Articles Posted in Division of Assets

A court’s ruling in a Southern California divorce case from San Diego, along with a bill making its way through the legislature in far-away Oklahoma, are bringing new attention to military retirement pay and how it is treated in divorce cases here in Orange County and elsewhere around the country.

According to a press release republished by PR Log, the San Diego case turned on the proper implementation of a 1997 California divorce settlement of a couple in which the husband was in the military. After the ex-husband retired in 2007, the ex-wife alleged, he failed to uphold their agreement.

The California case focused on what were essentially technicalities regarding the drafting and implementation of the original agreement and the wife’s contention that these led to her being denied the full portion of her husband’s military retirement pay to which she was entitled. If proposed legislation in Oklahoma passes, however, that share could shrink for spouses in future cases – a prospect that has other legislatures paying close attention and has sparked warnings that Oklahoma might become a haven for armed forces members seeking to dissolve their marriages.

Now that the Real Houswives of Orange County season has kicked off, it cannot go without controversy. A few years ago, it was Tamra Barney who became the center of a divorce matter. Now, its VIcki Gunvalson. Ironically, I recall watching the episode where Vicki and her husband jetted off to Turks and Caicos to renew their wedding vows. I guess the renewal could not hold muster as now the Gunvalsons are involved in an Orange County divorce. In fact, Vicki has stated to US Weekly the following:

“We’re still living together. We’re [mediating] our divorce. We still have our finances co-mingled [and] joint accounts.” She went on to say: “My love tank has truly been empty for many many years. We stopped communicating. My happiness came from my work and my children.”

From an Orange County divorce lawyer’s perspective, it is not uncommon for couples to continue living in the same residence. However, doing so could cause plenty of stress and tension. Often times, one party does not want to move out because they don’t want to lose leverage in the divorce and they intend to keep the house after the divorce is over. Another reason could be that one spouse (typically, the stay at home spouse) will not have enough money to move out of the residence. If this is the case, usually that spouse will petition the court for an order that the other spouse pay the stay at home spouse a distribution of funds to be able to initially move out into a separate residence.

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.

When last we left the soon-to-be-California-divorced Christina Aguilera and her husband Jordan Bratman they were feuding over his refusal to move out of their home (see this December post by my colleague, Winiviere Sy). Now, according to the celebrity press, the couple have finalized their California divorce settlement.

Under California law a divorce cannot be final until at least six months have elapsed since the initial filing of court papers. Thus, according to E! Online, the Aguilera-Bratman divorce is now set to become official on April 15. The website writes that the couple “have reportedly reached financial and custody agreements that will presumably make the next couple of months of their “marriage” go down easier.”

The site reports that the couple, who have been married a bit over five years, have agreed to a Southern California child custody arrangement under which they will share custody of Max, their son, who is three. A statement from Bratman did not elaborate on financial arrangements, but said that money issues have been “resolved by signed agreement.” That would at least imply that non-financial issues – such as who gets the house – have been settled as well.

A fascinating column published recently on the Reuter News Agency’s “Prism Money” blog examined issues we sometimes do not think about when contemplating Orange County divorce. In the popular imagination, break-ups are the province of couples married for two, five, 10 or 12 years. Of course, we all know this is not true. An Orange County divorce attorney sees clients in every conceivable stage of a marriage, and most of us know of at least one couple married for decades who decide to call it quits at a time when others are picking out retirement properties (Al and Tipper Gore, for example).

As the Reuters piece highlights, the issues faced by a couple who have been married for decades are often fundamentally different from those where both spouses are in the prime of their working lives.

According to the article, more older couples are signing settlements that forego alimony or spousal support in favor of a single division of assets, generally including a lump sum payment. Some women, the author notes, are “foregoing alimony in order to front-load money in case their ex-spouse can’t come up with the payments down the line.” It is an interesting concept – though, as the article notes, one fraught with potential pitfalls that make it something one should not venture into lightly. It is also worth mentioning that while the article offers some fascinating stories it does not back them up with any hard data.

An essay on the subject of pets and divorce published earlier this month at The Huffington Post has been blogged and commented-upon widely over the last ten days or so. The article, by Jill Brooke (an author who describes herself as a “Blended Families Expert”), looks at the increasing prevalence of pet-related issues in divorce cases.

“According to the American Academy of Matrimonial Lawyers, attorneys have seen a 23 percent jump in pet custody cases,” Brooke writes. A similar analysis at the pet-focused website Paw Nation notes that “today half of the 190 accredited law schools in the United States, including Harvard and Yale, offer courses in animal law” – a field that barely existed as recently as a decade ago.

Brooke presents a long string of anecdotes outlining the strife that pet custody can cause in a divorce proceeding. She writes that “dogs used to be viewed as property… But now courts realize that pets are members of the family and their best interests are being considered.” That, however, is not an entirely accurate reading of the law, at least here in Orange County and elsewhere in California.

A spokesman for John Mellencamp confirmed last week that the rocker and his wife of 20 years, Elaine, plan to divorce, according to the Associated Press. It was unclear from the agency report, as well as accounts of the break-up on a number of celebrity-watching blogs, whether the couple plan a California divorce or intend to file in another state.

Mellencamp is famously from a small town in Indiana – a fact he has built into many of his hit songs (including one about his marriage to Elaine, a former model). The couple have been raising their children in Indiana, according to the AP, but also own property in California and, by some accounts, may seek to finalize their divorce here.

If these reports are accurate that would make Mellencamp’s split the latest in a growing line of celebrity break-ups to involve jurisdictional questions. As Winiviere Sy and I have noted in earlier posts, celebrities and their spouses can have a number of reasons for seeking a California or Orange County divorce, or for seeking to avoid one. Shaquille O’Neal’s wife sought to establish residency here shortly before her break-up with the basketball star, apparently with an eye on California’s community property laws. A similar focus on community property may lead Michael Douglas’ ex-wife Diandra into a Los Angeles or Orange County family law court as she continues her battle for a share of the money his earnings from the latest Wall Street movie. Sandra Bullock, in contrast, filed for divorce in Texas with an eye toward avoiding public scrutiny.

Details surrounding the Los Angeles County divorce of Emmy Rossum have surfaced. There is not anything too dramatic but here is a run down of the details of their divorce Judgment:

1) Rossum to keep the Beverly Hills residence (she probably had enough money to buy him out or this is her separate property);

2) Rossum to keep her two production companies in her name;

In a typical California divorce, it is very common for couples to dispose of the family residence, whether it be by selling it, one party buying the other party out or allowing one spouse to remain in the house with the children until the youngest child gradutes high school. Often times, couples will elect to sell the house because neither party can afford to buy the other out. Thus, selling a family residence is the only remaining alternative.

If you are a potential buyer of a home from a divorcing couple, here are some things to keep in mind.

1) Buying a home from a divorcing couple could mean that you will get a “bargain” on the sales price. Often times, divorcing couples are desperate to get rid of the house and will sell it for a reasonable, bargain price.

There have been two noteworthy developments in the last few days in the divorce proceedings of Kelsey Grammer and his wife, Camille Donatacci. According to Canada’s CTV News, the long-time star of Fraiser and his third wife, now a reality-TV star in her own right, have reached an impasse over the terms of their California divorce settlement.

The network reports that Camille “reportedly rejected a $30 million divorce settlement” on the grounds that it offers neither child support nor alimony. According to numerous media reports over the last few months, the couple do not have a pre-nuptial agreement. That being the case, CTV reports that Donatacci believes she is due approximately $50 million on the basis of her 14 -year-marriage to Grammer and her status as a partner in his TV production company.

In the wake of this development, celebrity-watching website TMZ reports that Grammer is now seeking to speed up the divorce process by asking a California family court judge to bifurcate the couple’s Southern California divorce. Under California law, bifurcation is a procedure by which the legal dissolution of a marriage is legally split off from the financial issues raised by the divorce. This was what happened recently in the long-running divorce case of Los Angeles Dodgers owner Frank McCourt and his wife Jamie. Thanks to a recent Los Angeles family court ruling they are now no longer married, though many (arguably, most) of the financial issues arising from the end of the McCourts’ marriage remain unresolved.