Sometimes Diamonds are Not Forever

Posted June 23, 2014 in Family Law by Julia Lemon.

California is a community property state, which means that all property acquired during marriage by either spouse is presumed to be community property.  Conversely, any property acquired by a spouse before marriage, by gift or inheritance during marriage, or after separation is presumed to be the acquiring spouse’s separate property. However, it is possible for a spouse to change the character of an asset by transmuting a community property asset into one spouse’s separate property, or vice versa.

Generally speaking, to qualify as a valid transmutation, there must be an express written declaration made, consented to, or joined in by the spouse whose interest in the property is adversely affected. These strict requirements were enacted to avoid “he said/she said” situations where one spouse was presenting “pillow talk” evidence.

For example, a couple buys a car during marriage with community funds for the wife to drive. When the couple later divorces, the wife claims the car is her separate property because she was the only one who drove it.  Unless there is a written agreement signed by her husband stating that the car is her separate property, her argument will fail because there was not a valid transmutation.

This rule makes sense for expensive items, like a car. However, spouses give gifts to each other all the time, and requiring a written agreement for every birthday gift or anniversary gift would be impractical and somewhat annoying.  Imagine, “Dear Wife, Happy Anniversary! I love you so much. Here is a necklace that I am gifting you as your separate property.” Fortunately, the Family Code does not require an express written declaration for gifts such as clothing, jewelry, or other tangible items of a personal nature used solely or principally by the spouse receiving the gift unless the gift is “substantial in value taking into account the circumstances of the marriage.” In other words, an expensive gift to one spouse may be considered community property absent a transmutation.

In Marriage of Steinberger, 91 Cal. App. 4th 1449 (2001), the husband purchased a diamond ring and gave it to his wife on their fifth wedding anniversary with a card congratulating her on her recent promotion. The ring was worth at least $14,000.  At divorce, the wife argued that the ring was her separate property because her husband gifted it to her on their anniversary. The husband, however, argued that he purchased the ring as an investment for them both to enjoy, and that it was not his intent to give her the ring as her separate property.  He testified that the most expensive gift he had given her during the marriage was a Christmas gift card that cost a couple hundred dollars. The trial court found that the ring was a gift to the wife since it was tangible personal property.

However, the California Court of Appeal reversed the trial court’s finding. The appellate court reasoned that the ring was of substantial value considering the circumstances of the marriage, so the exception to the written declaration requirement did not apply.  Since there was no express written declaration, there had not been a valid transmutation, and the ring was a community asset that should have been divided equally upon divorce. When it comes to substantial gifts in California, formality takes precedence over informality.

If you have any questions about how your personal property or your last anniversary gift may be classified, feel free to contact our experienced family law attorneys at Lonich & Patton for further information.

Remember that each individual situation is unique. While this post may detail general legal issues, it is not legal advice. Use of this site does not create an attorney-client relationship.

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Common Fears about Divorce

Posted June 23, 2014 in Family Law by Susan Dent.

For the longest time, your spouse was your world. Whenever you had an exciting day, an interesting moment or fun experience you couldn’t wait to share it with them. They were your life, and they were enough.

Today, everything is different.

You and your significant other argue – constantly. It’s been like this for a while and it hasn’t been getting better. You wonder how and why it got to this point. Is it you or is it them? Wherever the problem is, it does not seem resolvable.

The decision to divorce can be one of the most difficult and emotional decisions to make. Before seeking a divorce, it is important to consider that there are many reasons to try and save a marriage, especially when there are children involved. Counseling and hard work can make a considerable difference, even if the circumstances seem bleak.

Unfortunately, often one or both parties see divorce as the only way to legally end a marriage which emotionally ended long ago. This is a personal decision for each party involved. Once the decision is made, each step afterwards may be clouded in mystery, especially if the divorce process is new.

Some of the most common questions regarding divorce are:

  • How do I find a lawyer that is right for me?
  • How much will it cost?
  • What steps need to be taken?
  • How do I begin the divorce process?
  • What should I expect as I go through this process?
  • Who gets the kids?
  • What am I legally entitled to get under California law?
  • Is divorce the same for a married same-sex couple?

If divorce is inevitable for your relationship, do not let fear and doubt paralyze you from making the best choice for you. Divorce is hard – emotionally, mentally, physically, spiritually, financially and socially.  It will impact each aspect of your life, from your immediate family to your extended family and friends. Seeking the advice of a professional may not only alleviate fears and doubts about the process, but will also educate you about the process so you can make better decisions for yourself and your family.

If you are considering divorce or have questions about divorce planning, please contact our California Certified Family Law Specialists (as certified by the State Bar of California Board of Legal Specialization). Our attorneys have decades of experience handling complex family law proceedings and offer a free consultation.

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 include legal issues, it is not legal advice.  Use of this site does not create an attorney-client relationship.

Source: http://www.huffingtonpost.com/diane-l-danois-jd/mistakes-we-fear-well-mak_b_3721696.html

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The Surprising Tax Benefits of Holding Title as Community Property with Right of Survivorship

Posted May 30, 2014 in Estate Planning by Jennifer Mispagel.

A married couple in California can hold title to their real property in various forms. Historically, many couples took title in joint tenancy without first consulting with an attorney, merely because their real estate agent would suggest it. However, the way that a couple holds title to an asset can have significant consequences in the event of divorce or the death of a spouse.

Community Property with Right of Survivorship is a relatively new way for married couples to hold title to property in California. Under Section 682.1 of the California Civil Code, property clearly titled “Community Property with Right of Survivorship” and deeded after July 1, 2001 will pass to the surviving spouse upon death of one of the spouses.

Depending on your situation, there may be significant benefits to holding title as Community Property with Right of Survivorship. When title is held in this manner and a spouse dies, their interest in the property is extinguished and it passes to the surviving spouse, avoiding probate. This can benefit the surviving spouse by eliminating any stress associated with probate procedures, family disputes, and attorney’s fees. For more information regarding the probate system and why people choose to avoid it, see our previous post.

Additionally, this form of title allows the surviving spouse to obtain the tax benefits of community property upon the death of the other spouse. Consider the happily married couple, Hank and Wendy, who bought a home in 2004 for $100,000. This is their basis.  Now, the house is worth $1,000,000. If Hank and Wendy were to sell the house for $1,000,000, they would be taxed on the difference between the sale price ($1,000,000) and their adjusted basis ($100,000), or $900,000. Now let’s assume that Hank unfortunately dies and Wendy wants to sell the house. In this scenario, the amount of taxable profit will depend on how title is held.

If the parties hold title to the house as Joint Tenants, each spouse owns a 50% interest in the house. When Hank dies, Wendy automatically inherits his half share of the house. The basis of inherited property is adjusted to the value of the property at the date of death. Wendy’s basis will stay the same ($50,000) and the share she inherited from Hank will be adjusted to the value of his share of the property at his death ($500,000). Wendy’s new adjusted basis in the house is $550,000. If Wendy sells for $1,000,000, she is taxed on the difference between the sale price ($1,000,000) and her adjusted basis ($550,000) or $450,000.

However, if the parties hold title to the house as Community Property with Right of Survivorship, each spouse owns the entire property rather than a 50% interest. Upon Hank’s death, both his interest and Wendy’s interest receive a stepped up basis. Thus, the basis of the home is adjusted to the date of death value for the entire property ($1,000,000). If Wendy sells for $1,000,000, she is taxed on the difference between the sale price ($1,000,000) and her adjusted basis ($1,000,000), or nothing.

In the event of a divorce, the house is treated as community property. If you have any questions regarding how your current property is titled or are considering changing your current estate plan, feel  free to contact the experienced estate planning attorneys at Lonich & Patton for further information.

Remember that each individual situation is unique. While this post may detail general legal issues, it is not legal advice. Use of this site does not create an attorney-client relationship.

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A Cautionary Tale of Fill-in-the-Blank Wills: Not So E-Z After All

Posted April 9, 2014 in Estate Planning by Jennifer Mispagel.

Online platforms like Legal Zoom and Rocket Lawyer, as well as form wills marketed by companies like E-Z Legal Forms, are gaining popularity in the estate planning world. However, a recent Florida decision* serves as a fresh reminder that using one of these one-size-fits all approaches to estate planning could land your family in court despite your wishes.**

In a recent case, a Florida woman created a will through E-Z Legal Forms, leaving all of her property to her sister and finally to her brother if her sister predeceased her. The sister died first, so the brother claimed the entire estate. That would have been the result that fit with the deceased woman’s wishes. However, because the document was made without attorney oversight, the document lacked a residuary clause (important in Florida) and opened the door to disagreement over the interpretation of the will. Two of the woman’s nieces sued for a share of the estate.

The nieces, who were born to another brother who had already passed away and who were not mentioned in the will, walked away with a portion of the estate because they argued that they should receive part of any property that the deceased earned after signing the original will.  The Florida Supreme Court agreed, determining that all property earned after the will was signed must go through probate and be distributed based upon the State’s intestacy laws. (Intestacy laws govern who will receive property when a person dies without a will). Because she had a will, this was clearly not what the deceased woman intended, and one Justice shared a word of caution:

“I therefore take this opportunity to highlight a cautionary tale of the potential dangers of utilizing pre-printed forms and drafting a will without legal assistance. As this case illustrates, that decision can ultimately result in the frustration of the testator’s intent, in addition to the payment of extensive attorney’s fees—the precise results the testator sought to avoid in the first place.”

The court also acknowledged that people want to avoid dealing with lawyers and spending additional money, but sometimes making an investment in legal counsel will help the party and their family avoid even greater legal feels and turmoil in the future.

Creating a will doesn’t always have to be complicated. Nevertheless, it is best to create yours with the aid of an experienced estate planning attorney if you wish to avoid probate and future disputes over your estate. If you need estate planning advice, call Lonich & Patton to schedule a free half-hour consultation. Our attorneys are passionate about estate planning and have decades of experience handling complex estate planning matters, including wills and living trusts. If you need a will or would like to review the will you currently have, contact the experienced estate planning attorneys at Lonich & Patton for further information.

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.

 

*FlascBlog: The Florida Supreme Court Blog reports on the opinion (PDF).

**To see the original article that inspired this post: http://www.abajournal.com/news/article/e-z_legal_form_proved_to_be_complicated_in_litigation_over_wills_missing_re/?utm_source=maestro&utm_medium=email&utm_campaign=weekly_email

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Judge Grants Restraining Order against School-Aged Boy

Posted April 8, 2014 in Family Law by Gina Policastri.

In a potentially precedent-setting move, a father from San Francisco has asked a judge for a restraining order – against an alleged nine-year-old bully. Generally, restraining orders are routinely issued against adult abusers, stalkers, significant others, and the like. However, as most parents presumably would, Stephen Feudner wanted answers after learning his 9-year-old son told him he’d been bullied, pushed, and punched at Rolling Hills Elementary School. When the public school claimed its hands were tied and refused to help, Feudner turned to the law.

Feudner’s temporary restraining order (TRO) from a Solano County judge stipulates that the alleged bully must remain 2 yards away from his son at all times and have no contact with him whatsoever. Daryl Snedeker of the Solano County Sheriff’s Department says he’s never heard of a restraining order against a grade-school student. However, the boy’s mother points out that there is no law against filing a restraining order against a child – and she’s right.

There are different kinds of restraining orders available through the court system, and each order has different eligibility requirements. For a restraining order against a child similar to the Feudners’ situation, a Civil Harassment Restraining Order would likely be the most appropriate. Civil Harassment Restraining Orders can be filed in Santa Clara County if the filing party and the other party do not have a familial or dating relationship (married, divorced, separated, dating or used to date, live together or used to live together) or are not related (parent, child, brother, sister, grandmother, grandfather, in-laws).

As for the Feudners, there’s a small but possibly determinative glitch in their case: the Solano County Sheriff’s Office officials had to serve the TRO within five days for it to go into effect. However, in order to serve the TRO, officials needed the alleged bully’s first and last name and full address. As of now, the school district still remains unwilling to release the information.

Although the Feudners’ restraining order against a school-aged child is unique, temporary restraining orders are very common, particularly in domestic violence situations. If you have any questions about restraining orders or are contemplating filing one, please contact our California Certified Family Law Specialists (as certified by the State Bar of California Board of Legal Specialization) at Lonich & Patton. Our attorneys have decades of experience handling complex family law proceedings and offer a free half-hour consultation.

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 include legal issues, it is not legal advice. Use of this site does not create an attorney-client relationship.

Source: http://abcnews.go.com/US/father-files-restraining-order-year-allegedly-bullying-son/story?id=23040537

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