Court Opinion

ID: 9558206
Source: CourtListenerOpinion
Date Created: 2023-08-21 17:04:18.514982+00
Date Added: 2024-06-11T09:04:54.481315
License: Public Domain

Filed 8/21/23 Marriage of Reeves CA2/5

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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                         SECOND APPELLATE DISTRICT

                                        DIVISION FIVE

 In re the Marriage of LYDIA H.                                         B309709
 KENNARD and SAMMIE L.
 REEVES.
 LYDIA H. KENNARD,                                                      (Los Angeles County
                                                                        Super. Ct. No. BD604788)
      Appellant and Cross-Respondent,

           v.

 SAMMIE L. REEVES,

      Appellant and Cross-Appellant.

      APPEAL from a judgment of the Superior Court of Los
Angeles County, Melinda Johnson, Temporary Judge. (Pursuant
to Cal. Const., art. VI, § 21.) Affirmed.
      Sheppard, Mullin, Richter & Hampton and Robert J.
Stumpf, Jr.; Stephen Temko; Phillips Jessner and Gregory W.
Jessner for Appellant and Cross-Respondent.
      Complex Appellate Litigation Group, Kirstin Ault, Claudia
Ribet and Charles M. Kagay; Jeffe Family Law Group, Daniel J
Jaffe and William S. Ryden for Respondent and Cross-Appellant.
                                     ___________________
       In this dissolution action, Lydia H. Kennard (wife) appeals
from a judgment that characterized a company she founded prior
to marriage as community property. Wife additionally challenges
the trial court’s computation of spousal support and distribution
of property. Sammie L. Reeves (husband) cross-appeals, also
contending the trial court erred in its allocation of community
property. We affirm.
           FACTUAL AND PROCEDURAL BACKGROUND
       Husband and wife married on November 8, 1992, and
separated August 7, 2014. The trial court entered a judgment of
dissolution on October 26, 2020, after four years of contentious
and expensive litigation.
       In 1984, before marriage, wife founded Kennard
Development Group (KDG). By the time they were married,
KDG employed approximately 12 people and collected a little
under a million dollars in annual revenue. Wife had an urban
planning and management degree from Stanford University, a
Master’s degree in city planning from MIT, and a law degree from
Harvard Law School. Husband owned a commercial furniture
business.
1.     The Antenuptial Agreement
       Shortly before the wedding, wife proposed they enter into
an antenuptial agreement; husband “didn’t have a problem with
it.” On November 5, 1992, three days before the wedding,
husband received from wife a proposed antenuptial agreement in
which the parties agreed “that during their marriage, that all of
the property that has been brought to the marriage shall retain
its separate property character, regardless of whether said
property is invested in community property interest or separate
property interest, unless by written agreement that transmutes

                                2
said property from separate to community property.” The
separate property “include[d] all rents, issues, profits, fees,
receivables, work in progress, appreciation, and income produced
by the separate property of each.” Husband signed the
antenuptial agreement the day he received it and wife signed it
the following day.
       In April 1994, wife accepted an executive position at Los
Angeles World Airports, a city-owned agency that manages and
operates four airports including LAX. By that time, husband had
closed his furniture business. They agreed the timing presented
a wonderful opportunity for wife to advance her career and that
husband would run KDG as its president. Although he asked for
equal ownership of the business, wife only agreed to transfer 10
percent of KDG to him. He also received a salary. The parties
entered into a “Modification and Reaffirmation of Antenuptial
Agreement” that acknowledged wife had transferred 10 percent
or 100 shares of KDG to husband while wife retained 90 percent
or 900 shares. The parties expressly ratified, adopted, and
confirmed the 1992 antenuptial agreement in all other respects.
2.     The 1996 Estate Plan and Spousal Property
       Agreement
       In 1995, the parties hired the law firm of Anker & Hymes
(Hymes) to create an estate plan. In a letter disclosing potential
issues related to dual representation, which both parties
acknowledged and accepted by their signatures, Hymes expressly
disclosed, “I understand from our meeting that you both consider
the great majority of your assets to be [wife’s] separate property
in origins (having been accumulated by her prior to marriage).
We discussed at some length the advantages (mostly estate tax)
of ‘transmuting’ some or all of [wife’s] separate assets into

                                3
community property – as well as the disadvantages (mostly ‘loss’
by [wife] of a considerable portion of any assets so transmuted in
the event of divorce) during our meeting. Because of the
complexities of the issues involved, we will (for now) plan your
estate on the assumption that [wife] will not transmute any of
her separate property into community property. If you later
decide to transmute some (or all) of [wife’s] separate property into
community, we will make the necessary arrangement to
accomplish that result – and adjust your estate plan accordingly.”
       In late June 1996, husband and wife signed “The
Reeves/Kennard Family Estate Plan.” They concurrently signed
a “Spousal Property Agreement” “to specify the character of their
property interests . . . solely for the purpose of interpreting how
property shall be disposed of on the deaths of the parties.” The
parties agreed that “except for the property described in Exhibit
A, all property owned by either party, or both, as of the date of
this agreement is the community property of both parties.”1
Departing from the antenuptial agreement, the parties further
agreed that “all earnings for personal services of each party
acquired after the date of this agreement . . . are the community
property of both parties.”

1      Exhibit A contained a list of husband’s separate property,
including his 10 percent share of KDG, while Exhibit B contained
a list of wife’s separate property, including her 90 percent share
of KDG. Although the Spousal Property Agreement does not
reference Exhibit B – the wife’s separate property – neither party
argues that the omission transmuted wife’s separate property
interest in KDG to community property.

                                 4
3.     The 2001 Estate Plan and Spousal Property
       Agreement
       In 2001, after the birth of their oldest child, the parties
amended their 1996 estate plan. Husband would later testify
that he believed the 2001 estate plan was intended to revoke the
antenuptial agreement such that his and wife’s separate
ownership interests in KDG became community property. Wife
would testify she intended the KDG ownership to be community
property for estate tax purposes only. She additionally intended
that any purported transmutation of KDG into community
property would be automatically revoked if either filed for
divorce.
       Although Hymes continued to represent both parties, the
previous written disclosures regarding dual representation and
transmutation of separate property were not repeated to husband
and wife in the 2001 estate plan. On August 8, 2001, husband
and wife signed an “Amendment and Restatement of Revocable
Trust” along with a new “Spousal Property Agreement.” The
parties acknowledged they had read the agreement “and that
their counsel has explained its meaning and legal consequences
to them.”
       Relevant to this appeal, the 2001 Spousal Property
Agreement contained the following provisions:
“1.2. Purpose of Agreement. The parties are entering into this
agreement in order to revoke that certain Antenuptial Agreement
executed by the parties on November 5, 1992, as modified and
reaffirmed on November 15, 1994, and to specify the character of
their property interests pursuant to the applicable provisions of
the California Family Code. This agreement is not made in
contemplation of a separation or marital dissolution and is made

                                5
solely for the purpose of interpreting how property shall be
disposed of on the deaths of the parties. [Italics added.]
“1.3 Revocation of Antenuptial Agreement. The parties hereby
revoke that certain Antenuptial Agreement dated and executed
by the parties on November 5, 1992, and subsequently modified
and reaffirmed on November 15, 1994, and said agreement shall
be of no further force or effect.
“1.4. Scope and Force of Agreement. The parties intend that the
characterizations of their property interests made in this
agreement take precedence over the forms of title in which those
interests are held.
“2.1. All Currently Held Property Is Community Property. The
parties agree that all property owned by either party, or by both,
as of the date of this agreement is the community property of
both parties. The parties also agree that any future rents, issues,
profits, and proceeds of that property are the community property
of both parties. In order to give effect to this provision, the parties
are transmuting separate property, as provided below. The
parties further hereby agree to sever any and all joint tenancies
which they may now own and agree to hold any property
heretofore or currently held by them in joint tenancy as
community property other than the potential transmutation
referenced in this agreement.”
“2.3. Transmutation of Wife’s Separate Property to Community
Property. Wife agrees that the character of the property
described in Exhibit B (including any future rents, issues, profits,

                                  6
and proceeds of that property) is hereby transmuted from her
separate property to the community property of both parties.2
“3.9. Automatic Revocation. In the absence of other evidence
indicating the party’s intent to terminate this agreement, it shall,
nevertheless, be deemed mutually terminated and of no further
force or effect upon either party’s filing a petition, complaint or
other pleading for dissolution of their marriage or divorce, or
upon a court of competent jurisdiction dissolving the marriage or
granting a decree of divorce or separate maintenance to either of
them.”
4.     Subsequent Amendments to the Estate Plan
       In 2003 and 2009, the parties again amended their
revocable trust. Neither party contends the 2003 or 2009
amendments are material to the issues raised in this appeal,
although wife argues the 2009 estate plan evidenced her intent to
maintain her separate property until the death of either spouse.
The 2009 estate plan included a “Schedule of Separate Property
of [Wife],” initialed by both husband and wife, that showed a
“Ninety percent (90%) interest in the outstanding stock of
[KDG].” Also in 2009, wife created the “Lydia Kennard Separate
Property Trust,” which set forth wife’s separate property,
including her 90 percent interest in KDG.
       Husband worked at KDG from 1994 to late 2010 or early
2011. During that time, KDG transitioned from a company that
mainly provided urban planning services to one that solely
provided construction management work for large public entities.
Husband’s salary, initially ranging from $30,000 to $50,000,

2     Exhibit B to the 2001 trust was entitled “Wife’s Separate
Property Being Transmuted to Community Property” and
included her “entire ownership interest” in KDG.

                                 7
increased to approximately $200,000. At trial, husband
presented evidence that his efforts substantially increased the
company’s profile, its revenue, the number of employees, and the
size of its projects though he later admitted it never made a profit
under his leadership.
       In 2007, wife returned to work at KDG. She became
increasingly involved in the day-to-day operations, resuming
control in 2011. Husband stopped working entirely at that time.
The trial court found KDG experienced significant growth in
revenue and profit under wife’s leadership after 2014.
5.     The Dissolution Proceedings
       On July 11, 2014, wife filed a petition for legal separation,
which she amended on August 7, 2014, to a petition for
dissolution of marriage. On August 28, 2014, husband filed a
response and request for dissolution.
       The case was tried in four phases before the Honorable
Melinda Johnson (retired) as judge pro tem pursuant to the
parties’ stipulation. This appeal is concerned with the rulings
issued after the first and third phases of trial.
       In the first phase of trial, held in April 2017, the court
heard testimony and received evidence regarding the validity and
enforceability of the antenuptial agreement and the 2001 Spousal
Property Agreement. It determined the 2001 Spousal Property
Agreement revoked the antenuptial agreement and transmuted
the parties’ separate property, including their individual
ownership interests in KDG, to community property.3

3    The 2001 Spousal Property Agreement revoked the
November 5, 1992 Antenuptial Agreement (as subsequently
modified and reaffirmed on November 15, 1994).

                                 8
       In the second phase of trial, the court determined the
appropriate date of valuation for KDG. The trial court’s later
ruling mooted this finding when it ordered KDG to be sold with
the sales proceeds to be divided equally between the parties.
       In the third phase of trial, held in February and May 2019,
the trial court heard testimony and received evidence on
numerous issues concerning the division of property and spousal
and child support. The trial court issued a 30-page final
statement of decision with extensive findings and rulings,
including ordering the sale of KDG. Because the marital estate is
large, we discuss below only the support orders and divisions of
property that the parties dispute.
       In the fourth and final phase of trial, occurring in March
2020, the trial court determined attorney fees and costs. By then,
the parties had expended approximately $6 million in fees and
costs, which the court found to be excessive relative to the size of
the marital estate.
       On October 26, 2020, the trial court entered its final
judgment, summarizing its findings and rulings from the
previous four statements of decision. Wife filed a notice of appeal
on December 4, 2020, and husband filed his cross-appeal on
December 16, 2020.
                           DISCUSSION
       KDG is the primary asset in the marital estate and forms
the basis for the parties’ disputes in this appeal. Wife contends
KDG is her separate property and the trial court erred when it
interpreted the 2001 Spousal Property Agreement to transmute
KDG to community property despite express language that the
agreement would be automatically revoked upon dissolution of
the marriage and that the terms of the agreement would only

                                 9
take effect upon the death of one of the spouses. Alternatively,
wife asserts the transmutation was a product of undue influence.
       Wife next contends the trial court’s spousal support
calculation is unsupported by substantial evidence. Wife lastly
argues the trial court impermissibly “double dipped” when it
awarded all of KDG’s income to wife in calculating her spousal
support obligation to husband but later took back $2,239,870 in
perquisites, which were derived from the same income previously
awarded to her, in the property allocation.
       In his cross-appeal, husband contends wife received
approximately $1.6 million more in distributions from KDG than
he did. He also contends wife used those distributions to pay
personal expenses. Husband asserts wife, as the managing
spouse, had the burden to prove the reason for the distributions.
Because wife failed to meet this burden, husband contends he is
entitled to an equalizing payment of $814,412. Husband next
argues the trial court improperly awarded all of KDG’s income
from January 1, 2019 to May 31, 2020 to wife in violation of its
obligation to divide the income evenly. Finally, husband
contends the trial court failed to take into account the tax
consequences of its treatment of wife’s postseparation
compensation from KDG.
       We find wife’s and husband’s arguments unpersuasive.
1.     The 2001 Separate Property Agreement Transmuted
       Wife’s Separate Property to Community Property
       Wife’s appeal primarily challenges the trial court’s ruling in
the first phase of trial: that the 2001 Separate Property
Agreement revoked the antenuptial agreement and transmuted
the parties’ separate property, including KDG, to community
property.

                                 10
      a.     Applicable Legal Principles and Standard of
             Review
       Both before and during marriage, spouses may agree to
change the status of any or all of their property through a
property transmutation. (Fam. Code, § 850; In re Marriage of
Campbell (1999) 74 Cal.App.4th 1058, 1062.)4 Section 850,
subdivision (b), provides that married persons may transmute the
separate property of either spouse into community property “by
agreement or transfer,” subject to the provisions of sections 851
to 853. Section 852, subdivision (a), in turn, requires: “A
transmutation of real or personal property is not valid unless
made in writing by an express declaration that is made, joined in,
consented to, or accepted by the spouse whose interest in the
property is adversely affected.” To satisfy the requirement of an
“express declaration,” the writing need not use any particular
language, including the terms “transmutation,” “community
property,” or “separate property.” But, it “must unambiguously
indicate a change in the character or ownership of property.” (In
re Marriage of Starkman (2005) 129 Cal.App.4th 659, 664
(Starkman); In re Marriage of Valli (2014) 58 Cal.4th 1396,
1400.)
       Prior to 1984, “it was ‘ “quite easy for spouses to transmute
both real and personal property” ’ because a transmutation could
be proved by evidence of an oral agreement between the spouses
or by ‘ “implications from the conduct of the spouses.” ’ ” (In re
Marriage of Valli, supra, 58 Cal.4th at p. 1401.) By adopting the
express written transmutation requirements, the Legislature
intended “ ‘to remedy problems which arose when courts found

4    All further section references are to the Family Code unless
otherwise specified.

                                11
transmutations on the basis of evidence the Legislature
considered unreliable.’ ” (Ibid.)
       “In deciding whether a transmutation has occurred, we
interpret the written instruments independently, without resort
to extrinsic evidence.” (Starkman, supra, 129 Cal.App.4th at
p. 664; Estate of MacDonald (1990) 51 Cal.3d 262.)
       b.    Holtemann and Lund
       Two cases are central to the transmutation issue raised in
this appeal, In re Marriage of Holtemann (2008) 166 Cal.App.4th
1166 (Holtemann) and In re Marriage of Lund (2008)
174 Cal.App.4th 40 (Lund). They present substantially similar
facts and address the same issues raised by wife in this matter.
       In Holtemann, the parties, with assistance of counsel,
executed trust documents to eliminate the need for probate and
to minimize estate taxes by transmuting the parties’ separate
property to community property. The trust document also
expressly allowed either spouse to revoke or terminate the trust.
Later, when the wife filed for dissolution, the husband attempted
to revoke the trust and thereby rescind the transmutation.
(Holtemann, supra, 166 Cal.App.4th at p. 1171.)
       The Holtemann court held the transmutation was valid and
could not be unilaterally rescinded, even though the trust was
revoked. The court relied on the plain language of the
transmutation agreement, which expressly stated in various
places and in various ways, that the husband agreed to
transmute the character of his listed separate property to
community property of both parties. (Holtemann, supra,
166 Cal.App.4th at pp. 172–173.)
       The husband argued the transmutation became invalid due
to the dissolution proceedings because the agreement stated “it

                               12
was not made in contemplation of a separation or marital
dissolution and is made solely for the purpose of interpreting how
property shall be disposed of on the deaths of the parties.” The
court was not persuaded: “Regardless of the motivations
underlying the documents, they contain the requisite express,
unequivocal declarations of a present transmutation.”
(Holtemann, supra, 166 Cal.App.4th at p. 1173.) “In any event,”
the court continued, “we are not aware of any authority for the
proposition that a transmutation can be conditional or
temporary.” (Id. at p. 1174.) Instead, the trust provided that the
property remained “community property” even upon revocation of
the trust. (Ibid.) The evidence was clear that both spouses in
Holtemann knew the legal consequences of the change at the
time it was made. Thus, the only way to have reconveyed the
property to the husband as his separate property would have
been by another express written transmutation agreement of
both husband and wife. (Ibid.)
       In Lund, the parties’ trust documents specified that
husband “for estate planning purposes” desired to convert his
separate property into community property. (Lund, supra,
174 Cal.App.4th at p. 44.) The trust documents specified that all
of the husband’s separate property “is hereby converted to
community property of Husband and Wife . . . .” Both parties
executed mutual wills with similar provisions. (Id. at pp. 44, 52.)
The trust also automatically terminated upon dissolution
resulting in the “return to each Settlor the separate property they
contributed to this Agreement not previously disposed of . . . .”
(Id. at p. 48.)
       Relying on Holtemann, the Lund court held that neither
the automatic termination upon marital dissolution clause nor

                                13
the words “for estate planning” as an apparent motivation for the
trust had any effect on the clear and direct words of the
transmutation agreement itself. (Lund, supra, 174 Cal.App.4th
at pp. 53-54.) To enforce an implied automatic revocation of
transmutation or read a contingency into a direct statement
would violate both the express, written declaration provisions of
section 852, and involve the court in perpetrating a fraud on the
IRS. The court further held the transmutation agreement could
not be undone either automatically, or by the action of only one
spouse, regardless of motive. (Id. at p. 55.)
      c.      The 2001 Spousal Property Agreement
              Contained an Express Declaration That
              Transmuted Wife’s Separate Property to
              Community Property
      Like the trial court, we conclude Holtemann and Lund are
dispositive. The record shows wife signed a document that states
in unambiguous terms that the parties’ antenuptial agreement is
revoked and that “the parties are transmuting separate
property. . . .” Specifically, “Wife agrees that the character of the
property described in Exhibit B (including any future rents,
issues, profits, and proceeds of that property) is hereby
transmuted from her separate property to the community
property of both parties.” Listed in Exhibit B is wife’s 90 percent
ownership in KDG. The term “transmutation” or its derivatives is
used repeatedly throughout the property agreement. “ ‘[A]
clearer statement of a transmutation is difficult to imagine.’ ”
(Holtemann, supra, 166 Cal.App.4th at p. 1173.) As in
Holtemann and Lund, neither section 1.2 of the Spousal Property
Agreement (stating the agreement was made solely to address
the disposition of property upon death of the parties and not in

                                 14
contemplation of dissolution) nor section 3.9 (automatic
termination of the agreement upon dissolution of marriage) had
any effect on these clear and direct words of transmutation.
      Wife’s attempts to distinguish Holtemann and Lund are
unavailing. Wife contends Holtemann never referred to a
“potential” transmutation like the 2001 Spousal Property
Agreement does. Wife also contends the automatic termination
provision in Lund is distinguishable because it was contained in
a separate document rather than the property agreement itself.
These minor distinctions do not affect our analysis.
      Wife nevertheless seizes on the trial court’s observation
that “[attorney] Hymes’ intent, and perhaps [wife’s] – although
not [husband’s] – was to have the best of both worlds –
community property tax advantage upon death and separate
property retention in the case of divorce.” The court found these
intents were “inconsistent and, to a large extent, irreconcilable.”
The court observed, “The language in the 2001 document states
that the revocation and transmutations are currently effective
and absolute, and that they are potential [sic] to take effect at the
death of the first, and that they are conditional upon neither
party filing a petition for dissolution at which point they are
ineffective.”
      She argues these “irreconcilable” provisions rendered the
agreement “at least ambiguous” under In re Marriage of Benson
(2005) 36 Cal.4th 1096 (Benson) and Starkman, supra,
129 Cal.App.4th at page 662. According to wife, the trial court
was required to find a transmutation did not occur due to these
inconsistencies.
      We disagree. Holtemann and Lund cogently addressed
these issues while Benson and Starkman did not. Benson, supra,

                                 15
36 Cal.4th at page 1100 involved an oral, not a written, promise:
the husband claimed he conveyed to the wife his community
property interest in their home after she orally promised to
waive, in writing, her community property interest in his
retirement accounts. The Supreme Court held no transmutation
of his retirement accounts occurred. The wife never executed a
written declaration and the husband’s transfer of the family
home, while evidence of partial performance of the bargain, was
not an adequate substitute for an express statement under the
statute. (Ibid.)
       In Starkman, supra, 129 Cal.App.4th at page 665, a
paragraph in the spouses’ trust agreement provided that the
property transferred to the trust “is the community property of
both of them unless such property is identified as the separate
property of either Settlor.” (Id. at p. 662.) The trust did not
expressly identify any separate property. The court nevertheless
held this clause did not unambiguously establish that the
husband effected a wholesale change of ownership in his separate
property by transferring it to the trust, particularly when other
language in the trust could reasonably be interpreted to mean
that separate property retained its separate property
characterization. The court suggested the parties could have
complied with the requirements of section 852 if the husband had
agreed that any property transferred to the trust “becomes” or “is
changed into” community property. (Id. at p. 665.)
       d.    Substantial Evidence Supports the Finding
             That the Transmutation Was Not a Product of
             Undue Influence
       Next, wife contends any transmutation was invalid because
she could not have predicted Holtemann and Lund would render

                               16
a conditional and revocable transmutation into an unconditional
and irrevocable one seven years later. We are not persuaded.
       A writing that satisfies section 852 is invalid if the court
finds it is the product of undue influence. Spouses are governed
by rules of fiduciary duty precluding them from taking unfair
advantage of each other. (§ 721, subd. (b).) If a spouse “secures
an advantage over the other, the confidential relationship will
bring into operation a presumption of the use and abuse of that
relationship by the spouse obtaining the advantage.” (In re
Marriage of Baltins (1989) 212 Cal.App.3d 66, 88.) An
interspousal transaction benefitting one spouse is presumptively
induced by undue influence. (In re Marriage of Haines (1995)
33 Cal.App.4th 277, 293-294; In re Marriage of Barneson (1999)
69 Cal.App.4th 583, 588.)
       To rebut the presumption, the benefitted spouse must show
“the disadvantaged spouse’s action ‘was freely and voluntarily
made, with full knowledge of all the facts, and with a complete
understanding of the effect of’ the transaction.” (In re Marriage
of Burkle (2006) 139 Cal.App.4th 712, 738-739.) This is a factual
issue reviewed for substantial evidence. (Id. at p. 737.)
       The trial court set out the substantial evidence supporting
its finding that wife had full knowledge of the facts and a
complete understanding of the legal effect of the transmutation:
“Wife was provided with a detailed explanation (albeit six years
earlier) of the possible negative consequences of a transmutation
and made a considered decision NOT to transmute her separate
property at that time. Here, the drafting attorney testified that
he would not have done a transmutation agreement or a
revocation of a prenuptial agreement without clear direction from
Wife to do so. The Agreement itself, at section 1.6 says ‘their

                                17
counsel has explained its meaning and legal consequences to
them.’ Although the word ‘understood’ is not used, all counsel can
actually do to effect an understanding is explain possible legal
consequences. Given the parties’ intelligence, sophistication and
training, the only reasonable inference is that they understood
what they were explained.” Substantial evidence supports the
trial court’s finding that wife’s decision to transmute her separate
property was freely and voluntarily made.
       Wife challenges this finding, relying on the trial court’s
observation that Holtemann “came as something of a shock to the
estate planning bar.” According to wife, this observation is
dispositive on the issue of whether wife had a complete
understanding of the legal consequences of the transmutation at
the time of execution. Wife’s theory is that if Hymes, a member
of the estate planning bar, believed a conditional transmutation
was lawful in 2001, then that is what Hymes would have
conveyed to wife and thus wife lacked a complete and full
understanding of the consequences of her decision.
       The trial court acknowledged: “Hymes, like the drafting
attorneys in Holtemann and Lund believed he could create a
conditional transmutation. All three Counsel were in error,
although that could not have been clearly known to them until
seven years after the Kennard/Reeves documents were executed.
[Wife] was informed of the possible legal consequences, known by
an experienced estate planning attorney at the time, and made
her decisions accordingly. The fact that the consequences were
inevitable, rather than merely possible, does not equate to her
not having an understanding of the legal effect of the agreement
at the time she signed it.”

                                18
       In short, the trial court found that Hymes advised wife
about the possible consequences of a transmutation — loss by
wife of her separate property. If Hymes, as wife asserts, was
certain that he could create a conditional transmutation, his
warning about potential loss in the event of divorce would have
been unnecessary. Indeed, Holtemann did not represent a
change in the law so much as a clarification of it. Holtemann
itself observed there was no authority for a conditional
transmutation, not that it disagreed with existing authority
allowing it. (Holtemann, supra, 166 Cal.App.4th at p. 1174.) The
trial court was entitled to weigh this evidence against wife’s
testimony that she believed Hymes could create a conditional
transmutation. (Lund, supra, 174 Cal.App.4th at p. 56.) The
trial court reasonably concluded from these circumstances and
from wife’s position as a sophisticated businessperson with a law
degree that the transmutation was not a product of undue
influence. (In re Marriage of Mathews (2005) 133 Cal.App.4th
624, 632 [no undue influence where wife handled all financial
affairs for both herself and the family].)
2.     The Trial Court Did Not Abuse Its Discretion When It
       Calculated the Marital Standard of Living to be
       Higher Than What Wife’s Expert Suggested
       In the third phase of trial, the trial court calculated wife’s
spousal support obligation to husband by first determining the
parties’ marital standard of living. Wife contends the trial court
erred when it adopted her expert’s income-based approach to
calculate the marital standard of living but declined to adopt the
expert’s conclusion that it equaled $20,000 per month. According
to wife, the court’s upward adjustment was not supported by
evidence. The record demonstrates otherwise.

                                 19
      a.     Standard of Review and Applicable Legal
             Authorities
       Spousal support is governed by statute. (See §§ 4300–
4360.) “[T]he court may order a party to pay for the support of
the other party an amount, for a period of time, that the court
determines is just and reasonable, based on the standard of living
established during the marriage, taking into consideration the
circumstances as provided in [section 4320].”5 (§ 4330; In re
Marriage of Cheriton (2001) 92 Cal.App.4th 269, 302.) The
marital standard of living, which describes the “station in life
that the parties had achieved by the date of separation,” “is
neither a floor nor a ceiling for a spousal support award.” (In re
Marriage of Nelson (2006) 139 Cal.App.4th 1546, 1560; In re
Marriage of Smith (1990) 225 Cal.App.3d 469, 491 (Smith).)
       As a general rule, “we review spousal support orders under
the deferential abuse of discretion standard. [Citation.] We
examine the challenged order for legal and factual support. ‘As
long as the court exercised its discretion along legal lines, its
decision will be affirmed on appeal if there is substantial
evidence to support it.’ [Citations.] ‘To the extent that a trial
court’s exercise of discretion is based on the facts of the case, it
will be upheld “as long as its determination is within the range of
the evidence presented.” ’ ” (In re Marriage of Blazer (2009)
176 Cal.App.4th 1438, 1443.) “A ruling that constitutes an abuse
of discretion has been described as one that is ‘so irrational or

5     Section 4320 requires the court to consider a number of
circumstances, such as the earning capacity of each party and the
duration of the marriage, in ordering spousal support. Wife does
not contend the trial court erred in its evaluation of the section
4320 circumstances.

                                20
arbitrary that no reasonable person could agree with it.’ ”
(Sargon Enterprises, Inc. v. University of Southern California
(2012) 55 Cal.4th 747, 773.)
       b.    Proceedings Below
       At trial, wife’s expert calculated the marital standard of
living by using a weighted average of the parties’ income for the
last three years of marriage (2011 to 2014), reduced by income
tax and child support, among other things. On direct, wife’s
expert testified each party needed $17,280 per month, after taxes,
to live at the marital standard of living. On cross, he
acknowledged that an investment resulting in a loss should not
have been subtracted from the parties’ income, resulting in an
increase of the marital standard of living to $20,000 per month.
Husband’s expert, on the other hand, considered only the family’s
2013 expenses to calculate the marital standard of living,
arriving at a figure of $54,402 per month for each spouse.
       The trial court agreed in concept with wife’s income-based
approach but not with the expert’s application of it. It declined
entirely to adopt husband’s expense-based approach because wife
contributed a “one-time infusion of cash” from inherited funds to
the community in 2013 that was spent on remodeling the family
home. The court found “as a guidepost” that each party needed
$35,000 per month to live at the marital standard, which is
approximately halfway between the experts’ calculations. The
court explained its adjustment: “the upward trajectory of income
should be considered, particularly as that trajectory has
continued. The court also finds a cost of living adjustment to be
appropriate, and considers that more than 50 [percent] of the
adults’ combined expenses is necessary for each to maintain the
marital standard, given that economies of scale are lost when

                               21
there are two households.” After taking into account the section
4320 circumstances, the court awarded permanent spousal
support in the amount of $27,000 per month if taxable or $16,000
per month if nontaxable.
       c.    The Trial Court Did Not Abuse Its Discretion
             When It Adjusted the Marital Standard of
             Living Calculation From That Suggested By
             Wife’s Expert
       The trial court did not abuse its discretion when it
determined the marital standard of living to be $35,000 per
month for each spouse, a $15,000 departure from the figure
suggested by wife’s expert. In the exercise of its broad discretion,
the trial court is not required to accept the opinion of any expert;
differences between the experts’ opinions go to the weight of the
evidence. (See In re Marriage of Bergman (1985) 168 Cal.App.3d
742, 752–753.). The trial court cited three factors leading to the
upward adjustment: the trajectory of the parties’ income, cost of
living, and increased costs in maintaining two households. Wife
does not contend these factors may not be considered in
evaluating the marital standard of living but contends the court
was required to assign a specific dollar amount to each factor.
Wife has presented no authority that a trial court is required to
do so. Although “[t]rial courts . . . are encouraged . . . to make
more specific findings,” “the more specific the better,” the marital
standard of living is not intended to be a “narrowly define[d]
mathematical standard.” (Smith, supra, 225 Cal.App.3d at
p. 491.)
       Wife also argues the evidence does not support the court’s
adjustments. As to the upward trajectory of income, wife points
to the parties’ adjusted gross income, which decreased from 2011

                                 22
to 2013. The court was entitled to disregard this evidence and
rely instead on evidence of KDG’s skyrocketing profitability since
KDG was the primary source of income, and wife had control over
her own compensation from KDG. At trial, wife presented
evidence showing KDG posted a loss in 2011 of $218,875 but had
net income of $66,218 in 2012 and $672,302 in 2013. Indeed,
KDG made millions in profits in subsequent years — $2.2 million
in 2014, $1.1 million in 2015, and $1.5 million in 2016. The court
was entitled to consider KDG’s income instead of the parties’
reported adjusted gross income to conclude the parties’ income
was on an upward trajectory.
       The trial court was also entitled to consider inflation and
that “[a]fter separation the parties have two households rather
than one, and with California’s high housing costs this represents
a significant increase in living expenses.” (Smith, supra,
225 Cal.App.3d at pp. 488–489.)6 This is particularly true when
the marital standard of living is high and the evidence shows
both parties are accustomed to living in a large, recently
renovated house. Given this substantial evidence, we conclude
the trial court did not abuse its discretion when it determined the
marital standard of living.

6      Wife contends the parties presented no evidence of inflation
at trial. Wife’s counsel, in his arguments on spousal support,
acknowledged inflation was low during the period leading to
separation, but did not assert it was nonexistent. On appeal, we
have taken judicial notice of the rate of inflation from 2013 to
2020 as reported by the Federal Reserve Bank of Minneapolis.

                                23
3.     The Trial Court Did Not Abuse Its Discretion in
       Allocating KDG Income and Distributions
       The remaining disputes between the parties involve the
allocation of both KDG income and distributions made by KDG to
wife. An overview of KDG’s operations is helpful to understand
these issues. KDG is a Subchapter S corporation with pass-
through income and tax liability election. This means its owners
report KDG’s income and pay its income taxes through their
personal tax returns. From the date of separation until
December 31, 2019, wife was responsible to pay KDG’s income
taxes. Since 2011, wife has managed and controlled KDG’s
operations, including its cash and noncash distributions to the
parties. As a general proposition, unless there has been a
distribution out of KDG, the profits earned by KDG have
remained within the company and thus will affect the future
value of KDG. The trial court ordered KDG to be sold with the
sales proceeds to be split equally between the parties.
       With this background in mind, we now consider the parties’
remaining arguments.
       a.    The Trial Court Did Not Impermissibly “Double
             Dip”
       Wife challenges the court’s allocation to the community of
more than $2 million in perquisites she received from KDG from
2014 to 2018. According to wife, the trial court impermissibly
“double dipped” when it awarded “all” KDG income to wife in its
temporary spousal support order, which wife used to pay spousal
support to husband, but then later took the $2 million in
perquisites (paid from KDG income) away in the guise of a
community property division. The record and the law rebut
wife’s double dip theory.

                               24
       The record shows that in 2017, the court ordered wife to
pay pendente lite spousal support to husband in the amount of
$34,392 per month, retroactive to September 12, 2014. Observing
there were discrepancies between what wife reported to the court
as her annual income and what she reported to a bank when
applying for a loan, the court deemed wife’s average KDG income
to be approximately $78,000 per month, of which $34,767 came in
the form of perquisites. Taking into account wife’s non-KDG
income, the court determined wife had an average total income of
$100,000 per month available for support payments. In reaching
that conclusion, the court “attribute[ed] all income and profits
from KDG to [wife]” for purposes of the support award, but
qualified that “[t]his is not meant to be a characterization of the
assets as separate or community.”
       In 2020, in the third phase of trial, the court determined
that wife’s reasonable compensation from KDG, including salary
and perquisites, totaled $1.2 million per year postseparation.
The court also found that from 2014 to 2018, husband received a
total of $54,592 and wife received $2,239,870 in perquisites from
KDG. By this time, the trial court had determined that KDG was
community property. The court found it was impractical,
however, to redistribute KDG profits from 2014-2018 to reflect
the community property character of the business, “which would
lead to a re-calculation of support, a re-determination of fee
contributions, a re-allocation of tax liability, etc. However, there
must be some acknowledgement of excess use of KDG funds
beyond what has found to be reasonable, and beyond what was
contemplated when the support and early fee orders were made.”
The court thus charged husband $54,592 and wife $2,239,870 in
community funds. The court ordered these amounts to be

                                25
“returned to the balance sheet.” The court additionally ordered a
$781,866 credit to wife representing the difference between what
KDG paid her from 2014 to 2020 and what the court had
determined to be her reasonable compensation (including
perquisites). The effect of these orders was that wife received the
perquisites she was entitled to and any excess distribution was
returned to the community.
       Wife filed extensive objections to the court’s treatment of
these perquisites, advancing her double dip theory and other
arguments. The court held a separate hearing allowing further
argument on the allocation of perquisites but did not change its
ruling.
       On appeal, wife contends she used the KDG perquisites to
pay spousal support to husband. Therefore, it was an
impermissible double dip to also give husband half of the
perquisites in a later division of property.
       We start with the legal principle that, “it must be kept in
mind that spousal support considerations are separate and
distinct from property division concepts. Because the division of
community property is premised on absolute ownership of
community assets by both parties, each must receive a respective
full share. An award of spousal support, in contrast, is broadly
discretionary.” (In re Marriage of White (1987) 192 Cal.App.3d
1022.) Thus, “[s]upport cannot be awarded in lieu of an equal
division of community property [citation] or to compensate for an
unequal division.” (Hogoboom & King, Cal. Practice Guide:
Family Law (The Rutter Group 2016) ¶ 6:980, p. 6–507.) The
source of spousal support is often the supporting spouse’s
separate property or their half of community property. (In re
Marriage of Epstein (1979) 24 Cal.3d 76, 91 fn. 14.)

                                26
       Under these authorities, the trial court properly calculated
spousal support based on wife’s separate income, which included
income and perquisites from KDG, and later charged wife with
the excess perquisites she received to ensure an equal division of
the community income derived from community property.
       The facts also disprove wife’s double dip argument: The
trial court awarded husband temporary spousal support on the
assumption that wife had over $100,000 in income to pay for it, of
which $78,000 came from KDG in the form of salary and
perquisites. In its final judgment, the court determined wife was
entitled to $100,000 per month or $1.2 million per year in salary
and perquisites from KDG alone. This was $22,000 more per
month than its original $78,000 assumption. Rather than
recalculate its spousal support order based on wife’s increased
income and reallocate KDG’s profits and associated tax liability,
the court acknowledged there was excess use of KDG funds by
the parties from 2014 to 2018 in the form of perquisites and
returned those sums to the community ledger. Under these facts,
the court did not award all KDG income to wife in 2017 and then
later take away $2 million of it away from her in the division of
property in 2020. The record shows it only allocated all KDG
income to her for the purpose of calculating spousal support but
expressly did not determine whether that income was community
or separate property. Absent actual distributions from KDG, the
income that was allocated to wife remained in the company.
       In sum, we are not persuaded by wife’s double dip theory.
Having addressed wife’s arguments on her appeal, we now turn
to the issues raised in husband’s cross-appeal.

                                27
     b.      The Trial Court Did Not Abuse Its Discretion
             When It Denied Husband’s Request for an
             Equalizing Payment for Excess Distributions
       According to husband’s expert, from 2014 to 2018, wife
received $1,826,503 in distributions that were in excess of her
salary and perquisites while husband only received $197,680.7
Husband asserts these excess distributions were used for wife’s
personal expenses, including payment of her personal income
taxes and her spousal and child support obligations. Husband
calculates that, based on wife’s personal use of community funds,
he is owed an $814,412 equalization payment, calculated by
taking 1/2 of $1,826,503 less the $197,680 husband already
received which equals $814,412. The trial court denied his
request. We conclude the trial court did not abuse its discretion
in denying the request.
       Under section 2550, the court must divide the community
estate equally, except as the parties have otherwise agreed or
under limited circumstances not applicable here (see §§ 2500–
2660). A trial court has broad discretion to accomplish an equal
allocation and may award one or more items of property to one
party with an equalizing payment to the other. (In re Marriage of
Andresen (1994) 28 Cal.App.4th 873, 880.) “This task constitutes
a nondelegable judicial function [citation] which must be based
upon substantial evidence.” (Ibid.) A court may consider not
only statutory and case law, but also equitable factors in its
allocation, including whether fairness to the parties requires
consideration of who managed and controlled community assets
and complied with related fiduciary duties. In Marriage of

7     These distributions are separate from the perquisites
discussed above.

                               28
Prentis-Margulis & Margulis (2011) 198 Cal.App.4th 1252, 1257
(Margulis), for example, the court held that “once a nonmanaging
spouse makes a prima facie showing concerning the existence and
value of community assets in the control of the other spouse
postseparation, the burden of proof shifts to the managing spouse
to rebut the showing or prove the proper disposition or lesser
value of these assets. . . . If the managing spouse fails to meet
this burden, the court should charge the managing spouse with
the assets according to the prima facie showing.”
       Here, the trial court declined to equalize the purported
excess distributions made to wife because the evidence showed a
“large part” of the distributions were used to pay KDG’s taxes.
Substantial evidence supported the trial court’s finding: At trial,
husband’s expert admitted wife claimed and paid “90 percent of
the company’s income on her individual taxes.” Indeed, the trial
court ordered wife to pay KDG’s income taxes from 2014 to 2019.
KDG was a subchapter S corporation, with pass-through tax
liability to its owners. Thus, wife’s effective tax rate of 44 percent
was also KDG’s tax rate. The evidence shows KDG’s profits each
year were a million dollars or more beginning in 2014. From
these facts, it is reasonable to infer wife used a “large part” of the
distributions to pay KDG’s taxes. The trial court did not abuse
its discretion when it declined to make the equalizing adjustment
requested by husband.
       Husband acknowledges wife received distributions for the
payment of KDG’s income taxes but faults the trial court for its
failure to assign a specific dollar amount to what was used to pay
KDG’s taxes and what was used to pay wife’s personal expenses.
He argues the court was required to do so to ensure wife’s use of
community income for her personal expenses could be equalized.

                                 29
Husband provides no legal authority that requires this level of
precision in the court’s findings, particularly when those findings
are supported by substantial evidence.
       Relying on Margulis, supra, 198 Cal.App.4th at page 1267,
husband nevertheless asserts he presented a prima facie case
that the distributions were used for wife’s personal expenses and
wife, as the managing spouse, bore the burden to rebut his
showing. Husband cites to the trial court’s observation that
husband “was hampered by often receiving late and/or incomplete
and/or inaccurate information regarding the business and its
non-operational assets.” Husband concludes that, because wife
failed to make the showing, Margulis required the court charge
wife with over $1.8 million in excess distributions according to
husband’s showing and order the $814,412 equalizing payment to
husband. (Margulis, supra, at p. 1267.)
       Unlike in Margulis, the record in this matter demonstrates
husband had access to the financial information necessary to
meet his burden of proof. (Evid. Code, § 500 [“a party has the
burden of proof as to each fact the existence or nonexistence of
which is essential to the claim for relief or defense that he is
asserting”].) At trial, husband’s expert testified he prepared an
analysis of how the $1,826,504 in distributions were spent “[b]y
looking at the books and records of KDG and also the individual
income tax returns of [wife].” Under these circumstances, the
trial court reasonably concluded that Margulis does not apply to
shift the burden of proof.
       In any event, although the court acknowledged “some” of
the distributions were used to pay wife’s personal expenses, the
court concluded that reallocating the distributions and
recalculating the taxes payable and support due “would be costly

                                30
beyond the value of the information received.” While husband’s
expert may have expressed an opinion on what portion of the
distributions were used for wife’s personal expenses, he did not
also recalculate the consequences of a reallocation – the amount
of taxes husband would have to pay and the amount of support he
would be owed. The court determined the cost to perform these
recalculations would exceed the benefit derived from them. The
record supports this finding. By the time a final judgment was
rendered in 2020, the parties had incurred over $6 million in
attorney fees and costs, which the trial court found to be
“extremely high” given the size of the estate. The trial court had
presided over this matter for four years; it was in the best
position to evaluate whether the value of the information sought
would exceed the cost to obtain it.
       c.    The Trial Court Properly Retained Jurisdiction
             to Consider Claims of Excess Distributions
             from KDG After January 1, 2019
       In the third phase of trial, the court ordered, “For the
purpose of proceeding with the final stages of trial, discovery
regarding distributions to [wife], directly to her or for her benefit,
in excess of her reasonable compensation was cut off as of
December 31, 2018. Reimbursements to the community were
calculated as of this date. Jurisdiction is reserved as to any
claims of excess distributions to or for [wife] on or after
January 1, 2019.” The trial court then ordered, “Commencing
June 1, 2020, the parties shall equally share KDG’s profits,
pending its sale. The parties are each responsible for taxes and
other liabilities on their respective shares of KDG profits.”
Husband interprets these orders to mean the trial court
effectively allocated all KDG income from January 1, 2019 to

                                 31
May 31, 2020 to wife. Wife does not disagree with this
characterization of the court’s orders. Husband asserts it was
error to divide KDG’s income unequally for that time period.
       We conclude the court did not abuse its discretion because
it expressly reserved jurisdiction to consider any claims by
husband that KDG made excess distributions to wife on or after
January 1, 2019. The court ordered equal distribution of profits
beginning June 1, 2020. From January 1, 2019 to May 31, 2020,
if wife received any cash or noncash distributions or perquisites
from KDG in excess of her reasonable compensation, the trial
court’s order leaves room for husband to seek reimbursement to
the community from the court.
       d.    Husband Failed to Demonstrate He Would Be
             Responsible to Pay Taxes on Wife’s Separate
             Income
       As we have just described, the trial court determined wife’s
reasonable compensation from KDG beginning 2014 was $1.2
million per year. It further determined she was underpaid by
$781,866 for the period from 2014 to 2020, and ordered a credit to
wife in this amount. Husband does not dispute the amount of
additional compensation wife was owed. He instead asserts the
trial court should have ordered KDG to pay wife directly rather
than order an equalizing credit on the community property
balance sheet. Husband contends the trial court’s treatment of
the underpayment would result in husband assuming half of the
taxes on wife’s separate property income.8 Husband explains it

8     Wife asserts husband has forfeited this argument because
he raised it after the trial court issued its final statement of
decision for the third phase of trial. We decline to find forfeiture
because husband made this argument to the trial court before

                                 32
this way: “if KDG had been required to pay [wife] her
compensation directly, she would have received $390,933 in
additional income on which she would have been required to pay
taxes ($781,866 excess income minus $390,933 less in profit
distribution). [Husband], on the other hand, would have received
$390,933 less in KDG profits, thereby lowering the amount of
income on which he would have been required to pay taxes.”
       Husband’s argument assumes the additional income would
all be paid out after June 1, 2020, when he became entitled to
receive half of KDG’s profits and obligated to pay half of its tax
liability.9 The record does not support husband’s assumption
that the $781,866 was an expense that could be applied solely
against KDG’s 2020 income when that amount represented
underpayment over six years. Nor does husband explain how a
pass-through tax liability for an S corporation would not have
already been paid or accrued by wife over those years when she
alone was responsible for paying KDG’s taxes through her
personal income tax return. We are not persuaded husband has

final judgment was entered. “Even after a court has issued a
written decision, the court retains the power to change its
findings of fact or conclusions of law until judgment is entered.”
(Bay World Trading, Ltd. v. Nebraska Beef, Inc. (2002)
101 Cal.App.4th 135, 141.)

9     Husband asserts, “the judgment in the case was not
entered until October 2020, and the same judgment also provided
that KDG profits would be shared equally commencing June 1,
2020. This means that [wife] received her compensation no
earlier than October 2020, at which time [husband] was entitled
to half the company’s profits.”

                                33
shown he would be responsible to pay tax on wife’s separate
income earned prior to June 1, 2020.
                         DISPOSITION
      The judgment is affirmed. The parties to bear their own
costs on appeal and cross-appeal.

                                        RUBIN, P. J.

WE CONCUR:

                       BAKER, J.

                       KIM, J.

                                 34