Student Loans and Divorce

Family Code 2641 discusses student loans and how they are treated upon divorce.  Family Code Section 2641 states: (a) “Community contributions to education or training” as used in this section means payments made with community or quasi-community property for education or training or for the repayment of a loan incurred for education or training, whether the payments were made while the parties were resident in this state or resident outside this state. (b) Subject to the limitations provided in this section, upon dissolution of marriage or legal separation of the parties: (1) The community shall be reimbursed for community contributions to education or training of a party that substantially enhances the earning capacity of the party. The amount reimbursed shall be with interest at the legal rate, accruing from the end of the calendar year in which the contributions were made. (2) A loan incurred during marriage for the education or training of a party shall not be included among the liabilities of the community for the purpose of division pursuant to this division but shall be assigned for payment by the party. (c) The reimbursement and assignment required by this section shall be reduced or modified to the extent circumstances render such a disposition unjust, including, but not limited to, any of the following: (1) The community has substantially benefited from the education, training, or loan incurred for the education or training of the party. There is a rebuttable presumption, affecting the burden of proof, that the community has not substantially benefited from community contributions to the education or training made less than 10 years before the commencement of the proceeding, and that the community has substantially benefited from community contributions to the education or training made more than 10 years before the commencement of the proceeding. (2) The education or training received by the party is offset by the education or training received by the other party for which community contributions have been made. (3) The education or training enables the party receiving the education or training to engage in gainful employment that substantially reduces the need of the party for support that would otherwise be required. (d) Reimbursement for community contributions and assignment of loans pursuant to this section is the exclusive remedy of the community or a party for the education or training and any resulting enhancement of the earning capacity of a party. However, nothing in this subdivision limits consideration of the effect of the education, training, or enhancement, or the amount reimbursed pursuant to this section, on the circumstances of the parties for the purpose of an order for support pursuant to Section 4320. (e) This section is subject to an express written agreement of the parties to the contrary.

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A man came into our office asking for our help with a case that had been lingering on for 4.5 years!  He just wanted it over with, but the continuances and lack of cooperation had thrown his case into a black hole.  Two months after hiring our firm, the case was done – and with the result he wanted!  Our office receives great satisfaction helping to move people on from being stuck in the combative role on to a happier life.

 

Moore – Marsden Formula

This formula applies to situations where community property is used to pay down the principle on a home that was the separate property of one spouse.  This can happen when a spouse purchases a home prior to marriage, but still owes on the home, or inherits a property that still has a mortgage that is paid down during the marriage.  Such application prevents the spouse who uses community funds to pay for a separate property asset, which would belong only to them upon divorce, from gaining an unfair advantage when dividing the assets during a dissolution.  There are no reimbursement rights for the portion of the payments that represent interest, taxes and insurance.  The appreciation and reduction of principle are also used in this calculation.  The formula is complicated, so if this type of situation applies to your case, you should consult an attorney to make sure this is performed properly.

Support Problems? Subpoena Bank Records

Support issues can be very troublesome, especially when the supporting parent/ex-spouse has their own business.  Hiring Forensic Accountants and Private Investigators may be necessary to ensure that every penny is accounted for, but many cannot afford such expensive investigation tools.  One relatively inexpensive alternative can be done if you know which bank the supporting parent/ex-spouse utilizes.  A nice, generic explanation of how to execute a business record subpoena is located at:

http://www.saclaw.org/Uploads/files/Step-by-Step/business_records_subpoena%202010.pdf

Understand that local rules may vary, so if you need assistance, contact a local attorney.  The bank will send you a bill, if they don’t charge you up front, for copying all records.

 

Who Gets To Claim Our Child for Tax Purposes?

Claiming a child as a dependent, therefore an exemption, on your tax return is definitely a consideration with regard to support, and should be settled before guideline support is set.  Your family law attorney should be aware of this.  Calculating the child support can make a considerable difference, depending upon who claims the child. The tax advantage is calculated by the Dissomaster program.  If, for example, if Dad will be paying Mom child support, the DissoMaster program will calculate a monthly amount depending upon who claims the children.  If Dad claims the children, he pays more each month.  If Mom claims the children, Dad will pay less.  In general, if Mom is making no money, it makes little sense for her to take the exemptions.

Failing an agreement between the parties, the IRS will determine who can claim the child, and sets forth a test to determine who will be able to file the deduction and whether an 8332 form will be required.  In most cases, because of the residency test (see item 3 under  Tests To Be a Qualifying Child in Table 3), a child of divorced or separated parents is the qualifying child of the custodial parent. However, the child will be treated as the qualifying child of the noncustodial parent if the special rule (discussed next) applies.

Special rule for divorced or separated parents (or parents who live apart).  A child will be treated as the qualifying child of his or her noncustodial parent if all four of the following statements are true.

  1. The parents:
    1. Are divorced or legally separated under a decree of divorce or separate maintenance,
    2. Are separated under a written separation agreement, or
    3. Lived apart at all times during the last 6 months of the year, whether or not they are or were married.
  2. The child received over half of his or her support for the year from the parents.
  3. The child is in the custody of one or both parents for more than half of the year.
  4. Either of the following applies.
    1. The custodial parent signs a written declaration, discussed later, that he or she will not claim the child as a dependent for the year, and the noncustodial parent attaches this written declaration to his or her return. (If the decree or agreement went into effect after 1984, see  Divorce decree or separation agreement that went into effect after 1984 and before 2009 , later.
    2. A pre-1985 decree of divorce or separate maintenance or written separation agreement that applies to 2011 states that the noncustodial parent can claim the child as a dependent, the decree or agreement was not changed after 1984 to say the noncustodial parent cannot claim the child as a dependent, and the noncustodial parent provides at least $600 for the child’s support during 2011. See  Child support under pre-1985 agreement , later.

Custodial parent and noncustodial parent.  The custodial parent is the parent with whom the child lived for the greater number of nights during the year. The other parent is the noncustodial parent.   If the parents divorced or separated during the year and the child lived with both parents before the separation, the custodial parent is the one with whom the child lived for the greater number of nights during the rest of the year.   A child is treated as living with a parent for a night if the child sleeps:

  • At that parent’s home, whether or not the parent is present, or
  • In the company of the parent, when the child does not sleep at a parent’s home (for example, the parent and child are on vacation together).

Equal number of nights.   If the child lived with each parent for an equal number of nights during the year, the custodial parent is the parent with the higher adjusted gross income.

Need further information?  See

http://www.irs.gov/pub/irs-pdf/p501.pdf

http://www.irs.gov/publications/p504/ar02.html#en_US_2011_publink1000175902

Financial Tips To Prepare For Divorce

My friend, Jeff Landers, wrote a Forbes article giving tips to divorced women.  Here is the link:

http://www.forbes.com/sites/jefflanders/2012/12/18/five-best-financial-tips-for-women-divorcing-in-2013/

Word of warning – if you set up your own account, be careful.  It may save you from having to set them up later, but any community property funds (your paycheck during the marriage, etc) put in that account runs the risk of having it all deemed community property.  If you have an inheritance, I would never recommend putting it in an account that has any portion of community property.  Maintaining a separate account from your spouse does not mean it is separate property – it depends upon the source of the funds.  Keep in mind that title does not control in family law.  If the source was community property, it doesn’t become separate just because one spouse’s name is on that asset.  An ounce of prevention is worth a pound of cure.

Stepparent Adoptions

While the adoption process itself is complicated, having an understanding of the basic process may help.  This blog is intended to give a general overview of the process.  Generally, the adult wishing to adopt a child must be at least 10 years older than the minor intended to be adopted.  Only a minor’s biological parent or parents, a licensed adoption agency, or the California Department of Social Services may legally authorize adoptions.

For stepparent adoptions, two separate cases must be opened.  One is the termination of parental rights.  If the biological parent whose rights are being terminated agrees, things go much smoother than if the whereabouts are unknown.  The parent wishing to terminate the rights of the other must prove that they have made a diligent attempt to locate that parent.  After that, they must file a petition to notify by publication, and then post notice in a newspaper for four weeks.

The process starts with a petition for adoption.  Often, several hearings are held to determine the status of the case, and then to finalize the adoption.  An investigation, including a criminal background check of both parents (even when only one is adopting), will be done by the Probate department before the adoption will be approved.  All members of the family will participate in an interview.  Paperwork is required to be provided that concern all members of the family, and is quite extensive.  Unless the parent’s rights have been terminated by a separate proceeding, they must be notified that the process is taking place.

The process of adoption is best handled by an attorney.  Often the termination of parental rights and the adoption process take place during the same period, and can be quite confusing.

Probate Rules Regarding Small Estates

California provides special rules for small estates to avoid the expense and time of a regular probate procedure.  As of January 1, 2012, eligibility limits have been raised from $100,000 to $150,000 for the value of all the property that would otherwise be subject to probate.  Real estate of small value, up to $50,000, can be transferred to the beneficiaries by filing an affidavit with the Court.   Surviving spouses can also collect up to $15,000 in salary owed to the deceased spouse.

What Are The Requirements For Filing A Petition For Dissolution In California?

In order to file a Petition for dissolution in California, one of the parties must live in California for a minimum of 6 months.  In order to file in a particular county, one of the parties must reside in that county for a minimum of 3 months.  These requirements are important, since a court must have jurisdiction over the parties.  Why is that important?  Fairness!  It wouldn’t be fair for a party to be required to travel to Northern California if both parties and all witnesses and other evidence are in Orange County.  There is also a filing fee that must be paid at the time the Petition is filed, or you must file a form to request the court to waive the fees.

What Does A “No Fault” Divorce Mean?

California is  considered to be a “no fault” state.  This means that the court does not look to place blame on either party for the breakup of the marriage. In practical terms, it means that infidelity has little relevance to a dissolution case. To bring the issue up in court will waste the court’s time and your money.

The main reason infidelity would become an issue in a divorce case is if the spouse has spent community funds to wine and dine someone they are having an extra-marital affair with.  This requires documentation.

Infidelity is also not a valid excuse for denying a parent access to the children of the parties.  If you find yourself too emotional to make a decision outside of the anger and frustration, an attorney will help guide you through until you are in a better place.

Law Office of Rhonda Ellifritz