Smith/Ostler Order: Accounting for Bonus Income’s Impact on Support Payments

Posted October 19, 2016 in Family Law by Michael Lonich.


October 19, 2016
Smith/Ostler Order: Accounting for Bonus Income’s Impact on Support Payments
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When calculating spousal or child support, courts look to a wage earner’s monthly income to determine an appropriate support amount.  However, what if the wage earner spouse or parent receives bonus income in the years after the initial support order is entered?  Support orders can be altered, but the process involves a court room, lawyers, and more legal fees.  In re Marriage of Ostler & Smith offers an alternative answer—the Smith/Ostler order.

A Smith/Ostler order takes into account a spouse or parent’s unearned or prospective income, detailing when and how any future, additional earnings should be incorporated into a support order.  However, because bonus income is prospective only, it may never be realized.  Calculating support based off an unknown and/or unguaranteed dollar amount can underestimate or inflate a support order.  Therefore, to account for the speculative nature of bonus payments, courts deal in percentages.

For example, in the seminal In re Marriage of Ostler & Smith case, the court awarded Wife 15 percent of Husband’s future cash bonuses.  If Husband received a bonus, he would give 15 percent of whatever amount he earned to Wife, but if Husband did not receive any cash bonuses, he would not pay additional support.  Importantly, the original support order would remain intact, and the parties would not need to argue over how much of the bonus income the supported spouse should be paid—the court order took care of those details and created a more easily administered support order.

In addition to cash bonuses, a Smith/Ostler order can account for future stock option income.  For example, in In re Marriage of Kerr, Wife and Husband, while married, improved their standard of living by exercising stock options that had increased in value.  Subsequently, during divorce proceedings, the court award Wife, through a Smith/Ostler order, a percentage of Husband’s income from any future exercise of those same stock options.

However, In re Marriage of Kerr presented an exceptional case where an additional measure besides a percentage amount was necessary to ensure that Husband’s spousal support order was not inflated.  The value of Husband’s stock had increased exponentially after he divorced Wife.  A specified percentage of the stock’s value would have increased Husband’s payments to a point that far exceeded the marital standard of living he shared with Wife.  Thus, the court concluded that under special circumstances, such as the case at hand, use of a Smith/Ostler order is permissible only if the court caps the amount of future income a spouse can receive at a number proportionate to the martial standard of living.

If you are considering a divorce or legal separation and would like more information about how either action may affect your finances, please contact the experienced family law attorneys at Lonich & Patton.  We can help you understand and manage any spousal or child support issues that may arise.

Lastly, please remember that each individual situation is unique, and results discussed in this post are not a guarantee of future results.  While this post may detail general legal issues, it is not legal advice.  Use of this site does not create an attorney-client relationship.


In re Marriage of Ostler & Smith (1990) 223 Cal.App.3d 33

In re Marriage of Kerr (1999) 77 Cal.App.4th 87



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Mediation: Taking control of your divorce

Posted October 10, 2016 in Family Law by Michael Lonich.

The underuse of the mediation process seems to be largely attributable to the fact that many people are unaware of what a mediation session is and how beneficial it can actually be. In family disputes, mediation can be extremely rewarding, saving parties time, money and sanity.

The rules of mediation: you create them

In mediation, parties are not bound by many of the rules that govern judges’ decision making. As a result, parties can reach solutions that might not otherwise be available from a court. For example, if there is a dispute over child support or child custody, rather than having a judge decide the amount of support or amount of visitation based on guidelines and factors required by statute,  parties are free to negotiate an amount or time deemed reasonable to both.

The outcomes: you decide them

In mediation, you are free to discuss with your spouse what is important to both of you and try to reach a mutually acceptable agreement.  It differs from litigation in that parties avoid the uncertainty, time and stress associated with going to trial. Parties are  able to hear and understand the other’s point of view and with the guidance of a mediator, this enables parties to reach a middle ground . Because the mediator does not have the authority to make decisions, it is ultimately the parties making their OWN decisions over their OWN lives.

However, a good mediator should have some family law experience and be able to offer practical guidance to the parties. A mediator with family law experience can offer parties insight as to what might and might not be granted in court, ensuring that no request is unreasonable or disadvantageous to the other spouse. This can make the mediation session much more productive.

Progress: in the mediation room and beyond

Lastly, even if you don’t settle all your divorce issues, chances are you did resolve some. Even having resolved one issue is progress.  Further, the tenants of mediation promote cooperation and communication. Thus because parties are provided the opportunity to resolve their own case, mediation tends to reduce hostility and preserve ongoing relationships.

While divorce mediation works in many situations, it is not always appropriate. Litigation is often the best option in situations where there is domestic violence, one party refuses to cooperate in making required disclosures, or communication between the parties is impossible. If you have any questions about divorce mediation and would like to speak to an attorney, please contact Lonich & Patton for further information.  Keep in mind that each individual situation is unique and results discussed in this post are not a guarantee of future results.  While this post may include legal issues, it is not legal advice.  Use of this site does not create an attorney-client relationship.


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Understanding the Spousal Fiduciary Duty

Posted September 9, 2016 in Family Law by Michael Lonich.

Marriage prompts a lot of change—last names, bank accounts, estate plans, housing—but one of the most important changes that arrives once you say “I do” is a fiduciary duty to your new spouse. Fiduciary duty may sound like a term reserved for the boardroom, but a broad fiduciary relationship exists between married spouses as well.

At the most basic level and as prescribed by California Family Code § 721, spouses possess a duty of “the highest good faith and fair dealing,” and “neither spouse shall take any unfair advantage of the other.”  Further, the spousal fiduciary duty includes “the same rights and duties of nonmarital business partners” as outlined in the California Corporations Code.  Although the Corporations Code uses business-centric language, the Family Code incorporates partner-based duties and applies them to spouses.  Thus, spousal fiduciary duties include:  1) allowing access to transaction books, 2) providing full and true information about any community property, and 3) an accounting of any benefit derived from any community property transaction by one spouse without consent of the other spouse.  Additionally, spouses owe each other a duty of loyalty—spouses must refrain from dealing with each other as an adverse interest and must refrain from competing with each other—and a duty of care.

Returning to the Family Code, Section 1100 details the fiduciary duties that accompany the control and management of community property.  Of note is subsection (b): “a spouse may not make a gift of community personal property for less than fair and reasonable valuable, without the written consent of the other spouse.”  In other words, even when giving a community fund-purchased gift to his/her children, a spouse needs the written consent of the non-purchasing spouse.  Typically, a nonconsenting spouse is unlikely to challenge holiday and birthday gifts given to his/her own children, but that spouse does have the legal ability to void the gift and receive compensation for its value—an issue usually raised during a separation or divorce proceeding.

Importantly, even after spouses separate or file for divorce, they still owe a fiduciary duty to one another—until all assets and liabilities have been officially divided, spouses must act with respect to each other and fully disclose all material facts and information regarding community property or debts.

Ultimately, most spouses don’t actually keep (or legally, even have to keep) detailed transaction books in the manner expected of business partners, nor do most spouses actually ask for formal consent before making routine purchases, but it is important to note that unilateral transactions could be used as ammunition in a separation or divorce proceeding.  Therefore, if you are pondering a large purchase or gift, it is wise to document the process, seek the written consent of your spouse, and/or use your own separate property to make the purchase.

If you would like more information about the fiduciary duty you owe to your spouse, please contact the experienced family law attorneys at Lonich & Patton.  From pre-nuptial agreements to divorce proceedings, we can help you understand how the spousal fiduciary duty plays a role in your marriage.

Lastly, please remember that each individual situation is unique, and results discussed in this post are not a guarantee of future results.  While this post may detail general legal issues, it is not legal advice.  Use of this site does not create an attorney-client relationship.


California Family Code § 721

California Family Code § 1100

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How SB 1255 (the “anti-Davis legislation”) Will Impact Your “Date of Separation”

Posted August 29, 2016 in Family Law by Michael Lonich.

Currently divorcing spouses or couples considering divorce better consult a lawyer soon—a newly enacted statute has changed the method by which California courts determine a married couple’s “date of separation.”  On July 25, 2016, the governor of California, Jerry Brown, signed SB 1255 (aka the “anti-Davis legislation”), a bill which amends California Family Code § 771 and adds section 70 to the Family Code.  As a result, the existing standard that governs a married couple’s “date of separation” has been changed.  Previously, Family Code § 771 instructed that spouses were not separated until they were “living separate and apart”—a phrase which courts interpreted to mean “living in separate residences.”  With the passing of SB 1255 though, spouses may now be considered “separated” even if they share a common residence.

A couple’s legal “date of separation” is important because it determines the point at which a spouse’s earnings and accumulations are no longer considered “community property” and instead, are considered a spouse’s own “separate property.”  In turn, the difference between community and separate property is important because absent a written agreement stating otherwise, all community property must be evenly divided between divorcing spouses.

SB 1255’s nickname—the “anti-Davis legislation”—came about because of the case its creation abrogates:  In re Marriage of Davis.  In July 2015, the Davis court held that “living in separate residences ‘is an indispensable threshold requirement’ for a finding that spouses are ‘living separate and apart,’” or in other words, for determining a “date of separation.”  However, the Davis court didn’t create new law—it merely affirmed what it believed was the California legislature’s intention when it coined the phrase “living separate and apart” many years ago.

To ascertain the legislature’s intent, the Davis court had to do go back 146 years to 1870 when the phrase was first used in a statute that protected the rights of married women.  Similarly to section 771, the 1870 Act did not define “living separate and apart.”  However, according to the Davis court, section four of the 1870 Act suggests that the legislature intended for the phrase to require separate residences: a wife, who was “living separate and apart” from her husband and wished to sell her real property without joining her husband, had to record a declaration that included a description of “her own place of residence” and a statement that “she is a married woman, living separate and apart from her husband.”

Additionally, when the California legislature repealed a number of Family Code sections in 1969, it created a new statute (section 5118) that reproduced the 1870 Act language.  Once again though, the legislature provided no specific definition of “living separate and apart.”  The Davis court reasoned that the legislature’s continued use of the phrase—without defining it—expressed its satisfaction with earlier judicial interpretation of the language.

Further, the Davis court also relied on a notable 2002 case—In re Marriage of Norviel—which concluded that “living apart physically is an indispensable threshold requirement to separation, whether or not it is sufficient, by itself, to establish separation.”  Therefore, relying on legislative history and case law, the Davis court affirmed the Norviel holding—spouses had to live in separate residences before they could be considered separated.

While the Norviel and Davis courts may have correctly discerned the original meaning of “living separate and apart,” our modern legislature took issue with their holdings and in response, passed SB 1255.  The bill expressly abrogates Norviel and Davis, and rather than provide a specific definition for “living separate and apart,” the legislature did away with the phrase all together.  Instead, section 771 (the modern statute that contained the disputed language) now uses the phrase “after the date of separation” to determine when a spouse’s accumulations and earnings transition from “community” to “separate” property.  In turn, newly added section 70 defines “date of separation” as a “complete and final break” that is evidenced by two factors: 1) a spouse has expressed his or her intent to end the marriage to the other spouse, and 2) the conduct of the spouse is consistent with his or her intent to end the marriage.  Further, section 70 requires that a court look at all “relevant evidence” when making the above determination.

This statutory change was spurred on by Senator John Moorlach (R-Costa Mesa), the author of SB 1255.  He believed it was necessary to change the Family Code language because many spouses wish to separate legally in order to protect their personal finances, but also, wish to continue sharing a residence in order to save costs during their divorce.  Thus, SB 1255 should better reflect the reality of modern divorce experiences.

While the amended Family Code sections do provide clarity and allow couples more post-separation flexibility, it is important to note that SB 1255 may not be the end of legal disputes about separation dates—in the coming years, case law will further refine section 70.  Additionally, couples in the process of a divorce should not let SB 1255 past by them unnoticed because when the new law goes into effect on January 1, 2017, it will retroactively apply to any cases pending on that date.  Therefore, now is the time to consult with your attorney and develop a “date of separation” strategy.

If you are considering a legal separation or divorce, please contact the experienced family law attorneys at Lonich & Patton—we can help you navigate the effects of SB 1255 and answer any questions you may have about how the new law will impact your divorce.  The sooner you understand how SB 1255 will affect your current or impending legal plans, the better you can prepare for the new rule when it goes into to effect on January 1, 2017.

Lastly, please remember that each individual situation is unique, and results discussed in this post are not a guarantee of future results.  While this post may detail general legal issues, it is not legal advice.  Use of this site does not create an attorney-client relationship.


2016 Cal. Legis. Serv. Ch. 114 (S.B. 1255)

In re Marriage of Davis (2015) 61 Cal.4th 846

In re Marriage of Norviel (2002) 102.Cal.App.4th 1152

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The More the Merrier?: When a Child Can Have More than Two Legal Parents

Posted August 5, 2016 in Family Law by Michael Lonich.

Traditionally, when multiple parties would claim to be a child’s parent, a court could only recognize two of those claims.  However, family matters are rarely so simple, and a recent California case has reaffirmed what subsection (c) of Family Code Section 7611 provides: “[i]n an appropriate action, a court may find that more than two persons with a claim to parentage under this division are parents if the court finds that recognizing only two parents would be detrimental to the child.”  “Detrimental to the child” is determined by (but not limited to) the “harm of removing child from stable placement with a parent who fulfills that child’s physical and emotional needs and has done so for a substantial period of time.”  Importantly, a finding of detriment does not require that a court find any other parentage claimant to be unfit.

In April 2016, the California Court of Appeal for the Sixth District elaborated on Section 7611.  In Martinez v. Vaziri, the petitioner was the child’s biological uncle, the respondent was the child’s mother, and the child’s father was the petitioner’s half-brother.  Petitioner and Mother had been in a long-term relationship when Mother conceived a child.  However, DNA testing revealed that the child was fathered by Petitioner’s half-brother.  Father abandoned Mother during her pregnancy, and since the child’s birth, he has been in-and-out of jail.

Aware that he was not the father, Petitioner raised the child as his own—he accompanied Mother to her doctor’s appointments, was present at the child’s birth, and lived with and cared for the child during her first six months of life.  Even after he moved out of Mother and Child’s home, Petitioner continued to see Child three days and two to three nights a week.  Eventually, Petitioner initiated proceedings to establish legal parentage.

Although the trial court denied Petitioner’s parentage claim, the Court of Appeal remanded the case for reconsideration of detriment to the child in light of its interpretation of “stable placement.”  The trial court had concluded that even though Petitioner established himself as the presumed parent of Child, there was no threat of Child’s “stable placement” being upended because Petitioner had already spent substantial time apart from Child while he attended a drug rehabilitation program.

The Court of Appeal found the trial court’s interpretation of “stable placement” to be lacking and remarked that the phrase is in reference to a parent’s physical and emotional attention to a child’s need.  Therefore, the critical distinction is not the living situation, but rather, whether a parent-child relationship has been established, and whether the claimant has demonstrated a commitment to the child.

Thus, as Martinez v. Vaziri demonstrates, a child is not limited to two parents.  If a third claimant can prove a sincere and stable commitment to a child (a still demanding standard), a court has the ability to protect the alternative parent-child relationship—without penalizing the child’s other biological or presumed parents.

Establishing parentage is important for both parents and children; however, multiple parentage claimants can complicate the process.  If you have questions about the parentage of your child or are interested in establishing legal parentage, please contact the experienced family law attorneys at Lonich & Patton to help you sort through your and your child’s rights.

Lastly, please remember that each individual situation is unique, and results discussed in this post are not a guarantee of future results.  While this post may detail general legal issues, it is not legal advice.  Use of this site does not create an attorney-client relationship.


1)  Cal. Fam. Code § 7612(d)

2)  Martinez v. Vaziri (2016) 246 Cal.App.4th

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