Orange County Divorce Lawyer Blog

A few days ago I blogged about the ATROs that go into effect upon the filing of a Petition for Dissolution of Marriage. Today's blog will focus on item #2 of the ATROs:

"2. Cashing, borrowing against, cancelling, transferring, disposing of, or changing the beneficiaries of any insurance or other coverage, including life, health, automobile, and disability, held for the benefit of the parties and their minor child or children."

If you are in the middle of the divorce and all of your accounts designate your soon to be ex spouse as the sole beneficiaries, can you change the beneficiares pending a divorce? First of all, you should always consult your Estate Planning attorney to ensure that you can do so. Typically, you must wait until the divorce is finalized before you start transferring and changing beneficiaries of financial accounts.

A good article that I found here, summarizes what you should consider prior to changing beneficiaries. Here is an excerpt:

"[i]deally you should consider changing your will and all your other estate planning documents before filing for divorce. This includes updating your living will (medical directives) and financial power of attorney so that someone other than your soon-to-be ex-husband has the ability to make financial and/or medical decisions on your behalf should you become incapacitated. (Do you really want him making possible life and death decisions on your behalf at this point in your relationship?) You may also want to name new beneficiaries on your life insurance policies, retirement accounts, annuities and other investments where applicable. Beneficiary changes to some accounts such as 401Ks and pension plans may require the consent of your spouse and, in all likelihood, you will not be able to change them until after your divorce has been finalized.

Also, once divorce proceedings have begun, the ability to change/move various accounts, name new beneficiaries and/or revise other documents might be prohibited. What's known as an Automatic Temporary Restraining Order (ATRO) may be in place to ensure that both parties' assets and ownership interests stay the same until they have been divided pursuant to the final divorce decree."

Contact an Orange County divorce lawyer if you have any questions or concerns about filing for divorce in Orange County or Los Angeles County.

Source: Should you disinherit your husband?

I recently read an article here about why it is important for women to have an estate plan. This comes on the heels of an increase in the estate tax exemption from $3.5 million in 2009 to $5.0 million for 2011 and 2012. This means that that when someone passes they generally will not be subject to estate tax unless the amount of his or her investments, property, cash, real estate, etc., (your net assets) is greater than $5 million.

Many wills are drafted to state that the amount of your spouse's assets that will go to your kids in an amount equal to the federal exemption amount ($5.0 million) and the remainder of the assets will go to you. This is fine when the exemption amount was $3.5 million, but it may not work so well at $ 5 million.

For example, say all of the assets accumulated by Husband and Wife are in Husband's name. Further, say that the assets are worth approximately $5 million. Husband passes away and his will dictates that the federal estate exemption amount goes to your children, the remainder to you. Let's do the math.

Total Assets : $5 Million

Amount to Kids: $5 Million

Amount to you: Zero.

People may think that they don't have to worry about estate planning because they do not have asset any where near $5 million. However, you may be wrong. Estate planning is not only about estate taxes. You should all consider what should happens to your assets (including your children) in the event of your demise.

The bottom line of this story is that you all should take time to review your estate plan now, no matter how much or how little you have,

Contact an Orange County divorce lawyer for more information.

Source: Why Women Need an Estate Plan

With tax time fast approaching this is a good moment to examine some of the ways in which an Orange County divorce can affect one's tax status. A fascinating article posted yesterday on the financial website Smartmoney.com examines the consequences of an obscure IRS provision known as the "Innocent Spouse Rule," touching on its particular role in divorce cases.

Briefly stated, the innocent spouse rule allows one spouse to avoid tax penalties related to a joint return if he or she can plausibly claim to have had no knowledge of what the other was doing in filling it out. As the article at Smartmoney.com makes clear, the term "spouse" can be slightly misleading, since the rule can also apply to divorced couples. That, of course, is good news. One of the sad realities of divorce, be it in Orange county, Los Angeles, San Bernardino or elsewhere, is that dissolving a couple's financial links can sometimes be a more complex process than dissolving the marriage itself.

Smartmoney, for example, cites a case from the 90s in which a woman "was denied an appeal after the IRS wouldn't let her claim the innocent spouse rule over a return prepared by her ex-husband." The point here being that tax obligations incurred during the marriage followed the woman even after her divorce. Smartmoney notes that the law was changed in 2004 to make innocent spouse claims easier to file. That, however, has led to a huge spike in the number of claims made under the law and has led the government, in turn, to view such claims with increasing skepticism.

On another key divorce-related tax issue, the IRS' innocent spouse rule Q&A page notes in several places that anyone whose name is on a joint tax return is responsible for the tax, interest and penalties related to that return - a fact which does not change "even if a divorce decree states that a former spouse will be responsible for any amounts due." In other words: your settlement may say your ex is responsible for the tax penalty, but, as far as the IRS is concerned, that is none of their concern; until someone pays the money you are both liable for it.

Issues such as these illustrate the important role an Orange County divorce lawyer plays throughout the process of dissolving a marriage and dividing up a couple's property. Without careful, detail-oriented legal advice a break-up can prove to have unanticipated, and far-reaching, consequences. An experienced California family law attorney can help clients avoid these pitfalls.

Smartmoney.com: More spouses off the hook for tax mess

IRS Innocent Spouse Questions & Answers Information Page

I came across this article in CNNMoney.com about the tax consequences on inhertiances. Someone asked what are the tax rules for valuing assets that one party inherits in 2010?

Answer: The absence of the estate tax does not mean you won't have to pay taxes on an asset you inherit this year, says Mark Luscombe, principal tax analyst at CCH.

Historically, when a party inherited assets like stocks or a home, the tax basis was the fair market value at the time of death (i.e. stepped-up basis).

So, if someone sold a stock that was inherited by a grandmother that died, that person would have to pay capital gains taxes only on any price appreciation since her death.

The same is still true for estates valued below $1.3 million. However, under current law, if if you inherit substantial assets (i.e. small business your dad started decades ago) the decedent's original tax basis also carries over.

Bottom line, you would owe taxes on the increase in value since your benefactor owned the asset.

An there you have it! For more information on inheritances and its effect on a Southern California divorce, contact an Orange County divorce attorney for more information.

Considering how strange some aspects of Michael Jackson's life were it was probably inevitable that the late singer's estate would end up in court. Arguments over the California custody of the singer's children emerged in the days following his death last year. Soon afterward Joe Jackson, filed suit alleging that as Michael's father he is entitled to a say in the administration of his son's estate.

According to the Associated Press, Jackson's will named a lawyer and a music industry executive as the co-administrators of his estate. Joe Jackson challenged this soon after his son's death.

"I think it's an important issue for all fathers around the country and around the world that when their child dies they should have a say-so in their child's estate," the news agency quotes the elder Jackson saying. Attorneys for the singer's estate take the position that as an adult Michael Jackson (who was 50 years old at the time of his death) was free to designate whomever he pleased to administer his fortune after he passed away. Joe Jackson lost the initial legal round of this case in a lower court. A California appeals court has now set October 6 as the date for arguments in the next phase of what promises to be a lengthy legal saga.

The fact that Michael Jackson's estate has reportedly earned $1 billion in the year since his death may be providing some impetus for the continued legal wrangling. That does not, however, change the broader point this case raises about California and Orange County family law issues: a careful ordering of your affairs while you are alive - especially Orange County child custody and guardianship issues - is one of the best ways for any parent to ensure the best outcomes for their children in the event of a parent's death.

An Orange County family law attorney can offer clients a wide range of legal services designed to prevent the sort of wrangling now taking place over the Jackson estate. Careful attention to your affairs now is the best way to ensure that California parental rights and a parent's wishes are honored after one or both parents pass away.

AP via The Washington Post: Appeals Court Sets Hearing in Jackson Estate Case

MTV: Michael Jackson's estate has generated $1 billion since his death

In California, we do not recognize common law marriages. In an interesting twist over the battle for Gary Coleman's estate, his ex-wife, Shannon Price is now asking the Utah courts to recognize her alleged common law marriage to Gary Coleman. She requests the commencement date to be the date of the divorce filing through Coleman's death. Ms. Price claims that she and Mr. Coleman continued to live together and they also continued to hold themselves out as husband and wife. Coleman most likely had a will in place awarding his estate to his surviving spouse.

It is also interesting to note that Coleman's ex-girlfriend, Anna Gray, contends that a 2005 document awards her Coleman's estate.

Whatever the case may be, a probate court will have to deal with these individuals wanting a piece of Coleman's estate. Since California does not recognize common law marriages and if you and your live-in partner have an agreement that sets forth any "promises" and if those promises are not kept, your best option would likely not be in a family law court. Contact a Costa Mesa divorce attorney to explore your options.

Source: Coleman's Ex Wife wants Common Law marriage recognized

By now, we all know of the untimely death of child star, Gary Coleman. It was reported last week that Shannon Price, the ex-wife of Coleman, requested to be appointed special administrator of Gary Coleman's estate. Price based this request on a handwritten document purportedly written by Gary Coleman making her the sole beneficiary of his estate. The alleged handwritten document appears to have been executed in 2007, When Coleman passed away, Price and Coleman were already divorced. Generally speaking, when couples are in the process of a divorce, the smart thing to do would be to consult a probate attorney and make arrangements to modify one's will or trust if they have no intent to bequeth assets to their soon to be ex-spouse. In an intereseting twist, Price is now claiming that she and Coleman were in a common law marital relationship, despite being previously officially divorced.

From an Orange County divorce attorney point of view, in California, common law marriages are not recognized. California is a community property State, which means all property acquired by couples during the marriage with community property funds should be subject to an equal division upon divorce.

According to Utah statutes, the law requires that couples "request to have a common-law marriage recognized" during the relationship or within one year after the end of the relationship. It is unclear if Price and Coleman had their purported common law marriage recognized.

If you are contemplating a California divorce, please contact an Orange County divorce attorney for information.

Source: Shannon Price: I was Gary Coleman's Common Law Wife

In one of the stranger Hollywood divorce twists in recent memory, a number of recent media reports indicate actor Dennis Hopper has filed for California divorce from his wife Victoria even as he lies dying of prostate cancer. A persistent theme of the reporting is that money - specifically the disposition of the actor's estate when he passes away - may lie at the heart of this unusual situation.

Hopper, 73, has a famously rocky personal life (one of his marriages lasted only eight days). Victoria is his fifth wife and by most accounts their 14-year marriage has brought the actor some personal stability. Media reports say a battle between Victoria and Hopper's adult daughter (from an earlier marriage) Marin may be at the root of a dispute over money and custody of the couple's six-year-old daughter.

It is difficult, of course, for outsiders to judge these things, but if the picture painted in the media is accurate the various members of the Hopper family seem destined to end up in court. This will be especially true if reports that the actor is heavily medicated most of the time - and, therefore, arguably not completely in control of his faculties - prove to be accurate.

As any Los Angeles family law attorney could advise, the Hopper situation is an example of why California estate planning and other family legal matters should never be left until the last minute, particularly in cases such as this where it is unclear that a California prenuptial agreement exists. Putting one's affairs in order before health issues arise is always a wise move. An Orange County family law attorney can advise clients on estate planning, as well as child custody and visitation issues that may arise in wake of the death of one or both parents.

A major goal of such planning should be to avoid a situation in which uncertainty about your wishes leads to family members to spend the months or years following your death fighting each other in court.

ABC News: Why is Dennis Hopper divorcing his wife from what may be his deathbed?

Huffington Post: Dennis Hopper Divorce Shocker

Unless you want your soon to be ex-spouse to inherit your share of the community estate, you ought to consider immediately changing your will pending your divorce. If you wait until your divorce is final, it could cause the wrong result in the event of your untimely death.

Typically, if you are married, your will might provide that your surviving spouse act as the executor of your estate. Your will might include provisions that all assets you own pass to your surviving spouse. If there is no will, the decedent's share of the community property will pass to the surviving spouse and potentially all of the decedent's separate proeprty will pass to the surviving spouse. California Probate Code Section 6401.

Pursuant to CA Probate Code Section 6122, a Judgment for Dissolution revokes an existing will as to the former spouse's rights. However, separating or filing for divorce does not. Pursuant to CA Probate Code Section 78, during the divorce, the parties remain married and have all the beenfits provided to a spouse by law in the event of death.

Moral of the story: if you do not want your soon to be ex-spouse to inherit your assets, change your will sooner rather than later pending the divorce proceedng. Contact an Orange County Divorce Attorney for more information.