One of the first steps should be for one or both parties to hire a valuation expert, who can determine the value of the business at the time the parties separated.  From that value will be subtracted the value of the business as of the date the parties were married, or the date the business began, whichever is later.  Since California is a community property state, each party will own 50% of this value, which represents the business appreciation during their marriage. (If the business becomes substantially more or less valuable during the divorce proceedings, a reappraisal will be needed.)

The business does not need to be split down the middle so that each party can receive 50% of its value. Both parties may want to continue running the business together, or one party may wish to keep running the business, while the other party’s interest in the business will likely end with the divorce settlement.  If the parties jointly managed the business while they were married but cannot agree on whether both or either of them will run the business after the divorce, it may be possible to craft a creative solution that involves hired managers or spinning off a portion of the existing business into a separate business.  And because each party is only entitled to 50% of the total value of the community property, the court may choose to award the entire business to one party, and give assets of equal value to the other.

During the divorce, the business will be classified as community property.  If one spouse or domestic partner is managing it, that spouse is required by law to act in the best interest of both themselves and the other party, and to fully disclose all of their business decisions and not conceal any debts or assets.

Call San Diego Law Firm to Protect Your Business and Financial Rights During a Divorce

The experienced divorce lawyers of San Diego Law Firm can provide sound legal guidance to protect the health of your California family-owned business in a divorce or domestic partnership dissolution, while also protecting your personal rights to receive your full share of community property assets.  To set up an appointment, please call San Diego Law Firm today at (619) 794-0243.  We look forward to helping you.

When a divorcing couple owns a house worth MORE than the mortgage, one of two things usually happen:

1. The house is sold, the mortgage is paid off, and the profits are divided; or

2. One spouse keeps the house, refinances the loan in his or her name only, divides any profit with the other spouse, and the spouse who moves out has no further responsibility for the mortgage or the property.

Neither of these options is feasible when the home is upside down.  Instead, one of four solutions is usually chosen:

1.  Allow one spouse to keep the house with an agreement that this spouse will refinance within a specified period of time. Keep in mind that both spouses are still responsible for the mortgage until the refinance is possible, and both spouses should remain on the title to the property.  Refinance will be possible only when the house regains enough value to make it worth more than the mortgage, and only if the spouse who keeps the house has good credit and a sufficient income to pay the mortgage once it is refinanced.

2.  Both spouses hire an attorney to negotiate with the mortgage lender to permit a short sale of the property – i.e., to let the house be sold for less than the mortgage balance, and to forgive the amount still owed on the mortgage.  This may be acceptable to the bank if it will still receive a substantial amount on the mortgage, and if it seems likely that the house may otherwise eventually fall into foreclosure due to the financial stresses of the divorce.

3.  The spouses create a partnership or limited liability company and transfer the house to it.  Both spouses keep paying on the mortgage.  The house is rented out, and the profits or losses are “passed through” to the spouses to be reported on their individual tax returns.  This only works if both spouses are able and willing to keep up on the mortgage payments.

4.  Move out of the home and let it go into foreclosure.  This will allow the couple to escape any responsibility to pay the post-foreclosure balance owed on a “purchase money mortgage” – a first mortgage used to buy the residence.  However, both spouses will still be legally responsible for any balance remaining on a second or third mortgage, or a refinanced mortgage, after the foreclosure sale.  Regardless, this approach is not generally recommended, because “walking away” from any mortgage will severely damage the credit scores of both spouses for many years after that.  If the couple has a large second or third mortgage on the house, Chapter 13 bankruptcy may be a better solution, because it will allow the court to “cram down” second and third mortgages so the total owed on them is no larger than the total value of the house minus the first mortgage.  With a Chapter 13 bankruptcy, good credit can be restored more quickly than it can after a “walk away” foreclosure.

Whatever course of action a divorcing couple decides on, there should always be a written agreement which the divorce court includes in a court order.  This can help protect the good credit of the spouse who keeps making their share of mortgage payments if the other spouse stops paying, because it will allow the paying spouse to have this information noted in their credit report.

Call San Diego Law Firm for Divorce Help with an Upside-Down House  

Our experienced San Diego divorce attorneys can guide you through every step of a divorce with an upside-down home.  We’ll work with you to come up with a strategy that best fits your needs and protects your interests and assets. Please call San Diego Law Firm at (619) 794-0243 to make an appointment.  We look forward to helping you.

Even though California did away with common law marriage, couples who live together may still have rights to financial support and property division as if they had been legally married, but only under strict circumstances.  In these cases, if one or both persons in the relationship had a reasonable and good faith belief that they had entered into a valid marriage, but it turned out the marriage was void, then that person can be considered a “putative spouse.”  To be given the status of a putative spouse, it’s legally not enough to say that you simply believed you had a common law marriage.  Instead, the couple must have actually gone through the motions to get married, yet had something go wrong when trying to comply with the legal requirements for marriage (often this happens when one person was in a prior marriage and mistakenly thought that he or she was legally divorced).  Not only that, but this good faith belief that you’re married must continue throughout the marriage, if you find out that the marriage is invalid, then you lose putative status.  Recently, it was also established that these same principles can be applied to couples who were in an unregistered domestic partnership.  A person with putative spouse status will be entitled to share in property acquired during the invalid marriage or domestic partnership under our community property laws, and to any spousal support that’s required once the relationship is terminated.  A putative spouse may also have marital-type rights in other situations as well, such as workers compensation or retirement benefits.

A second category involves the rights of unwed couples who aren’t putative spouses (because they never tried to get married), but had an agreement to treat assets like community property or promised lifetime support, despite the fact that both partners knew they were not married.  Here, no one is entitled to support or property rights under California family law, but there can be rights created under the oral or written contract.  One person may have promised to provide support for the other that’s similar to spousal support (alimony), and this has come to be known as “palimony.”  These palimony actions started in the early 1970s after actor Lee Marvin (think The Dirty Dozen and Cat Ballou) broke up with his girlfriend Michelle Triola who he had lived with for several years.  After the break up, Triola took Marvin to court claiming that he had orally promised to financially support her for the rest of her life in exchange for her giving up her own acting career to take care of him.  Marvin denied he ever made that promise, and in the end, Triola lost her case, but in the process, the California Supreme Court had established the rights of unmarried cohabitants.  The problem for Triola, and many since, is that it can be very hard to prove the terms of an oral agreement.  For this reason, it’s important to put promises into writing and couples who live together without getting married or entering into a domestic partnership should be forewarned.  Many of these troublesome issues can be resolved with a written “cohabitation agreement” to help protect your interests if the relationship dissolves.  As the two of you contribute toward your financial future together, a cohabitation agreement can set out fair arrangements regarding property ownership and division, and any support, similar to how a prenuptial agreement works.  If you lived together before getting married, then both a civil palimony lawsuit and family court divorce (dissolution) action may be necessary, but note that palimony suits must be brought within a certain time period after the agreement is broken to prevent your claim from being barred.  Our skilled family law attorneys can prepare an effective and comprehensive cohabitation agreement, or pursue your rights and protect your assets in a putative spouse partition action or a palimony lawsuit.  To reach San Diego Law Firm, call (619) 794-0243.

As part of Brazil’s online divorce, you’d be able to divide assets.  While this seems like it should be simple enough, many of the most difficult issues in a divorce come up when figuring out who gets what.  For example, under California law, do you know what happens if one spouse started a business before getting married (making it separate property), and continued working in the business during the marriage?  As a general rule, separate property stays with the spouse it belongs to and isn’t divided when divorcing.  So does the other spouse have an interest in the business?  Well, assuming there was never an agreement to change the ownership of the business, the business is generally still that spouse’s separate property…but that’s not the end of the story.  If the business has grown during the marriage, part of that increased value is often shared by both spouses.  This is because under California’s community property system, once you’re married, each spouse’s labor is considered a community effort.  After all, had that spouse not spent the community’s time improving his or her own business, and instead had earned a salary by working for someone else, then that salary would have been community property. 

Once it’s determined that at least part of the business is community property, then you have to figure out what the business’s value is, and how much the community is owed.  Depending on the circumstances, it may be that the business earned well over what’s considered to be a fair return on the investment, and so any earnings beyond a “fair return” could be considered a community asset to be divided upon divorce.  While at other times, a better approach may be to set a reasonable value on the services of the spouse who worked in the business, and this salary would be the community’s interest in the business.  The community may have already received part of this value during the marriage, such as when the money earned is used to pay family expenses.  Those payments would be deducted from the salary, and whatever amount remains would be divided at divorce.

Every divorce is different, and many more factors need to be evaluated to fully determine a business’s value.  We’ll assess these factors to determine how to fairly value and divide a business and other marital property.  Valuation methods vary, and we’ll always work to protect your interests as assets are divided.  It may be true that at first glance, a do-it-yourself divorce is tempting for obvious reasons, e.g. speed and cost.  But even when couples are on good terms with each other, tough questions come up.  You need to know your rights under California law to help ensure you get a fair divorce, and you must fully understand what you’re agreeing to.  Otherwise, you may wind up having to deal with dreaded surprises later on if mistakes were unknowingly made during the divorce.  Instead, consider cost-effective alternatives such as collaborative divorce and mediation.  We’ll discuss your options with you and help you get through the complex property division and divorce process.  Reach San Diego Law Firm’s experienced divorce attorneys at (619) 794-0243.

Even though you’re probably (and hopefully) not thinking about splitting your house in two, less theatrical tactics can also lead to consequences in court that can deeply affect you now and in the future.

In a California divorce, much of the property acquired during the marriage is considered community property, and is divided equally. Separate property, which can include inherited property, is your own. This may seem simple, but figuring out what’s what can get complicated, and actions taken during the marriage may have changed the ownership of the property. Other important questions come up when valuing property and in dividing assets such as stocks and businesses.

San Diego Law Firm encourages you to contact our North Park San Diego office to resolve these questions as soon as you have decided to separate, so we can help protect your financial interests when negotiating a property division agreement and advocating on your behalf in court. As for a lesson that can be learned from this report: two is not always better than one. Contact our skilled San Diego Law Firm attorneys at (619) 794-0243 for assistance with your asset division matter.

A Familyresource.com article provides guidance on how to “be smart about time apart,” discussing the different reasons couples choose to separate and how to handle the transition period. If you and your spouse decide to end the relationship, you may choose to legally separate instead of divorce for practical reasons, since to get a divorce in California (called “dissolution”) you have to meet a residency requirement that doesn’t apply to legal separation. Other times, it’s seen as an easier transition than divorce, while for some legal separation is elected for religious reasons.

Our San Diego attorneys are here to advise and protect your best interests throughout the legal separation process, both in court and through negotiations. If you’ve decided to legally separate and later choose to divorce, we’ll file the necessary legal papers with the court to modify the separation, and seek to change any other orders when needed. To reach us at San Diego Law Firm, call (619) 794-0243.

Hollywood prenups aside, a premarital agreement is a smart idea for many engaged San Diego couples, including professionals or people who have been married previously.  With a premarital agreement, you (instead of the State of California) decide together how you’ll want to divide assets in the event of divorce, and also identify who can sell or encumber property during the marriage.  In his Nola.com blog, certified financial planner John Gin advises that couples get off to a strong start by discussing current and future finances before getting married, and cautions on the added importance of this talk if either of you have been married before or have kids.  In these cases, a premarital agreement not only protects your assets, but helps you to better provide for your children’s future.

As experienced San Diego attorneys, we’re able to create a premarital agreement that is fair and reflects your financial planning goals, and carefully abides by California law to help ensure your wishes will be upheld in court.  Also be sure to create or update your will and living trust to fit the new circumstances.  Take the right steps now as you get ready to begin your marriage, and contact San Diego Law Firm at (619) 794-0243.