Monday, March 27, 2017
Double-dipping is only awesome when you represent the outspouse. The rest of the time, it sucks. In divorce, "double-dipping" refers to when an asset (which was previously awarded to one spouse in equal division of the estate) is counted again for income for support purposes.
Double-Dipping is generally barred in pension/retirement. Thus, if you are the payor, and you already paid your ex-spouse half your pension, when you finally receive it as an income stream, you would not have to then pay alimony based on its receipt.
What about for division of a business? For example, when a business is valued and the owner spouse buys out the non-owner spouse's interest, future support obligations to the spouse who relinquished his or her interest will be determined based upon the entire income stream produced by the business. This could occur with any income-producing asset (such as a pension or annuity) when it is valued based upon its projected, future income stream and assigned to the earner spouse after an equalizing payment to the non-earner spouse.
According to the California Court of Appeal in Marriage of 1Vhite ( 1987) 192 Cal. App. 3d 1022, 1026, the flaw in the ··double dipping" argument is that spousal support considerations are separate and distinct from property division concepts. The Court found that a spouse who wants pension benefits treated as income is not claiming entitlement as a co-owner, but instead is asserting that those payments cannot be ignored when calculating the ability of the pensioned spouse to pay spousal support. Calling the double-dipping theory a "fallacy," the Court found "in every case where one spouse receives pennanent spousal support from the other spouse, the source is from the separate property of the paying spouse, including ... earnings or property which were once the community property of both spouses.." Id at 1028 (quoting In re Marriage of Epstein, 24 Cal. 3d 76, 91 n.14). Marriage of White remains good law.
However, distinctions can me made where business cash-flow is reinvested to capitalize or diversify a business. In 2009, the California Court of Appeal held that a trial court acted within its discretion in calculating an obligor's income for spousal support purposes without including funds derived from the obligor's company that he used to diversify the business so that it could remain a viable entity, thus attributing t hose funds to the business instead of the obligor, where the reinvested funds were reasonable expenses properly chargeable to the business. Marriage of Blazer (2009) 176 CA4th 1438, 1447-1448.
In Marriage of Blazer, the parties were married in 1982 and separated in 2002. Husband was a partner in Blazer-Wilkinson, LLC ( BW), a brokerage company that bought and sold produce. Temporary spousal support was set at $57,224 per month during the pendency of the divorce.
In 2004, the trial court valued the community interest in BW at $5,600,000. Wife received other property plus an equalizing payment of $1,340,000 for her share of the business. Temporary spousal support was reduced to $52,000 per month pending further findings of the court.
In 2006, temporary spousal support was reduced to $30,000 per month retroactive to August 2004 and permanent spousal support was set at $20,000 per month beginning January 1 , 2006. In determining Husband's income available to pay support, the court excluded profits from the business. which were needed to maintain adequate capitalization and to diversify. All other profits were considered as available to Husband. The court specifically rejected Husband's argument that his buyout of Wife's interest in BW was a factor that should eliminate spousal support.
Wife appealed the decision, arguing that the trial court abused its discretion by excluding a portion of husband's income when considering his ability to pay support. Husband cross-appealed on the grounds that the support order unfairly allowed the wife to ''double dip" into the income stream from his business
The Court of Appeals disagreed with Wife, finding that there was a need to diversify and to maintain adequate capital in the business. In reaching its decision, the court relied in part on the California child support statute, which excludes income required for the operation of a business from income. Thus, amounts required to achieve such were not available to Husband. It should be noted that credible expert testimony from a CPA to the effect that reinvesting the funds was necessary for Husband's business to survive likely swayed exercise of the trial court's discretion in Husband's favor without such credible testimony, a contrary result (i.e., charging Husband with the funds reinvested in the business for purposes of determining his ability to pay spousal support) may well have been reached.
The Court of Appeals also disagreed with Husband. The Court's decision was based primarily on the lack of evidence before it that BW had been valued using a stream of future income. Although Husband's expert testified that he assumed that BW had been valued using the capitalization of excess earnings method that implicitly ties the val ue to Husband's future earnings, the court was not convinced. In fact, the court stated that even though the expert's testimony had not been contradicted, it was not conclusive to either the trial court or the Court of Appeals.
Based on the Court's explicit statement that the record was devoid of whether the business valuation included a stream of future income, I believe argument could be made that goodwill is the expectation of what will be earned in the future. Since goodwill is a component of the business valuation, this results in a "double dip" scenarios.
Thus, "double dipping" appears to be permitted unless (i) the parties explicitly agree to an ··Anti-White'' order during negotiations; (ii) a portion of the business' cash flow is required to be reinvested to either capitalize or diversify the business; or (iii) sufficient evidence is presented that demonstrates a business is valued using a stream of future income. For the third possibility, credible CPA testimony will be key.
Thursday, October 6, 2016
Law and Mediation Offices of Kelly Chang now offers online scheduling of consultations. If you prefer to call, you can call 323-393-5669. Thank you! We look forward to meeting you.
Tuesday, February 2, 2016
Divorce is expensive. As the joke states, they're worth it. Sometimes it's "cheaper to keep her".
Around this time of the year (starting the first work day of January) to right after Valentine's Day, most divorce lawyers' phones are ringing off the hook. In fact, I was quoted here, in this article, "Kelly Chang, a Los Angeles-based divorce lawyer said she has seen an increase in divorce filings shortly after Valentine’s Day. This can be attributed to two major groups of people: the ‘Delayed New Year’s Resoluters’ who are merely moving forward on their resolution to be single, just a month late, and the ‘Waiting to Exhalers,’ who, depending on the actions of their spouses on Valentine’s Day, will either reconcile or file for divorce,” she said.
Google "expensive divorces", and you will find a listing of the most expensive divorces in history, including but not limited to: Alec Wildenstein's divorce from Jocelyn Wildenstein; estimated at $3.8 billion; Rupert Murdoch's divorce from Wendi Deng; estimated at $1.8 billion.; Rupert Murdoch's divorce from Anna Murdoch: estimated to be $1.7 billion.
I have been a divorce attorney for over 16 years. Here in Los Angeles, the estimate is that a contested divorce costs approximately $100,000 total in attorneys' fees, and lasts 3-4 years.
Why? Because it's divorce!!! They still want to WIN!!! DESTROY!!! They want that PITBULL! I wish I could share some of the emails I have received from people i have NEVER met, telling me how much they hated their spouses and how much they needed to WIN.
Here are 10 ways to drive up your divorce costs.
1. Refuse to talk to your spouse. Have everything go through the lawyers.
2. Don't teach yourself anything about the divorce process. Just stick your head under the sand and have your lawyer handle it.
3. Email/call your lawyer to tell her everything that happened today between you and your ex.
4. Assume settlement is for "losers", and always try to "win".
5. Insist on being "heard" in court, because your situation is different, and you just KNOW the Judge will always side with you.
6. Even though you have always handled the finances, develop a conspiracy theory that your spouse is hiding assets, and stick to it. Hire private investigators and forensics to back up all your theories.
7. Refuse to read any documents presented by the other side's lawyer, because you don't trust them. At all.
8. Even though your wife hasn't worked in over 12 years because she has been a stay-at-home mom, refuse to pay ANY spousal support and make her undergo a vocational evaluation.
9. Fight for FULL CUSTODY, because you alone KNOW what's in the best interests of your children.
10. Refuse to hear anybody's version of "what's fair", because only you know best, and you will get what you want in Court.
Good luck out there!
Tuesday, January 5, 2016
Your children have come into this world because of the two of you. Perhaps you two made lousy choices as to whom you decided to be the other parent. If so, that is your problem and your fault.
No matter what you think of the other party - or what your family thinks of the other party - these children are one-half of each of you. Remember that, because every time you tell your child what an "idiot" his father is, or what a "fool" his mother is, or how bad the absent parent is, or what terrible things that person has done, you are telling the child half of him is bad.
That is an unforgivable thing to do to a child. That is not love. That is possession. If you do that to your children, you will destroy them as surely as if you had cut them into pieces, because that is what you are doing to their emotions.
I sincerely hope that you do not do that to your children. Think more about your children and less about yourselves, and make yours a selfless kind of love, not foolish or selfish, or your children will suffer.
- Honorable Judge Michael Haas
Mediating Child Support
When couples with children separate, both know that support must be paid. We've heard of "deadbeat" moms and dads, but in reality, in the almost 20 years that I have been a divorce/family lawyer, I have never met a parent who would purposely shirk their financial obligations to their children to spite their wife. (Which makes sense because those who don't want to pay child support will not likely want to pay an attorney either, so our paths don't cross.)
In any case - usually, spats over child support result from fear, yielding the following types of accusations: "He's spending this money on his mistress instead of his children". "She is using it for Botox and alcohol instead of the children". "He really makes 50,000 a month!" "She is a doctor! She chooses not to work to punish me!"
In California, child support is calculated using the formula found in Family Code 4055. Family law practitioners who are not good at algebra, use this God-sent program named Dissomaster (I've heard it called Discomaster many times). You just plug and chug and bam, you get a number for child support!
Simple? Not so much. As with all computer programs, it's GIGO (garbage in, garbage out).
What causes most disputes over child support is when one or both of the parents is self-employed, and there is a dispute over how much money is made, and thus, how MUCH support should be paid.
Or, when one or both of the parents' income fluctuates. (because of seasonal work, or bonuses).
SO....we should go to Court, right? The Court can apply Family Code 4055 and get a number.
Wrong. First, it takes money to go to Court. If you and your ex simply cannot agree on how much money is being made, you will need to hire attorneys (the average family law attorney in Los Angeles charges 200 - 1000/hour; it's more for a Certified Family Law Specialist), who will then file Motions to get into Court to convince the Judge to see it their way.
Secondly, it takes time! If you are a business owner, you will likely have to hire a forensic to prepare a sophisticated Income Available for Support chart, which comes with bells and whistles - at a steep price.
If your ex is not working, but arguably could be working, you may need the services of a vocational evaluator who can assess him/her, and peg him/her with an imputed income that he/she could potentially be earning.
It's a lot of work. And with parties with a lot of anger and no trust, it's easy to see why money (which should be paying child support) go to pay attorneys instead.
Issues regarding child support are appropriate for mediation. Both you and your ex can benefit from discussing your fears which drive you, and talk about the needs of the children in a non-combative format. Mediation is confidential, so there is no risk of something "being used against you in a court of law".
In mediation, you can use the Dissomaster (Discomaster) to arrive at a number; or, you may choose not to use it at all if you are self-employed. Ask any attorney or accountant you know - the "numbers game" can be played forever, with no end.
In mediation, here are some tips:
1. Be real. Create charts of spending. What are the real costs of supporting these children? Do they attend private school? Do they have tutoring, counseling, soccer team dues? What about childcare?
2. Expect costs to increase after a separation. When you are ONE raising a family, it was tough enough. Now, if there is only one breadwinner, that person is now supporting TWO families under TWO separate roofs. Sometimes it's possible to go on living the same way. The majority of the time, there will need to be adjustments.
3. Bonus income? Consider using Ostler-Smith support order. I discuss it in detail in this blog post.
4. Consider paying family support so you can deduct it.
What's important is that the children are protected. After all, would you rather pay for your kids to go to college, or your lawyer's kids?
Wednesday, December 16, 2015
Japan is once again making headlines in family law. (See previous post regarding Japan and child custody).
The Supreme Court of Japan has held that a 19th century law mandating couples to have the same last name (usually that of the husband) is not unconstitutional. This is a ruling resulting from a 2011 case filed by 5 women who claimed forcing them to have the same last names violates their rights. One of the stated it was losing her identity, "it's as if part myself vanishes".
There is no such law in the United States.
A minor victory for women in the latter part of the ruling shortened the requirements for remarriage after a divorce to 100 days (down from 6 months). Incidentally, there is no law stating when men can remarry.
Thursday, November 19, 2015
A San Francisco Judge has upheld a consent form between former spouses providing for destruction of the frozen embryos upon divorce.
In the case of Mimi Lee and Stephen Findley was decided yesterday. Mimi (an anesthesiologist), age 46, discovered she had breast cancer prior to her marriage to Stephen, and the two decided to freeze the embryos to preserve fertility. They signed a consent form in 2010, which provided that the embryos would be thawed and destroyed upon divorce. They later separated in 2013, and divorced this year.
Despite Mimi's arguments that this was the only chance she could have to bear children, Judge Anne-Christine Massullo firmly upheld the consent form in an 83-page decision, stating, "“It is a disturbing consequence of modern biological technology that the fate of nascent human life, which the embryos in this case represent, must be determined in a court by reference to cold legal principles,” "Decisions about family and children often are difficult, and can be wrenching when they become disputes,” Judge Massullo wrote. “The policy best suited to ensuring that these disputes are resolved in a cleareyed manner — unswayed by the turmoil, emotion and accusations that attend to contested proceedings in family court — is to give effect to the intentions of the parties at the time of the decision at issue."
Judge Massullo's decision is consistent with approximately 11 other cases of this pattern. Mainly Judges have ruled in favor of the person who did not want to become a parent. It appears at this time the law seems to favor the right NOT to procreate over the right to procreate.
Mimi Lee will likely appeale case.