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How Can High-Net-Worth Spouses Avoid Giving Up Too Much in Their Divorce?

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How Can High-Net-Worth Spouses Avoid Giving Up Too Much in Their Divorce?

As a high-net-worth individual, protecting your assets is likely to be a central focus of the divorce process. You’ve spent years, decades, or perhaps your entire life building your wealth, and you want to make sure that you are able to keep as much of it as possible.

In California, unless you signed a prenuptial agreement or postnuptial agreement, any assets you accumulated during your marriage are likely to be classified as “community property”, unless it is a gift or inheritance. This means that they will be subject to distribution in your divorce; and, absent unique circumstances, it means that your spouse is likely to be entitled to somewhere around half of your overall community property estate (including any assets that he or she accumulated during the marriage).

So, how can you ensure that you preserve as much of your wealth as possible? This is a complex question that requires legal advice that is carefully tailored to your unique financial and family circumstances. In broad terms, some of the key factors include:

1. Delineating Separate and Community Property

When millions of dollars are potentially at stake in your divorce, every asset matters. While California law is clear that community assets are subject to division, it is equally clear that “separate” assets are not. The basic rule regarding separate property is that anything one spouse owned prior to the date of your marriage is his or hers to keep (along with certain categories of assets acquired during the marriage).

In practice, however, delineating between separate and community assets is far more complicated, and identifying your separate assets will be a crucial early step in determining how much of your wealth is on the table in your divorce.

2. Identifying and Valuing All Community Property Assets

In addition to identifying which of your accumulated assets qualify as community property, it is important to identify which of your spouse’s accumulated assets qualify as community property as well. Of course, here, the terms “your” and “your spouse’s” are somewhat misrepresentative, as community property assets are technically owned equally by both spouses.

Even if your spouse’s contributions to your community estate pale in comparison to yours, they are still relevant to the divorce process, and identifying all of the assets that are on the table will help ensure that you do not give up any more than is absolutely necessary.

In addition to examining your shared personal property, real estate holdings, and shared and individual accounts, there are various other ways to identify community assets for purposes of your divorce. You are entitled to this information as a function of the formal divorce process in California; and, if you are concerned that your spouse may be hiding assets, there are legal means for uncovering hidden assets as well.

3. Finding Leverage in Divorce Settlement Negotiations

When negotiating a divorce settlement, protecting as much of your wealth as possible means securing an understanding of your spouse’s priorities as well as your own. As with all aspects of the divorce process, protecting your wealth starts with putting together a strategic plan, and an experienced North County, San Diego family lawyer will be able to help you develop and execute a plan that allows you to retain as much of your wealth as possible after your divorce. 

Discuss Your Divorce with North County, San Diego Family Lawyer Richard M. Renkin

If you would like more information on how to protect your wealth during your divorce, we encourage you to contact us for a confidential initial case evaluation. To request an appointment with North County, San Diego divorce attorney and Certified Family Law Specialist Richard M. Renkin, please call 619-299-7100 or tell us how to reach you online today.

Need To Know – Business Ownership and Divorce

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Q. What Do I Need To Know About Business Ownership and Divorce Proceedings in California

A. If you are preparing to file for a divorce, or a domestic partnership dissolution,

it is important to consult with an experienced San Diego divorce lawyer before filing your paperwork. If you are a business owner and you are concerned that the business can be controlled by your ex, only a qualified California family law firm will be able to help you sort through the complexities of the process.
Divorce and Business Ownership in California

It Has to Be Determined if the Business is Community or Separate Property

In the state of California, all community property of the marriage or domestic partnership is divided up between the two parties in a marriage settlement agreement. Not all property owned by one party is considered community property. Assets that were inherited by one spouse or assets that were earned prior to marriage are considered separate property. If you owned a thriving business prior to getting married, the business is your separate property and will be treated as such in a divorce proceeding.

You and Your Spouse Started the Business Together

If you and your spouse started the business together, you will have to decide if you want to be the one to continue running the business. As a piece of community property, both parties are entitled to half of the value of the property. If you are both on the registration paperwork, and you both have a say in how the business is run, you will have to buy out your spouse in order to retain control of the business.

The Business Is a Family Business You Inherited from Your Parents

If the business you are concerned about is a business that you inherited from your parents, your ex is not entitled to half of the business assets. If you have been wise, and you have kept your business completely separate from your marriage, then the business you inherited is yours to keep. If you added your spouse to the business incorporation paperwork, gave your spouse a title, and allowed your spouse to have control in the business proceedings, they may be entitled to some of the assets. If the business grew as a direct result of your spouse’s involvement, it is likely that this will be taken into consideration.

As with any divorce that involves a business, your business value will have to be determined by a third party. An accountant or valuation team will consult all of your business records and determine what your business is worth at this time. Future earnings are always considered when valuation is determined, and your current success in your business can result in a higher payout to your former spouse.

When you are concerned that your spouse is going to be able to control your business assets, it is best to get prepared before filing for your divorce. Encourage your spouse to find other employment and remove responsibilities from your spouse if at all possible. Gather together information that proves you are the primary business owner and allow a third party to come in and assess your business for the court system.

Consult a Divorce Attorney about Your Business As Soon As Possible

The quickest way out of a complicated divorce proceeding is to offer your spouse fair financial compensation for their part in establishing and growing the business you have. Consult with an experienced divorce attorney today to see what your rights are.

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How Do Unmarried Couples Divide Property in Separation?

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For married couples, prenuptial agreements and postnuptial agreements provide means for taking certain decisions out of the hands of the judge in the event of a divorce. Negotiated settlements, collaborative law divorces, and mediation can all serve this function as well, but entering into an agreement prior to making the decision to separate can help minimize the expense and emotional strain involved in reaching compromises with your soon-to-be-former spouse.

But, what if you never actually get married? Since there are no nuptials, it stands to reason that there can be no prenuptial or postnuptial agreement. You also cannot get divorced. Under a landmark court decision that is fast approaching its 40th anniversary, California law recognizes an alternate solution for unmarried couples to make binding decisions regarding how their affairs will be handled in the event of a separation.

Marvin v. Marvin

In a 1976 case known as Marvin v. Marvin, the Supreme Court of California decided that agreements between unmarried couples regarding property division and other matters that would otherwise typically be settled through a nuptial agreement or divorce constitute binding and enforceable contracts. These contracts – known as cohabitation agreements or “Marvin agreements” – are now a well-established part of California law.

Written Marvin Agreements

Cohabitating couples in California have had, for many years, the opportunity to enter into written agreements in order to prescribe how certain financial and other matters will be handled in the event of a separation. Pooling or Marvin agreements can be used to address matters such as:

  • Rights to property acquired prior to or during the couple’s period of cohabitation
  • Obligations regarding expenses such as housing, utilities, and education
  • Financial support rights following separation (known as “palimony”)
  • The method (such as mediation) that the partners will use to resolve any disputes that arise down the road

Implied Marvin Agreements and Equitable Distributions

Beyond enforcing written cohabitation agreements, the court in Marvin also held that implied contracts regarding these matters may be legally enforceable as well. An agreement may be implied under a variety of circumstances – most notably when the couple’s conduct during the course of their relationship suggests that they had an understanding regarding how finances or other matters should be handled.

Further still, the Supreme Court held that considerations of equity and fairness may justify enforcement of an unmarried partner’s obligations even when there is no agreement in place. As a result, one former partner may be able to impose legally-enforceable duties on his or her former cohabitant even in the absence of a mutual understanding.

Marvin Actions: The Mechanism for Enforcement

As perhaps you can see, situations involving separation of unmarried partners can get complicated very quickly. Having a written Marvin agreement in place can help eliminate the issues that arise in the absence of a formal contract.

If you need to enforce a written pooling agreement – or if you need to establish an implied agreement or equitable obligation – the mechanism for doing so is known as a “Marvin action.” A Marvin action is a lawsuit filed in civil court in which you ask a judge to award property or support rights based upon your cohabitation with an unmarried partner.

In considering your request, the judge will consider numerous factors, including:

  • the length of cohabitation
  • each partner’s contributions to the relationship, and
  • the parties’ respective sources of income.

Having an experienced attorney on your side can help ensure that your rights are fully protected and you get what you deserve.

If you have questions about creating a cohabitation agreement or enforcing a Marvin agreement under California law, contact the Law Office of Renkin & Associates to learn more.

Is Your Spouse Hiding Assets From You

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Even if you think you have a legal claim to an asset, there can be consequences for attempting to conceal assets from your spouse. Hiding assets during divorce proceedings occurs more than you might think even though it can result in stiff penalties for the spouse responsible. Here are some of the ways that your spouse might be hiding assets from you.

Physical Possessions

It can be easy to hide expensive collections – or even just parts of them – such as art, guns, stamps, or coins. The value of furniture or other antique items can also get overlooked during the tallying of assets and the subsequent divorce proceedings. Spouses who own their own business may also underreport the number and value of corporate physical assets in order to downplay the value of their company.

Unreported/Delayed Income

If your spouse gets paid completely or partially in cash, he or she may be able to hide this income and not report it. By doing so, you would have no knowledge of the income to have it included during the proceedings. Additionally, some people who are in the process of getting a divorce or who are contemplating divorce might try and have their income deferred or reduced. By waiting to receive income, bonuses or stock options until after the divorce is complete, your spouse may be able to hide income that was earned during your marriage and to which you are entitled. If your spouse owns a business, he or she may have pushed off signing a lucrative contract with a client or delayed receiving or depositing funds in order to decrease the value of the company and their overall own net worth.

Abnormal Cash Withdrawals/Unknown Accounts

You can check all bank accounts that you know of to see if there have been any large or abnormal cash withdrawals. Some people have also tried to hold cash in traveler’s checks until their divorce is finalized. Your spouse might also have taken out cash in order to buy government bonds such as series EE savings bonds, which are, unfortunately, a fairly easy way to hide money since they do not have to be registered with the Internal Revenue Service. Some spouses also have separate bank or retirement accounts that their spouses know nothing about.

Suspicious Gifts/Fake Debt Repayment

A court will look suspiciously on most large gifts that were made leading up to a divorce, especially those made to family members or children of only one of the spouses. Any gifts to or purchases made for a spouse’s lover will also be closely scrutinized. Still other people may “repay” debts to friends or family members even though these debts never existed prior to the topic of divorce coming up. After the divorce process is complete, these family members will then return most if not all of the “debt repayment.” A spouse who owns a business might try to make expense or payroll payments in advance in order to temporarily decrease corporate assets.

What to Do If Your Spouse is Hiding Assets

If you suspect your spouse of hiding assets during a divorce proceeding, you can feel powerless. Since this is such a common problem during divorce, there are many checks and balances in place during the proceedings that help to prevent the honest spouse from being taken advantage of by their spouse. There are some steps that you can take in order to protect yourself and your rights – even before you officially start the divorce process.

Keep Records

Try to document your financial situation in as much detail as possible. If your spouse usually keeps the records and will not provide you with copies, you can ask the bank or other account-holder directly. Just because your spouse is hiding assets it doesn’t give you the right to hide assets as well – even if the asset is something like inheritance that was given to you only and to which you will most likely be completely entitled to after the divorce. Despite your best efforts to monitor financial activity in your marriage, there may still be factors that are beyond your control, especially if your spouse has opened an account without your knowledge or is underreporting assets. Fortunately there are ways to overcome this dishonesty.

The Discovery Process

Discovery is the legal process during which you and your attorney get to ask your spouse multiple questions and request multiple documents regarding your finances. Your spouse is required to answer honestly and not hide documents, unless your spouse’s attorney can assert a valid legal reason why your spouse should not answer, such as a question being irrelevant or a document being privileged. During this process, your attorney may ask your spouse such questions as whether or not he or she has other accounts or has information regarding certain expenses. Typical document demands include requests for copies of tax returns, contracts, business files if your spouse owns a company, and other accounting records. Via the discovery process, you may also obtain the right to physically inspect property such as a safe deposit box. You may subpoena your spouse in order to get a sworn deposition, and you may also be able to bring in your spouse’s boss or other people knowledgeable about his or her income to get your questions answered. You can even request account information from banks and other institutions, and they are legally required to provide this information. The discovery process is beneficial because a court has the ability to enforce an order for production and also has the power to impose sanctions if your spouse does not comply honestly.

Other Professionals

Once you have received all of your spouse’s answers and documents, there is still the gargantuan task of sifting through everything and seeing where information could be hiding in plain sight. For example, a tax return may look straightforward until you notice that your spouse has a carryforward tax credit that will be available next year or that he or she has been overpaying taxes intentionally in order to downplay income and get a large return once you are divorced. Fortunately, analyzing this data will not be your responsibility alone.

With the guidance of your attorney and possibly a forensic accountant who specializes in this area, you will be able to find even the slyest attempt to hide assets. Even if you do not suspect your spouse is hiding assets, it’s good to get peace of mind and make sure your divorce is handled correctly.

In order to make the divorce proceedings go smoothly, it is important to track your finances as closely as possible and gather as much documentation as you can. Also, make sure that you are not hiding any assets. For help with all aspects of your divorce, call the Law Office of Renkin & Associates. Our attorneys have experience in all areas of family law and are ready to fight on your behalf. Contact the Law Office of Renkin & Associates today for representation in your case.

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Divorce Tax Strategies for Spousal Support

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Divorce Tax Strategies for Spousal Support

Couples who are hashing out the final details in a divorce agreement are typically eager to get on to the next chapter of their lives; however, this does not mean that they should overlook some of the benefits or avoidable pitfalls in spousal support payments in the federal income tax code.

There are three main types of support – alimony, child support and property settlement – all of which should be taken into consideration for their potential tax consequences when going through a divorce regardless of whether you are the paying or receiving spouse. Alimony and child support are the ones that cause the most trouble for divorcing couples due to their tax consequences.

Alimony

Although you typically are not allowed to reassign income to another person, alimony is one way to work around this. While the receiving spouse must declare alimony as income, the payor can deduct it. Payors are typically in a higher tax bracket than the receiver, so the receiver usually pays less money in taxes on alimony than the payor would have. There are additional factors to take into account regarding alimony for tax planning purposes. For example, many payors may prefer to pay as much alimony as possible in the first or second year following a divorce in order to get as big of an adjustment as possible and also to try to attain some feeling of finality with the divorce. However, front-loading alimony payments in this way may result in more taxes due in subsequent years. If alimony payments decrease more than $15,000 in the first three years that alimony is paid, the excess that was frontloaded may be “recaptured,” meaning that the tax benefit to the payor will be lost. For tax purposes, this recapture is considered income to the payor and a deduction to the receiver who already received the money and already paid taxes on it.

Child Support

Child support is neither deductible by the payor nor taxable by the receiver. For this reason, many receivers prefer to receive child support, and many payors prefer to pay the same amount in alimony instead, which clearly saves more money for the payor and typically for the divorcing couple overall. Because of the tax benefits to alimony payors, many divorce agreements may try to disguise child support as alimony payments. Nevertheless, the tax code has very clear guidelines for what counts as child support and what is considered alimony. Alimony payments that terminate if the child dies or within 6 months of the child turning 18 are particularly suspect, but there are also many other restrictions.

Besides these tips, there are many more tax considerations to take into account while going through a divorce. If you need skilled legal representation in a divorce, custody proceeding, restraining order, civil union or any other aspect of family law , you can turn to the Law Office of Renkin & Associates for the expertise that you deserve. Our attorneys fight hard to help clients protect their assets during a divorce, which is one of our San Diego divorce lawyers’ specialties.

Is One Billion a Fair Divorce Settlement

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Is $1 Billion a Fair Divorce Settlement?

 

The answer to that question appears to be the only thing that ex-couple Harold Hamm and Sue Ann Arnall can seem to agree on: no. Oil entrepreneur and multi-billionaire Harold Hamm, the CEO of Continental Resources, originally called the settlement “fair and equitable” but has since changed his tune. His ex-wife, a former attorney and manager for Hamm’s company, also appealed the settlement amount, claiming that it was was unfair. With this being one of the largest divorce settlements in recorded history, it’s important to find out: who is right?

 

The Ex-Husband’s Case

Hamm already owned 68% of Continental before he got married. Although he is respected as an experienced and successful businessman, Hamm claims that the price of the Continental stock he owned became higher-valued because of the increase in oil prices and other factors over which he had control. He is not just being modest. Under Oklahoma law, if assets are accrued during marriage from passive rather than active sources, they may not be divided equitably between the divorcing spouses. By arguing that the increase in his net worth was due to passive luck instead of his or his wife’s hard work may save him hundreds of millions or even billions. Although Hamm initially agreed to the $1 billion settlement agreement, he now claims that the figure is too high. Previously worth $19 billion, his assets have decreased by more than 50% to just over $9 billion, most likely due to the recent sharp drop in oil prices. This sharp passive loss may also fuel his claim that the value of his stocks only went up because oil prices climbed over the decades since he started the company in the 1960s. Although the couple was legally separated in 2012 (despite filing for divorce twice beforehand), Hamm has attempted to get the legal separation date restated as 2003 so that Arnall would not be entitled to anything accrued after that date. This change would have been substantial, considering Continental went public in 2007.

The Ex-Wife’s Case

Following the award, Arnall asserted that the settlement amount is less than 10% of the wealth that was accrued during their 26-year marriage. Although Hamm started the company before their marriage, it was only valued at $50 million when they got married. Furthermore, as a former executive of Continental, she pointed out that she was instrumental in amassing this fortune. A lawyer at the company, Arnall was involved in winning lawsuits against competitors. She worked at Continental from the 1980s until 2008, including time spent as a manager. The couple had no pre- or post-nuptial agreement, and Arnall contends that Hamm refused to put property in both of their names during their marriage. Arnall has subpoenaed documents in an attempt to establish Hamm’s business savvy to show that he was instrumental in increasing the company value and to show that the gains were not merely passive.

No matter how complicated your divorce, we can help. For help with your case or in any other aspect of family law , you can turn to the Law Office of Renkin & Associates for the help that you deserve. We are prepared to answer your questions and fight for your assets.

Can My Ex Take Ownership of My Business During a Divorce

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What Happens to the Business in a Divorce in San Diego

Agreement on the characterization, value, and how property is to be divided can be extremely challenging and contentious. Business ownership by the community can contribute to the complexity of settling or litigating a divorce case in San Diego. During the divorce process in San Diego, a question that arises is whether or not one spouse can take ownership of your business. The answer to this is yes for several reasons.

Options For a Business During a Divorce in San Diego

The least complex method is for one partner to buy out the other’s interest. To accomplish this, it is paramount to obtain a fair valuation of the business. If one party can manage the business alone and you decide not to perform a buyout, it is possible to reach an agreement where both parties will receive an equitable portion of the income generated by the business. If both partners are essential to the running of the business, or neither of them is willing to forgo your claim, it may be possible to continue the business relationship if both parties agree.

However, a financial buyout is oftentimes the only way for the business to be dealt with. Furthermore, one party might have a unique position in the company and withdrawing from the business might have a negative impact on the company. If such a scenario exists, an alternative solution must be approached.   In order to properly separate this property, that business will need a valuation when dividing the business assets.

During a valuation, a percentage of ownership that is being held by one of the spouses, and that will be held in the future, will determine the value of the ownership interest. One of the most prevalent methods is the market approach in which the market will determine the value of the business. Experts who are using this approach will look at similar businesses that have been sold.

As to the question posed at the onset, under certain conditions, an ex-spouse can definitely claim ownership of a business during a divorce.

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