A guest author discusses businesses and property division in California divorce cases.
Divorce is a complicated process that often requires the division of community property. Unfortunately for business owners, their business may also be deemed community property and subject to division.
The Rule in California
In the State of California, within the context of divorce, a business is considered an asset that needs to be characterized and valued. Briefly, characterization refers to the classification of the business as community property, separate property, or a combination of both.
Valuation refers to what the business is worth. Unfortunately, California family courts may not take your estimate; in many cases the estimate needs be completed by an accountant or other financial professional.
How much, if any, of your business your spouse is entitled to will depend on the characterization and valuation of your business. A consultation with a family law attorney will help you determine whether the business is community property and subject to division in divorce.
Special Considerations and Scenarios
Business associations like divorce cases can be complicated. When and how you started your business can make a difference as to whether you keep this asset in full or will have to split it with your spouse. Other factors can help you keep your business or at least a bigger portion of it.
If you started your business before you got married to your spouse, the family court will want to know some details, such as the time between the start of your business and when you got married. They will also want to know the value of the business at the time of marriage and whether its value has increased.
It is understandable that you do not want to split your business when you started the business with your own separate funds. It is also possible that you have a business partner and cannot buy them out without losing your business. Perhaps you have a family business you inherited before or after your marriage. To determine whether the property will be split with your spouse, the court must consider particular factors such as:
- Is the business fully yours or split among family members?
- Are your parents maintaining ownership interest?
The Stanislaus County family court understands that few people can afford to hire a divorce attorney. Accordingly, the Modesto family court provides links to form packets for dissolution of marriage, requests for orders, stipulated custody agreements, and other family law forms. Links to these forms can be found on https://sacramentodivorce.us/modesto/family-law-forms/ and the Court’s websites on https://www.stanct.org/common-forms-packets.
If you are filing for divorce without an attorney, or currently have a case filed in Stanislaus County family court, consider contacting the local family law facilitator’s office for self-help assistance. They can help you compute child support, review your court documents, and provide additional self-help resources.
Not everyone in Modesto can afford a divorce attorney. This is evident by the number of self-represented parties in Stanislaus family court. Fortunately, parties who can’t afford an attorney have a number of resources to navigate the substantive law and court procedure.
Family Law Facilitator’s Office
The first stop for self-help resources when filing divorce in Stanislaus County is the Family Law Facilitator’s Office. They can help with straightforward cases by helping with forms and procedure. If you need some basic guidance with your routine family law case they may be able to help.
The second resource for self-represented parties in Stanislaus family court is the self-help center. The self-help center can help you in the following manner:
Help you select the proper legal forms based on what you are trying to accomplish.
Help you prepare paperwork to begin dissolution (divorce), legal separation or annulment, step-parent adoption or domestic violence restraining orders.
Assist you to prepare motions and/or orders to show cause and responses for custody and visitation, child support, spousal support and limited property issues.
Provide information and prepare draft calculations of support amounts based on statutory guidelines.
Review documents for completeness and instruction of how to file and serve the documents.
Instruction on what to expect and how to be prepare for a Court hearing.
Hold daily clinics in a classroom style setting to help you complete legal forms in all types of legal matters (not just family law).
Give you legal information and “How To” instructions in easy to understand language.
Referrals to other free self-help services (such as mediation) that can help resolve your case without having to go to Court.
Give you information about other free services and agencies that can help you help yourself.Stanislaus County Self-Help Center Website
Paralegal Document Preparer
This is a last resort. Some paralegals are very good and can help you with judicial council and local family law forms without offering legal advice. However, it’s difficult to gauge the knowledgeable and reputation of these non-attorney document preparers. A safer bet is to hire a divorce attorney for a flat fee to prepare your documents. Attorneys can offer procedural guidance and prepare the required forms to start your divorce. In addition, it’s easier to hold a licensed attorney to account if mistakes are made.
Pension rights can be one of the largest assets in divorce. While it may feel unjust to the working spouse who earned the pension, the marital community owns the pension rights attributable to work during the marriage. In the event of divorce, a QDRO or qualified domestic relations order may be required to divide the pension rights such as a CalPERS pension.
Vested vs Non-Vested
Pension rights such as rights in a CalPERS pension can be categorized into two: vested and non-vested. Vested pension rights are those which survive after the termination of the employment while non-vested pension rights do not. As a general rule, pension rights earned during the marriage in the course of employment belong to the marital community and are community property.
In case both the separate property and the community property has interests in the pension proceeds, then division and allocation of the proceeds must be done in a reasonable manner that reflects the relative contributions of the parties.
Length of Service
The time-rule is applied if the length of time served by an employee is a substantial factor in computing the amount of retirement benefits. In this instance, the community share will equal to a percentage based on:
- The length of service performed during the marriage but before separation, divided by
- The total length of service necessary to earn those benefits.
What is temporary child support?
Temporary child support is support awarded for children, during the pendency of:
- A proceeding for dissolution or legal separation
- Any other proceeding in which support of a child is at issue.
How is temporary support computed?
The Statewide Uniform Guideline applies to both temporary and permanent support orders. Temporary support is computed using the same formula given by the Statewide Uniform Guideline and following the same principles.
Can the amount of permanent child support and temporary child support be different if the same formula was used?
Yes. Although permanent and temporary child support both use the Statewide Uniform Guideline formula, the amount of the permanent award may vary from the amount of the temporary award, based on the changes in the parties’ circumstances during the pendency of the proceedings. Examples of circumstances that can change are parties’ income or time-sharing arrangements.
Can temporary support be given retroactive effect?
Yes. The order for temporary support may be made retroactive to the date of filing the petition or other initial pleading. If the parent ordered to pay child support was not served with the petition or other initial pleading within 90 days after filing, and the court finds the parent was not intentionally evading service, then the earliest date on which the order can be effective is the date of service.
For how long will temporary support be effective?
A temporary support order remains in effect until a permanent support order is made, or the order is otherwise terminated by the court or by operation of law. The court may modify or terminate a temporary support order at any time, except as to amount that have accrued before the date the notice of motion or order to show cause to modify or terminate was filed.
When is temporary support not enforceable?
A temporary support order is not enforceable during any period in which the parties have reconciled and are living together, unless the order specifies otherwise.
For example, if a wife files for divorce in Stanislaus County in May and obtains a temporary child support order, but reconciles with her husband in June who resumes living with her, she cannot collect child support in subsequent months as she has reconciled with her husband and is living with him.
It’s not uncommon for a spouse to enter marriage with a vacation property. However, in the event of divorce a child support issue may arise: can the family court consider the parent’s ability to receive income from the vacation property in calculating child support?
If you own income producing assets like a vacation property the family court can, in it’s discretion, impute the earning capacity of the vacation property to the parent-owner. Even if the vacation property is used solely for personal use, it can generate income as a short-term rental property. Accordingly, the court has the ability to impute the earning capacity of the non-income producing vacation property against the owner-parent. In brief, just as the court can impute earning capacity for a voluntary reduction in income, the court can impute earning capacity for not utilizing assets that can produce income like a personal vacation property.
The California family court is guided by certain statutory principles in calculating child support. Some of those principles suggest why the family court deems it acceptable to impute the earning capacity of non-income producing assets such as vacation properties, even if those assets/properties are separate property. Namely, Family Code 4053 states in part
(a) A parent’s first and principal obligation is to support the parent’s minor children according to the parent’s circumstances and station in life.
(d) Each parent should pay for the support of the children according to the parent’s ability.
(e) The guideline seeks to place the interests of children as the state’s top priority.
(h) The financial needs of the children should be met through private financial resources as much as possible.
Family law cases involving imputed earning capacity are not straightforward. In the case of imputing earning capacity for underutilized assets, the court must determine a reasonable rate of return from the asset. That value isn’t necessarily determined by a past history of income from the asset; rather, the court may need expert testimony to learn what should be a reasonable rate of return. Accordingly, cases of this complexity require representation from a local family law attorney. In light of the number of court appearances that may be required, hiring a local family law attorney may save you some money in attorney fees for travel.
The Goal of Alimony
Alimony (also known as spousal support) allows many individuals to get divorced and end abusive or unhappy marriages by awarding ongoing financial support during and after a divorce. California family courts grant alimony only in cases where they can determine that alimony is necessary. There are several types of alimony available after you file for divorce. Consult with a family law attorney to learn how to ask for spousal support and find out whether you’re entitled to temporary or permanent spousal support when you file for divorce.
The main goal of alimony is to give a spouse ongoing financial support after the marriage. A spouse no longer has to stay in a bad marriage for fear of losing financial support and comfort. A spouse can get a divorce and receive financial support temporarily to help get back on their feet or, in some cases, maybe even permanently.
How To Get Alimony
To receive alimony, you will need to prepare a strong argument about why you need it. Courts typically grant alimony to spouses who can demonstrate they need it. Alimony is typically granted in these or similar circumstances, but it can be granted in other cases as well:
- A disability or health concern that makes it hard to support yourself.
- A very long marriage, and you are accustomed to being supported.
- Stay at home parent who cares (or cared) for the children or home.
Depending on the reasons that you request alimony, the court still needs to make a full assessment of your alimony claim. Family law courts apply different alimony factors listed under California Family Code § 4320 in deciding whether to grant permanent alimony. These factors range from the spouse’s income and assets to each spouse’s needs and the standard of living to which the couple were accustomed. Other factors that will be considered are each spouse’s age, health, and contribution to the other’s education or professional license.
If you are considering getting divorced, but you are concerned about how you will be able to support yourself during and after the divorce, speak with a California family law attorney. An attorney can explain your options and help you understand whether you might qualify for temporary alimony or permanent alimony, as well as the possible amount. An attorney can also help you develop a strong case for spousal support to be presented to the family court judge.
In California, many types of property are divided equally in divorce. California is a community property state, meaning that with limited exceptions property acquired during marriage is classified as community property and subject to equal division in divorce. However, even when some types of property are classified as community property, they’re not divided equally. One of those types of community property that are NOT divided equally in divorce are “community estate personal injury damages.”
Personal Injury Damages Are Community Property
Family Code Section 780 states:
money and other property received or to be received by a married person in satisfaction of a judgment for damages for personal injuries, or pursuant to an agreement for the settlement or compromise of a claim for such damages, is community property if the cause of action for the damages arose during the marriage.Family Code 780
In light of Family Code 780, personal injury damages for a claim that arose during marriage are considered community property. For example, if a husband was injured in a car accident during marriage and filed a personal injury lawsuit, any subsequent settlement or judgment proceeds would be classified as community property.
Personal Injury Damages Exception To The Community Property Division Rule
While Family Code 780 classifies personal injury damages as community property, Family Code 2603(b) creates an exception to the 50/50 division rule for this form of community property. The statue reads:
(b) Community estate personal injury damages shall be assigned to the party who suffered the injuries…Family Code 2603(b)
Therefore, while personal injury damages for a claim that arose during marriage are community property, they are generally awarded to the injured spouse. The only instance in which the court can award some of the damages to the non-injured spouse are when the “interests of justice” require such after considering the needs and economic condition of the parties, time since recovery of the personal injury damages, and all other facts of the case. (See Family Code 2603(b)).