implications can result from one party staying in the residence, including the application of Watts and Jeffries credits. This blog will explain what these are and when they come into play.

Watts credits and Jeffries credits are named after the court cases that first recognized them explicitly. In the Watts case, the court held that when one party to a divorce has the exclusive use of a community asset, that party may be required to reimburse the other party for that use. For example, if a married couple owns their home as a community asset and the wife stays there after the date of separation, she may have to reimburse the husband for the fair rental value of the home. Watts makes sense because the spouse living in the home is benefitting from a community asset. She does not have to pay rent somewhere else. Likewise, the spouse not living in the home cannot make use of the property himself, nor can he rent or sell it. If you would like to read more about community property, please see our separate blog here.

The Jeffries case may come into play if the parties own the home as a community asset and still owe money on the mortgage. In Jeffries, the court held that mortgage payments made out of the separate funds of the spouse living in the family home may be applied by the court to offset Watts charges. Therefore, in the example above, if the wife, while living in the family home, paid the mortgage out of her current salary, she could ask the court to reduce any amount she owed under Watts with Jeffries credits.

Whether Watts and Jeffries apply is discretionary with the court. In other words, it is the judge’s decision whether or not to grant them, after considering all the circumstances in the case. They area called “charges” when assessed against a party; they are called “credits” or “reimbursements” when they are granted in a party’s favor.

You may also have heard of Epstein credits, which may be implicated when one of the parties uses separate funds to pay for community debts. If you are interested in this concept, please read our earlier blog here.

In all of these circumstances, accurate recordkeeping is essential. Charges and credits can be significant to the financial outcome of a divorce or legal separation. They require accurate documentation and an aggressive, knowledgeable lawyer. Judy L. Burger has extensive experience in high conflict divorces in Northern California. Contact her today at (415) 293-8314.

California Divorce

What Is an Ex Parte Hearing?

July 13, 2015 Judy L. Burger

Regardless of the circumstances, divorce and legal separation are difficult for everyone involved. Sometimes, however, they can be particularly stressful, such as when there is a threat of violence, danger, or significant financial injury.

Fortunately, the California judicial system has in place a procedure to deal with circumstances like these quickly: ex parte hearings.

Ex parte hearings are simply emergency hearings. Depending on a court’s caseload, it can take weeks or even months to get a hearing before a judge.

Ex parte hearings are designed to reduce that time drastically. However, they are only available for true emergencies, when there is a threat of irreparable harm or immediate danger. Examples of factual circumstances that may warrant an ex parte hearing include the following:

child visitation or custody rights with a parent who leads a dangerous lifestyle;
a threat of grave injury to a couple’s children; and
a valid concern about depletion of community funds from a joint account.

An application for ex parte relief must be supported by very strong evidence of future irreparable harm or immediate danger. For example, exposure of a young child to alcohol and drugs could warrant an application for an ex parte hearing. Likewise, the prior acts of a spouse wiping out community funds from one bank account would likely warrant ex parte relief to prevent him or her from doing the same thing with other accounts.

In most cases, the person against whom an order will operate, usually the other party to the divorce or custody proceeding, has a right to notice before an ex parte hearing is held. This is because the judge may order relief that contravenes that person’s rights, such as the right to visitation or the right to access his or her own money. However, when absolutely necessary, notice may be avoided. This is only true if providing notice will result in immediate, irreparable harm.

Care must be taken when requesting ex parte relief. If it is requested unnecessarily, it can affect the court’s view of the parties in future proceedings. Judy Burger is experienced in presenting ex parte issues in the San Francisco Bay and Sacramento areas. If you believe ex parte relief may be needed in your case, contact her today at (415) 259-6636.