Divorce can be devastating on multiple levels—especially financially. Getting through the process and back on your feet can take time. In this situation, it’s not uncommon for family members to help out by providing extra funds. Depending on the circumstances, someone’s family support could be a temporary measure or ongoing. Additionally, some family “gifts” operate more like recurring income. If you or your ex are getting supplemental financial assistance from family, you will want to know: Can in-law gifts and support be considered during my California divorce? Continue reading
Keeping perspective during divorce can be challenging, especially when parents are fighting over child custody. Sometimes, when parents get very angry with one another, they may inadvertently say and do things that negatively impact their kids. In this situation, a California family court may determine that a Guardian ad Litem (minor’s counsel) needs to be appointed to provide the court with insight into the child’s situation. If you have a disputed California custody matter involving a Guardian ad Litem, you will want to know: What is the role of a Guardian ad Litem in a California child custody case? Continue reading
When a California court needs to make decisions regarding child custody, the judge will consider multiple aspects of the child’s life. Ultimately, what the court decides or the parties agree to must be in the child’s best interest. If you are involved in a California divorce or other child-related case, you may be wondering: What does the “Best Interest of the Child” mean in a California custody case? Continue reading
When you file for or are served with a divorce, it can immediately impact your daily life, including your living situation. Once your case begins, you and your ex may decide that you no longer want to live together. While living apart during divorce can provide each person with the physical space they need, it can also raise certain practical issues that will need to be addressed. Having temporary orders in place while your divorce case is pending can help clarify each person’s responsibilities and minimize conflict. The good news is that it’s possible to get temporary orders during your divorce. However, temporary order issues can be just as complex as those raised during divorce. Therefore, it’s important to understand temporary orders and how they may operate during your California divorce case. Continue reading
If you are newly divorced or going through a divorce, you may be unsure how the Internal Revenue Service treats spousal support for tax purposes. Many people do not think about taxes until tax time rolls around. Of course, it is wise to be prepared on this issue, as receiving (or paying) spousal support will affect your tax bill and potentially lead to an underpayment that you will need to make up by April 15.
The Internal Revenue Service (IRS) treat spousal support, also called “alimony,” as income for federal tax purposes. The most important issue is what qualifies as alimony under federal tax law.
- The parties do not file a joint return.
- The payments are made in cash, by check, or by money order.
- The payment is received either by the ex-spouse or on that person’s behalf.
- Neither the parties’ separation agreement nor a court decree says that the payment is not spousal support.
- The responsibility to make the payments stops when the ex-spouse dies or remarries.
- The payment is neither child support nor part of the parties’ property settlement.
- child support;
- property settlements that are not made in cash;
- payments that are intended to be a spouse’s share of community property income; and
- payments made either to keep up or for the use of the paying spouse’s property.
The former spouse who receives the payments is required to report alimony as income for federal tax purposes. Likewise, the former spouse who makes alimony payments is entitled to a deduction for payments made.
Those who receive payments are required by law to cooperate by providing their Social Security number to the paying party. If receiving spouses do not do this, they may receive a $50 penalty. A party making the payments could not only receive a $50 penalty for failing to include the recipient’s Social Security number but also could see his or her income tax deduction disallowed.
Here are a few trickier situations that require competent financial or legal advice:
- payments made to a third-party under a separation agreement, a divorce decree, or at the written request of the receiving party;
- payments for life insurance premiums for the benefit of the receiving spouse, if they are required by court order or a written separation agreement; and
- certain mortgage, real estate tax, or house insurance payments.
In California, the assets of a married couple seeking divorce must be distributed on an equal basis to the extent they were accumulated during the period of marriage. These assets are known as community property. Sometimes, however, one party owns or has an interest in a business that preexists the marriage. That interest is considered separate property.
Even though a business interest may be considered separate property, part of any appreciation in value that occurred during the marriage may be allocated to community property. In order for that to occur, a value must be established for the business. This is a very complicated task that is performed by a variety of professionals such as business appraisers, certified public accountants, economists, and financial analysts.
Business valuations normally use one of two methods, depending on the nature of the business. These two approaches were established in case law in the beginning of the 20th century and still stand today. Pereira v. Pereira, decided by the Supreme Court of California in 1909, and Van Camp v. Van Camp, decided by the Court in 1921, set the course for allocation of business value to community property.
The difference between the two approaches hinges on the participation of the owning spouse in the operation of the business. Under Pereira, if that spouse was an active operator or manager of the business, appreciation in its market value during the marriage is likely to be considered community property. This is often the case with professional services such as legal or dental practices, as well as with small contractors or retail businesses.
On the other hand, the Van Camp method usually applies if the business was of such a size and structure that the owning spouse did not expend personal effort affecting its income and growth. In that case, appreciation is less likely to be included in community property and subject to equal division. Any amount included would be based on an assessment of the owning spouse’s compensation from the business during the marriage, as well as whether that compensation sufficiently contributed to the accumulation of other community property. This approach would be appropriate for larger manufacturing, contracting, or technology businesses.
The methods of business valuation are complex, and they vary depending on the type of business involved. At a basic level, valuation involves establishing how much a business is worth at the time of marriage and at the time of divorce or separation. The difference in the two values is then considered in light of proper method noted above. Courts will generally accept a business valuation method as long as the evidence on the record legitimately supports the value.
As you might imagine, the value of a business and how it is allocated to marital assets can make a substantial difference in a what both spousal and support orders. If your marriage involves a business interest, you should hire an attorney with substantial experience in complicated divorce cases, especially those involving the valuation of business assets. Judy L. Burger and her team have considerable experience in contested family law matters, and Judy is well-versed in business matters. Submit our Contact form today or call (415) 259-6636 to arrange an appointment.
Have you ever wondered what can be done when one spouse threatens to hide or get rid of property during divorce or legal separation proceedings? California law gives judges the power to appoint what is called a “receiver.” A receiver’s job is to find, take control of, manage, and preserve assets.
Any party may ask for a receiver to be appointed. However, receivers serve as officers of the court and must be neutral where the parties are concerned, favoring neither.
There are several reasons that a court might appoint a receiver in a family law case:
- hiding or moving assets;
- diminishing assets;
- depleting assets; or
- threatening to do any of the above.
By law, a court may impose a receivership to tend to a couple’s assets for the following purposes:
- carrying a judgment into effect;
- disposing of property according to the terms of a judgment;
- preserving assets until they are all identified and divided by a court;
- preserving assets pending an appeal; and
- preserving assets for use in setting child support.
At bottom, receiverships are intended to prevent a party from squandering community assets to the detriment of the other party or the couple’s children.
For example, one of the major California cases relating to receiverships in family law is Quaglino v. Quaglino, 88 Cal. App. 3d 543 (1979). In Quaglino, the husband killed the wife, leaving two minor children and landing him in jail. The children’s guardian ad litem bought a lawsuit against the husband, seeking child support. The trial court appointed a receiver, and the husband appealed.
The appellate court affirmed. It rejected the husband’s argument that receivership was improper because no judgment had yet been entered. In so doing, the court specifically held that the trial court had the power to appoint a receiver due to the “great probability that [it] would soon make an order of support and that the defendant’s property was in fact needed as a source to provide payment.
Receiverships are set up to protect the parties’ assets pending the outcome of legal proceedings. Although they can be costly, they are sometimes necessary to preserve the status quo and to protect the parties and their children. If you need an aggressive family lawyer who isn’t stymied by the more complicated aspects of family law, call me today. I have an extensive background both in family law and in business: (415) 259-6636.