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Here are 11 ways to protect yourself, when going through an unexpected separation of finances.
I can speak from experience when I say, everyone should have a “yours, mine and ours” account when it comes to money. By no means should you hide money or avoid financial responsibility, but each of you should have your own account, plus a joint account.
In the event of a death, sudden accident or divorce, you will still have instant access to your money. This prevents any type of confusion about who gets what (which can happen once lawyers and banks get involved) until everything is sorted out.
If you don’t handle the household finances, now is the time to have a money talk with your spouse, and update yourself. No one likes to be taken for a ride and have an “I didn’t see that coming” moment.
Look over the bank statements, insurance policies and other important financial documents to update yourself. It will make any unexpected situations less stressful if you have control over this part of your life.
Your network of friends, families and co-workers are your best assets right now. They can give you emotional support as well as financial support. They can use their resources to help you find a new place live or a new job.
Keep an updated contact list handy, so you can refer to it quickly. It’s also a good idea to update your resume. During this transitional time in your life, you never know what to expect and it’s important to be prepared.
Depending on your state’s laws (and if you had a prenup), whatever you acquired during the marriage or partnership is joint property. During the duration of the relationship, many couples take out joint mortgages and car loans. Once you both decide to end things, you need to separate any joint property, like loans or credit cards.
In the case of a mortgage you will likely have to sell the property or refinance it into your partner’s name. You should also check your credit report and remove your significant other from your account. That way, their credit decisions won’t affect you in the future and vice versa.
Some days, my ex and I were fine talking calmly and sorting through our business, other days we were yelling and threatening. In the event you and your ex can’t discuss anything in a calm fashion, you need to have proof of your decisions.
Sending emails or text messages back and forth, is much better than a verbal agreement. You’ll need a paper trail, in case something bad happens or you’re wrongly accused. This also applies to any transactions with creditors or joint accounts where you are separating your finances.
Whether you’re breaking up with your roommate or going through a divorce, the best way to protect yourself is to treat all your decisions like a business. Stay calm, remove your emotions and try to create a well thought out plan.
Valentine's Day is upon us. Some of us will receive flowers, others jewelry and others may receive more expensive gifts such as a new car. Wouldn't that be nice? You would think that a gift is a gift but in California that is not always the case. As a divorce lawyer in California, I hate to rain on your parade but if you receive a diamond necklace from your husband as a gift, the law may not treat it as a gift if you ever get divorced.
This is very common where a divorce turns nasty. Suddenly the gift giver and their lawyer decide that all the gifts of jewelry etc. during the marriage were not gifts at all but property of the marriage.
The reason for this is that in a community property state like California there is a presumption that all property acquired during marriage is community property and must be divided equally in the event of a divorce. Certain types of gift are an exception to this rule but the exception is narrowly defined.
In California, gifts of jewelry and other items of a personal nature are separate property if they are not substantial in nature taking into consideration the circumstances of the marriage. In other words, a $10,000 diamond ring from a millionaire is probably a gift of separate property. The same diamond ring from a spouse making an average income with no other valuable assets in the marriage is probably not. In one California divorce case, In re Marriage of Buie & Neighbors, the court found that a gift of a Porsche was not an article of a personal nature as contemplated by the law.
Another exception if where there is something in writing indicating that a gift was intended. In California, a gift is separate property if there is a writing which expressly declares that giver intends the nature of the property to be changed from separate to community property. The legal term for such a declaration is a "transmutation." It is difficult to say whether your typical gift card would meet this standard. A hopelessly unromantic divorce lawyer receiving such a gift would therefore ask their spouse to append a declaration of transmutation under the declaration of love at the bottom of the card, "Please honey, just underneath where you say, "I love you, xxxx" do you mind writing “I give to you all and any interest I have in this diamond ring.”"
This from the Huffington POst- some very basic advice about finances during the divorce: "A client came into my office the other day in tears. She was just about to sign papers to purchase her new home, but was now feeling unsure of her decision. My client was in the middle of negotiating her financial agreement and wanted to prepare herself for the fresh start she desired once her divorce became final." Read full article.
Breaking up is not only hard to do, it can be brutal on your finances.
Legal fees and creating two households from one are just the initial costs of separation. And while some expenditures are necessary, others can be emotionally charged and careless and can lead to serious debt.
See the list of seven mistakes here.
Los Angeles (myFOXla.com) - Researchers say that one of the most common causes of divorce is financial problems. It seems money has a way of ruining relationships even when you're just dating.
Sanyika Calloway Boyce, financial fitness coach and author of “Give Yourself Credit: How to Recover from a Financial Fall”, shares some tips on how to manage money and relationships.
Earlier this year, the Minnesota State Patrol launched a criminal investigation into Denny Hecker Automotive Group.
Bankruptcy cases generally don’t involve bitter divorces, complaints about mistresses and boy-toys, multiple homes, Rolexes, furs, expensive cars and plastic surgery. Unless you’re Denny Hecker.
In Minnesota, Hecker is in the middle of a particularly contentious liquidation of his personal assets as a result of the collapse of his business empire. The former owner of 26 auto dealerships, the Advantage Rent-A-Car chain and other businesses is simultaneously going through a nasty divorce battle with estranged wife Tamitha Hecker, which has devolved into a he-said, she-said fight over their financial situations and personal conduct.
The latest news from the land of 10,000 lakes is that a state district court judge has ordered Denny Hecker to explain just how he’s been able to burn through a minimum of $25,000 a month while calling himself bankrupt and unemployed. According to the Minneapolis Star Tribune, Hecker has two weeks to document what he has said is the generosity of his friends and business associates. With such information, the judge plans to determine whether Tamitha Hecker’s request for $7,500 in monthly support (the estranged spouses have two kids, ages 14 and 7) should be granted.
While covering the twists and turns of the Heckers’ legal woes, the Star Tribune has reportedthat Tamitha Hecker hasn’t bought Denny Hecker’s claim that his pockets are bare. She pointed to $13,000 on six round-trip, first-class plane tickets that ferried her ex, his mistress and their respective kids to Hawaii this August. He also treated his mistress to steakhouse dinners nearly every day, Tamitha Hecker alleged, plus scheduled a $9,500 facelift. Denny Hecker defended the latter charge, saying that he consulted the plastic surgeon regarding damage to his neck from the tumor he had removed last year. He also denied that the plane tickets cost $13,000 and said he didn’t frequent high-end steakhouses with his mistress. He shot back at her for heading to Arizona to visit her “boy-toy.” And he argued that his estranged wife doesn’t need his help, what with the $200,000 in cash she has stored in a safety deposit box, not to mention a dozen Rolex watches, half a dozen fur coats and at least $1 million in jewelry she can sell.
Nearly a dozen Rolex watches are in fact headed to the auction block, but they’re not Tamitha’s. The watches – along with a Cartier travel clock, 18-karat men’s diamond ring and portraits signed by golfers Arnold Palmer, Tiger Woods and Jack Nicklaus – will be up for grabs at a public auction of Denny Hecker’s assets on Oct. 19 in New Germany, Minn.
Don’t expect to see Tamitha Hecker’s possessions on the block; she reportedly promised the trustee in charge of her ex’s estate that she wouldn’t touch the money or goods. Apparently that doesn’t exclude wearing them. The Star Trib spotted her at a recent court hearing with “a dazzling yellow-and-white diamond ring” on one hand and “a more subdued but equally sparkling diamond ring” on the other.
The following information is specific to California.
After separation and before the divorce in finalized one spouse stays in the family home while the other spouse pays the mortgage. What are the consequences?
It's often the case that after separation one spouse moves out of the family home ("the out-spouse") while the other spouse stays in the home with the children ("the in-spouse"). The out-spouse, usually the husband, may offer to maintain the status quo by continuing to pay the mortgage payments and other payments such as property taxes to maintain the property. In such a situation the in-spouse should be warned that there may be serious consequences of such an arrangement at the time of trial.
One consequence is that the out-spouse paying the mortgage payments may be entitled to what are called “Epstein” credits because they are paying separate property earnings towards a community property debt unless there was an agreement to waive such reimbursements or such payments were a form of child or spousal support.
The other major consequence is that if the reasonable rental value of the family home is more than the mortgage payments, the in-spouse may be required to re-imburse the community for the difference in these payments between the date of separation and the date of trial. These are called Watt's charges after the case that established the rule. FN6. The general rule is that where one spouse has the exclusive use of community assets during the date of separation and trial, that spouse may be required to compensate the community for the reasonable value of that use. Consider this example. Husband and Wife separate. Wife and the kids stay in the family home after separation. Husband agrees that he'll continue to support the family and pay the mortgage and other expenses. The mortgage payments are $1,500 per month. If Wife had to pay the fair market rent for the property she'd pay $2,500 per month. Husband pays the mortgage for 10 months from the date of separation to the date of trial. Husband could argue that he should be re-imbursed Watt's charges of $10,000 ($2,500 - $1,500 x 10). In a division of community property he'd be entitled to an extra $5,000. Husband could argue that he should also be entitled to Epstein credits of a further $15,000 ($1,500 x 10) which would increase his share of community property by $7,500.
This would mean that Wife's entitlement to community property would be reduced by $25,000 when she thought that Husband was supporting her and maintaining the status quo? Isn’t this grossly unfair? FN8 You'd think so but that didn’t stop the Court of Appeal awarding Epstein credits and Watts charges in similar circumstances in In re Marriage of Jeffries (1991) 228 Cal. App. 3d 548. But wait a minute. Isn’t there an exception to the rule where payments are made "in lieu of spousal support?" The answer is yes "but" this has to be clearly spelled out before the Court will treat such payments as support. In Jeffries, there was even an Order of the Court that said the payments were "in lieu of spousal support." However, the Order also said that the Court retained jurisdiction to characterize these payments and determine whether the Husband should be entitled to reimbursements.
In another case the Court of Appeal reached exactly the opposite conclusion to Jeffries. FN7. In that case the husband also paid the mortgage pursuant to a temporary court Order "in lieu of spousal support" and at trial claimed Epstein credits and Watts charges. The Court of Appeal held that public policy and the language of the Court order required that the Court deny the husband's claims for Epstein credits. The Court then decided that since the wife was, in effect, paying the mortgage she would not have to pay any Watt's charges because the monthly mortgage payments were the same as the fair market rental value of the home.
The only solution to this mess is for the parties and their attorneys to agree early on in the proceedings whether a spouse’s payment of community debts (such as the mortgage) and one spouse living in the family residence should be treated as spousal support which does not generate Epstein credits or Watt's charges. If it's treated as spousal support any agreement or Order should contain explicit language that mortgage and other payments by the out-spouse and exclusive residence by the in-spouse in the family home "shall be treated" as spousal and child support and the paying spouse shall not receive any reimbursements such as Watt's, Epstein, Jeffries credits and charges.
© 2009 Warren R. Shiell. All rights reserved. Los Angeles Divorce and Family Law Attorney.The information contained in this website is an "Advertisement." It is for informational purposes only and shall not constitute legal advice. Nothing in this Website shall be deemed to create an Attorney-Client relationship. An Attorney-Client relationship shall only be created when this office agrees to represent a Client and a Client signs a written retainer agreement.
FN1. Brooks v. Robertson (2008) 169 CA4th 176.
FN2. Marriage of Marsden (1982) 130 CA3d 426; Marriage of Moore(1980) 28 C3 366.
FN4 IRS Publication 936 “Home Mortgage Interest Deductions.
FN5. Marriage of Fonstein (1976) 17C3 738.
FN6. Marriage of Watts (1985) 171 CA 3d 366.
FN7. Marriage of Garcia (1990) 224 CA. 3d 885.
· the mortgage is a secured debt on a qualified home in which you have an ownership interest.
If you keep the house in joint names, the spouse who does not live in the house may also be entitled to take a spousal support deduction for payments that are made directly to the bank for mortgage and property tax payments.
Under IRS §121, the gain on the sale of a principal residence is excluded up to $250,000 for a single person and $500,000 for a couple filing a joint return. A detailed explanation of IRS §121 is set forth in IRS Publication 523, “Selling Your Home.” To qualify for the exclusion that taxpayer must have owned and used the residence as a principal residence for a total of at least 2 years in the 5 years immediately ending on the date of sale or exchange.
If one spouse receives the family home as part of the divorce settlement, that spouse will only be entitled to a $250,000 IRS §121exemption when they sell it.
If a couple decides to keep the family home in joint names as part of a divorce settlement and to sell it later, both former spouses may be entitled to the $250,000 IRS §121excemption, if one of the spouses continues to live in the home as their primary residence. For example, husband and wife divorce in 2000 and as part of a marital settlement agreement or stipulated Judgment agree to allow wife to say in the home for another five years when the children are 16. If the house is then sold at a gain of $700,000 both husband and wife can exclude $250,000 of their $350,000 gain on the sale.
When the house market is depressed, spouses may want to hold onto the property in joint names until house prices rise again. Most couples will want to hold the property as tenants in common. You will want to retain an experienced family law attorney in this situation since there are considerable risks for both parties. Any agreement should clearly specify who is responsible for housing costs such as mortgage payments, insurance, property taxes and maintenance and repairs. An agreement should also specify how risk will be allocated in the event of damage or loss and how adequate insurance coverage will be maintained. The parties will also have to agree on the time-table for selling the house. Sometimes it is linked to the children’s ages and completion of school. It may be linked to a limited time period – say two to three years – based on speculation as to when house prices will rise. Once the time period expires, the house will either be placed for sale on the market or the parties have the option of buying out the other at an agreed upon formula.
How do we determine the value of the house?
If you decide to either to buy out the other spouse’s community interest in the house or to exchange it for another asset, you will need to know the equity and financial value of the house. The equity in the house is equal to the house’s fair market value less any debts connected to the house such as mortgages and liens. The fair market value of the house is usually assessed by a certified real estate appraiser. The parties may agree to jointly retain an appraiser to keep down costs. A certified appraiser who knows the local market may provide a more accurate appraisal than the local realtor. Sometimes couples place the house on the market to see of anyone makes any offers.
It is important to note that if the Court is asked to calculate each spouse’s share in the house it will only consider the equity value. The court will not consider other costs that might reduce future sale proceeds such as closing costs, sales commissions and tax bills because those costs are not considered “immediate and specific.” FN5. Therefore, if the fair market value of the house is $500,000 and the balance of all outstanding mortgages is $200,000, the equity value of the house is $300,000. If this is all community interest then each spouse will be entitled to $150,000.
If you are trying to negotiate a settlement, you may wish to argue that the financial value of the house should be considered after taking into account taxes after sale and closing costs. This is important because once you get divorced and awarded the house you are only entitled to a $250,000 exemption on any gain. Therefore what may look like a fair bargain may not seem so fair after you factor in taxes. Consider this example: the equity value of the family home is $500,000 and the equity value of stocks and shares is also $500,000. Is this a fair exchange if the husband keeps the stocks and shares in exchange for the house? It depends. Assume that the shares have a high tax basis so that if they are sold the husband is liable for $100,000 of gain. The wife on the other hand is liable for $250,000 gain if she ever decides to sell the house. Is this still a fair exchange?
What are the options for dividing the house?
The house remains in joint names for a limited period of time and is then sold to the other spouse or is put on the market.
During economic downturns when house prices are depressed couples increasingly turn to the last option.
But there is a catch. If you litigate, option (c) is called a deferred sale order (or a “Duke Order”) and the Court can only order a deferred sale in very limited circumstances where it is in lieu of child support and economically feasible. FN3.
It is very important to consider the financial as well as the legal realities of electing to keep the house. It is used to be very common where the husband owns a business to suggest that the wife keeps the house and the husband keeps the business. Before even getting into whether this is a fair exchange of assets of equal value, one has to consider whether the spouse who wants to keep the house can afford to do so. Often the spouse who has primary custody of children wants to stay in the house for the sake of the children but this may not be economically possible. The spouse who wants to stay in the home should sit down and work out a budget. They should estimate housing costs and compare this with their estimate earnings from employment, support and other sources. Housing costs are more than just mortgage and property taxes and one should factor in utilities, repairs, insurance, fees etc. You may also be entitled to mortgage interest deduction relief lowering your costs. If you can still afford to stay in the house, only then should you consider this option.
Must the house be sold?
one spouse is able to raise sufficient funds to buy out the other. Otherwise there are several ways to buy out a spouse’s interest in the family home.
1. One party may be able to buy the other out if they can re-finance and qualify for a new mortgage on their own using their own income. The selling spouse should never agree to remain on the mortgage.
2. If refinancing does not generate sufficient income, the selling spouse may be persuaded to accept an installment note secured by a deed of trust on the home. This is generally a bad idea. A spouse who cannot afford an immediate buy out upon divorce, in the long run is probably not going to pay all the costs associated with maintaining a home and pay back the installment loan.
3. Another option is buying out all or some of the community interest in the house with a release of spousal support. You will need to consult with an attorney and a tax specialist to determine the present and after tax value of the total support payments that are being exchanged.
5. If there are other assets in the marriage, one spouse may elect to keep the house and the other may keep assets of equal value. For example, if the equity in the house is $200,000 and the value of pensions is $200,000 one spouse may keep the house and the other may keep the pensions. This is discussed in more detail below.
In many divorces, the biggest financial question is who gets the family home. Should the wife get it, should the husband, or should they sell it and split the proceeds? And if they sell it how should the proceeds be divided.
Many times, the wife has an emotional tie to the home and she wants to keep it. This is where she raised their children and decorated and entertained. But she needs to consider whether she can afford to keep the home. If she keeps the house she is getting an illiquid asset that does not buy groceries for her children or create any income.
The first issue that must be considered is who owns the house. Is it entirely community property that should be split equally or does one spouse have a claim to a greater share.
Often the family home is the most important asset that a family owns. In a divorce the first question that a couple must consider is who owns the family home. Is it entirely community property that should be divided equally or does one spouse have a separate property interest that would result in an unequal division.
In California, there is a presumption that property acquired during the marriage is community property and each spouse is entitled to an equal share upon divorce. However, in the case of the family home this presumption may not apply if title is not in joint names. For example, if a house is purchased during the marriage but only one spouse’s name is on the title that spouse may be able to claim that the entire property is their separate property and that they do not have to share it with the other spouse. FN1. This can lead to very unfair results if the mortgage was paid during the marriage with community earnings or the downpayment was made with community savings. To avoid this result the disadvantaged spouse has to prove that there was a breach of a fiduciary duty and the Court should treat the house as community. If you are ever in this situation you need to immediately consult with an experienced family lawyer. Further, if your credit is bad and your spouse ever tries to convince you that the only way to get a mortgage is to put title in their name you should immediately consult with an attorney.
Another common situation is where one spouse owns a house prior to marriage. During the marriage the title remains in that spouse’s name but the outstanding mortgage is paid with community earnings. The spouse who is not on title may still have a community property interest by virtue of the mortgage payments made with community earnings. This is commonly referred to as a “Moore-Marsden” interest based on the two cases that establish the formula for calculating the community interest. FN2. When a couple have been married a long time and substantial amounts of community earnings have paid off an existing mortgage, making improvements or the parties have re-financed, this “Moore-Marsden” interest can be substantial.
You may wonder why this situation is so different to the one above where the home is acquired during the marriage in one spouse’s name. The simple answer is that’s what the Courts have decided. If you are ever in this situation you need to immediately consult with an experienced family lawyer.
Jon and Kate calling it quits might be the news of the moment, but financial hardships brought on by the recession already have helped make separation or divorce a reality for couples across the country.
Yet the recession also is causing some unhappy couples to rethink their marital situation, since a costly divorce would only further deplete already-shrunken assets.
It can be hard to deal with divorce from an entirely rational viewpoint, but letting your emotions get the better of you can hurt your wallet more than your pride.
Your best option is to be as honest as possible – don’t try to hide your assets – no matter how badly you’d hate to share them with your ex – as this will only take more time and money to sort out and is TOTALLY ILLEGAL.
Collaborative law is growing in popularity. Rather than attorneys exchanging a series of angry (and expensive) letters as they negotiate the terms of the settlement and ending up in court if they can't agree, instead both parties sit down with their respective attorneys to, if possible, work out the terms of the settlement. This only works if both sides are prepared to be constructive and, again, make full-disclosure of their assets. It is an “all cards on the table” exercise but, if successful, can reduce the legal costs of divorce considerably.
Collaborative law is not dissimilar to mediation, although this has proven unpopular with couples as there is usually only one mediator involved who can give advice to both parties, meaning one often feels short-changed at the end of the process.
In collaborative law, your attorney is present during the meetings and if a settlement can’t be reached, the same attorney can’t go on to represent you in court, thus eliminating any incentive to draw out the process in hope of a larger fee.
If you are experiencing an emotional or bitter divorce then make sure, if you do choose to get married again, that you’re prepared for the worst. A prenup, is a worthwhile consideration particularly where one party is bringing significant assets into the marriage. It is intended that the prenup would provide the couple with a framework for dividing the assets on a divorce. (read more on pre-nups) Finally, no matter how betrayed you feel, or how bitter the divorce, it is almost always best to grin and bear the pain even after the proceedings are over rather than harbour a grudge into eternity.
Intellectual property rights such as copyrights, patents and trademarks can be valuable assets which should not be overlooked in any divorce settlement. This article will briefly look at copyrights and community property in California. In California the case of In Re Marriage of Worth established that copyright should be treated as community property subject to equal division in a marital dissolution. In that case Susan and Frederick Worth agreed in a stipulated Judgment that she would be entitled to royalties from two trivia books he authored during the marriage. When Frederick Worth later filed a copyright infringement action against the Trivial Pursuit board game, Susan claimed that she should be entitled to half the proceeds of the infringement action. The Court agreed with Susan and rejected Frederick ’s arguments that State community property law was preempted by Federal copyright law. Although the decision has been heavily criticized by scholars and by other courts, it remains the law in California .
This means that when a marriage ends it is important to identify any copyright that either spouse holds, to place a value on that copyright and to make adequate provision for its division. This is especially important for copyright works such as literary and music creations which can be licensed and generate future income. For example, consider an author who writes a series of books featuring a famous cartoon character. While the non-author spouse is entitled to fifty percent of the copyright in the books written during the marriage, what is the situation where the author continues to write new books after the marriage using the same cartoon character? The post divorce books might then be turned into television shows and movies generating further income. In this kind of situation, in creating a settlement your attorney will need to distinguish and value the various forms of intellectual property that are created during the marriage. These will include the copyrights in the books and the character, good will developed by the author and trademark rights created in the character and the series. It is likely that these values will depreciate over time due to post divorce services performed by the author. This was the situation in the divorce of Charles M. Schulz, the creator of the comic strip “Peanuts”. His wife of 24 years reached a property settlement whereby he agreed to pay for a share of the revenues he received from the comic strip after the divorce that would decline from 27% to 15% over ten years to take into account the fact that over time an increasing percentage of revenues would be attributable to his personal efforts.
It is important to distinguish between the physical work and the underlying copyright in the work. For example, in the case of an artist, the community will be entitled to the market value of any unsold paintings in a divorce but if the painter is famous there may be value to the other reproduction and merchandising rights in the paintings. Even where the copyright has been sold, there may be valuable residual rights that should be considered. For example, a novelist even after selling a book to a publisher may retain movie rights and even when the movie rights are sold may be entitled to “reserved rights” such as stage and performance rights. Screenwriters who are subject to the Writers Guild of America (WGA) Theatrical and Television Basic Agreement may not be the primary owner of the copyright in their scripts which are deemed “works for hire” and are owned by the studio or production company. However, the writer may be still be entitled to “separate rights” which can include stage, publication, series and sequel rights depending on the terms of the writers negotiated contract. Given the complexity of characterizing and valuation issues, in many cases it is a good idea to retain an experienced entertainment lawyer and accountant.
The first step in a divorce is to identify the nature of the intellectual property rights that may exist. A search of the U.S. Copyright Office will determine whether the copyright has been registered in the U.S. However, copyright registration is not a requirement for copyright protection and will not reveal works that have not yet been published or exploited or foreign works. For example, a half written book or a story outline is not likely to be registered but may still have value. Informal or formal discovery methods can be used to discover copyrighted works from the creator spouse or interested third parties such as book or music publishers, agents, business or personal managers and accountants. In some cases, it might be advisable to join them in the marital proceeding. In the case of a T.V. writer you would want to examine all contracts and royalty statements. In California, section 2100 et seq. of the Family Code requires both spouses to make a “full and accurate disclosure” of all separate and community assets and liabilities and to supplement those disclosures through the proceeding. Failure to do so may result in sanctions against the non-disclosing spouse and in extreme situations an award of those non-disclosed assets to the innocent spouse.
Once you have identified community copyright there are various methods for distribution. With copyright, the cleanest method is for one of the spouses to buy out the other’s copyrights interests although this can present valuation problems. Value is often speculative especially with the development of new technologies which can take many years to add value to old properties. Another solution is to equally divide both the ownership and control of the copyright assets. Often this will be problematic since it may impair the creator’s ability to commercially exploit the work. By analogy, in dealing with the division of the family business where one spouse has been responsible for management, it would be rare to give the other spouse a say in management. That leaves the other solution which divides ownership –that is the legal title and right to revenues- between the spouses but leaves control of the copyright to the creator spouse. This can create problems since it gives the creator spouse the ability to structure deals in such a way that disadvantages the other spouse. Consider the case of Jerry Lewis and Patti Lewis who divorced after 35 years. In the divorce, Patti reached a settlement under which she was entitled to a one half interest in royalties from “Community Titles” over which Jerry retained control. This included the Nutty Professor which was remade by Universal with Eddie Murphy. In a subsequent lawsuit, Patti alleged that Jerry structured the deal with Universal is such a way that minimized the “remake rights” (to which she was entitled to 50%) but paid him substantial personal service fees as writer and producer (which did not). If you do decide to separate ownership and control of the copyright it is important to negotiate how the managing ex-spouse will administer the asset, including defending the copyright and bringing infringement claims, and what fiduciary duties will be owed to the other spouse. Also there should be provision for a buy-out in certain circumstances e.g. an ex-spouse dies or no longer has the ability to manage or either party wishes to sell.
 Registration is often a condition for bringing an infringement action and attorney fees.
Couples often think that if they've figured out who pays what and get court approval, they're safe. Not necessarily. And it's even more important to be careful during this economic downturn.
Couples in the process of divorce spend a lot of time divvying up their assets. But in today's miserable economy, experts maintain that soon-to-be-exes should take even greater care dividing up the debts.
Otherwise, your former spouse's job loss could end up hitting your balance sheet -- and credit report -- years after you think the divorce is settled.
"This is one of the more difficult things to do and people often forget about it," said John Ulzheimer, director of consumer education at Credit.com. "But if you don't do it, or don't do it right, it can not only cost you money, it can cost you your credit rating for a long period of time."
Unfortunately, even people who think they are dividing debt often aren't dividing it legally -- despite approval from a divorce court, experts say.
Couples often think that they can assign repayment of debts in the process of a divorce -- e.g., you repay the Visa; I'll take the AmEx -- said D. Michael Bush, a Newport Beach-based lawyer. But unless they got the creditor's approval -- in addition to the court's -- the assignment is not legally enforceable, he said.
"There has to be an upfront agreement that includes the lender, or the lender can go where the money is -- it doesn't matter what you did in court," he said.
So how do you properly divide debt?
Everybody has the right to one free credit report every year from each of the three major credit bureaus. Now is the time to request one at www.annualcreditreport.com. On the report, you'll see that each credit listing shows the status of your account, when opened, when closed (if applicable) and whether the responsibility is individual or joint. These reports also show your payment history with each debt, the addresses your creditors have on record, and the names under which you have received credit.
Under normal circumstances, it's wise to check your report once annually for errors and signs of identity theft, such as new addresses and new credit that you didn't secure. In a divorce, you need the credit report because you're likely to find old accounts you'd forgotten about that have never been properly canceled, said Bill Hardekopf, chief executive of LowCards.com.
Next, cancel joint credit cards.
If both you and your ex are authorized users on credit card accounts, those cards should be canceled. If the cards have revolving balances, you must pay off the balances with other assets or transfer the debt to cards that are newly issued in just one name.
Why is that so important? A jointly held card is reported on the credit reports of both you and your ex-spouse. If your ex fails to pay bills on time, the damage ruins your credit too.
Worse, said Hardekopf, is that you are jointly and separately liable for any balance on that card. The divorce court does not have jurisdiction over existing contracts with your credit card companies. So even if the court says your ex is supposed to pay that bill, the creditor can come after you to collect. If an account is left open, your ex can add more debt and leave you holding the bag.
Not fair? True. But if you don't cancel the cards upfront, you'll be left to argue about it, possibly in court (again) later.
It's also important to check student loans.
Many student loans are issued in just one name and payable by just one person. But if you incurred private student debts while married -- or if you cosigned on your spouse's loan -- they may be joint obligations. Traditional student debt is low-cost and flexible and generally the last debt you want to pay off. However, you might want to pay off or refinance any private student debt to clarify repayment obligations after the divorce.
Auto and home loans also become an issue in divorce.
You don't necessarily want to refinance a home loan if you have a good rate, and you might not be able to refinance a used automobile. If you have these debts, you may want to try to modify them with your lender.
Typically, this requires the lender to look at your new, single financial statements and determine whether you can afford the payments on whatever income you'll maintain, whether that's from work or spousal support.
Another thing that can have enormous effect in a divorce is if one spouse files for bankruptcy protection.
Gary Leibowitz, a Los Alamitos bankruptcy attorney, says he's increasingly getting referrals from divorce lawyers who realize that their clients have more debts than assets. In these cases, it's often necessary to file for bankruptcy in conjunction with the divorce, he said.
And if one spouse is in bankruptcy, Leibowitz maintains that it would be foolish not to have the other look closely at filing too. The reason: all those joint debts.
"Any debt that was incurred during the marriage is joint debt," he said. "You could have divided up $100,000 in debt and then one spouse files bankruptcy and gets their $50,000 discharged.
"That leaves the other spouse with the whole obligation because that debt was never really divided. The [divorce] court doesn't have the jurisdiction."
Question: My spouse ran up huge credit card debts during the marriage. In dividing assets and debts in the settlement agreement who should be responsible for these debts?
In California, Family Code section 910 provides that the community is liable for all debts incurred during the marriage and prior to separation. It doesn’t matter whether the debt was incurred by one spouse for there own benefit or for the family. It also doesn't matter whose name appears on the bill or the credit card statements. If it was incurred during the marriage and prior to separation it's a community property debt and both spouses are equally liable. This means that when the parties are negotiating a settlement and tallying the marital balance sheet such debts should be divided equally. A better option might be that one spouse agrees to pay off the joint debts in return for a greater share of the community property. The spouse paying off the debts can at least make sure that joint debts are paid because as long as debts are jointly owed both spouses are financially responsible to the creditors.
Question: What if a married couple pays off one parties pre-marriage debts?
Consider this example. Bob and Jackie get married. Bob has huge credit card debts that he incurred before the marriage. Bob and Jackie want to improve their credit rating so they can buy a house. They agree to pay off Bob's debts. However, once they are debt free, Bob files for dissolution. In this case, Bob and Jackie have used community property earnings to pay off Bob's separate property debt. California case law states that the community is entitled to a re-imbursement for the amount it paid to discharge one parties separate property debts. 1 So in the above example, the community is entitled to a reimbursement for paying Bob's debts.
Question: What if one party uses their separate property to pay off community property debts?
In this example after they get married Bob and Jackie go on vacation and rack up huge debts. Jackie dips into her brokerage account which she built up prior to the marriage to pay off the vacation debts. In this case, Jackie has used her separate property to pay off community debts. California case law states that a spouse who, during marriage and before separation, uses separate property to satisfy a community debt is presumed to make a gift to the community. 2 So in the above example, Jackie is not entitled to a re-imbursement for paying the community vacation debts.
There is one important exception to his rule. Family Code section 2640 provides that where one party uses their separate property for the acquisition of community property, the paying spouse has a statutory tracing right of reimbursement if they have not waived the right in writing. Contributions to the acquisition of property include downpayments, payments for improvements, and payments that reduce the principal of a loan used to finance the purchase or improvement of property. They do not include payments of interest on a loan to purchase property, or payments for maintenance, insurance, or taxation of the property. So in the above example, if Jackie had used her separate property brokerage account to pay off the principal on a joint mortgage or for a downpayment she would be entitled to a reimbursement of that amount.
Question: After separation one spouse uses their separate property earnings or property to pay off community debts.
In this example after Bob and Jackie separate, Jackie continues to drive the BMW which was purchased with a loan during the marriage. Bob continues making the loan payments on the car. Can Bob claim a reimbursement credit for all the payments he makes from the date of separation to the date of trial?
California case law has developed the general rule that a spouse who, after separation, uses earnings or other separate property to pay pre-existing community obligations should be reimbursed out of community property upon dissolution. 3 These are traditionally called "Epstein credits" after the California Supreme Court case that established the rule.
Under this general Bob could, in theory, claim credits for all the payments he makes on the car loan after separation. But what if Bob was driving the car and making the payments. Wouldn’t it be unfair for Bob to have the use of the car and also claim reimbursement credits? That's what the Court said in Epstein. It laid out an exception to the general rule where the paying spouse also uses the asset and the "amount paid was not substantially in excess of the value of the use." So this means that Bob could not claim credits for the monthly payments if he drives the car but probably could claim a credit if he paid of the entire loan.
There are two other important exceptions to the Epstein general rule that a spouse who uses separate earnings or property to pay off pre-existing community obligations is entitled to a reimbursement: (a) where there is an agreement between the parties that the payments will not be reimbursed, and (b) where the payments were intended as a gift or as child or spousal support.
Question: After separation one spouse uses community property funds to pay of their living expenses. What are the consequences?
In this example, Bob and Jackie separate and Bob agrees to pay $1000 per month in support and "whatever else you need out savings." Jackie takes out $1,000 community property from the joint bank account to pay various living expenses. California case law provides that the community is entitled to re-imbursement where one spouse uses community property to pay separate obligations after separation to the extent that exceed a reasonable amount for child and spousal support. 4 A reasonable amount would probably be the amount of guideline support that a Court would order in an application for temporary child and spousal support. If that amount were $1,500 amount in the above example, Jackie would have to reimburse the community $500 ($2,000 - $1,500 she received). In the division of community property she would receive $250 less in community property. Since this rule flows from Epstein, the parties can waive the rule in writing and agree that such payments shall not reduce the community estate.
Question: After separation one spouse stays in the family home while the other spouse pays the mortgage. What are the consequences?
We've already seen one consequence. The out-spouse paying the mortgage payments may be entitled to Epstein credits because they are paying separate property earnings towards a community property debt unless there was an agreement to waive such reimbursements or such payments were a form of child or spousal support.
The other major consequence is that if the reasonable rental value of the family home is more than the mortgage payments, the in-spouse may be required to re-imburse the community for the difference in these payments between the date of separation and the date of trial. These are called Watt's charges after the case that established the rule. 5. The general rule is that where one spouse has the exclusive use of community assets during the date of separation and trial, that spouse may be required to compensate the community for the reasonable value of that use. Consider this example. Bob and Jackie separate. Jackie and the kids stay in the family home after separation. Bob agrees that he'll continue to support the family and pay the mortgage and other expenses. The mortgage payments are $1,500 per month. If Jackie had to pay the fair market rent for the property she'd pay $2,500 per month. Bob pays the mortgage for 10 months from the date of separation to the date of trial. Bob could argue that he should be re-imbursed Watt's charges of $10,000 ($2,500 - $1000 x 10). In a division of community property he'd be entitled to an extra $5,000. Bob could argue that he should also be entitled to Epstein credits of a further $15, 000 ($1,500 x 10) which would increase his share of community property by $7,500.
This would mean that Jackie's entitlement to community property would be reduced by $25,000 when she thought that Bob was supporting her and maintaining the status quo? Isn’t this grossly unfair? 7. You'd think so but that didn’t stop the Court of Appeal awarding Epstein credits and Watts charges in similar circumstances in In re Marriage of Jeffries (1991) 228 Cal. App. 3d 548. But wait a minute. Isn’t there an exception to the rule where payments are made "in lieu of spousal support?" The answer is yes "but" this has to be clearly spelled out before the Court will treat such payments as support. In Jeffries, there was even an Order of the Court that said the payments were "in lieu of spousal support." However, the Order also said that the Court retained jurisdiction to characterize these payments and determine whether the Husband should be entitled to reimbursements.
In another case the Court of Appeal reached exactly the opposite conclusion to Jeffries. 6. In this case the husband also paid the mortgage pursuant to a temporary court Order "in lieu of spousal support" and at trial claimed Epstein credits and Watts charges. The Court of Appeal held that public policy and the language of the Court order required that the Court deny the husband's claims for Epstein credits. The Court then decided that since the wife was, in effect, paying the mortgage she would not have to pay any Watt's charges because the monthly mortgage payments were the same as the fair market rental value of the home.
The only solution to this mess is for the parties and their attorneys to agree early on in the proceedings whether a spouses payment of community debts (such as the mortgage) and one spouse living in the family residence should be treated as spousal support which does not generate Epstein credits or Watt's charges. If it's treated as spousal support any agreement or Order should contain explicit language that mortgage and other payments by the out-spouse and exclusive residence by the in-spouse in the family home "shall be treated" as spousal and, if applicable, child support and the paying spouse shall not receive any reimbursements such as Watt's, Epstein, Jeffries credits and charges.
1. Marriage of Walter (1976) 57 Cal. App. 3d 997.
2. See v. See (1966) 64 Cal. App. 2d 778. In Re Marriage of Nicholson (2002) 104 Cal. App. 4 289, the Court of Appeal held where Husband had used $30,000 that his mother had given him as a gift (i.e. separate property ) to pay off the credit card ( community property debts) so they could qualify for a loan to buy a house, he was not entitled to a re-imbursement.
3. In re Marriage of Epstein (1979) 24 Cal. 3d 76. Also In Re Marriage of Tucker (1983) 141 Cal. App. 3d 128.
4. Epstein, above; In re Marriage Stalworth (1987) 192 Cal. App. 3d 742.
5. In re Marriage of Watts (1985) 171 Cal. App. 3d 366.
6. In Re Marriage of Garcia (1990) 224 Cal. App. 3d 885.
There are two types of credit accounts, and each is handled differently during a divorce.
The first type is a secured account, meaning it’s attached to an asset. The most common secured accounts are car loans and home mortgages. The second type is an unsecured account. These accounts are typically credit cards and charge cards, and they have no assets attached.
As a fellow member of the Divorced fraternity, The President of Victory Mortgage Lenders, also went through a Divorce.

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