Articles: Litigation Articles

     Parties going through a divorce in California have a duty to disclose all of their assets and debts.  California has created a form that assists you in disclosing your assets and debts.  It is aptly named a “Schedule of Assets and Debts.”  You can use this form and then add to it on additional pages. 

     The duty to disclose your assets and debts exists until the asset or debt has been divided, either through a written agreement or court order.  You must list all of your assets and debts, even if you contend that an asset is your separate property and even if you contend that an asset is held by a third party.  However, just listing an asset is not good enough.  You also need to disclose its value.  The case of Marriage of Brewer and Federici (2002) 93 Cal.App.4th 1335, illustrates this point.  Ms. Brewer listed her pension plans, but the Court of Appeal stated that she failed to provide accurate and complete valuations of those plans.  The California Court of Appeal stated that Ms. Brewer had a duty to provide accurate and complete valuations of her pension plans to her husband, Mr. Federici.  This led to the parties’ settlement agreement and judgment being set aside. 

     Obviously, some assets have so little value that you could bundle them together and estimate a value.  For example, all of the kitchen appliances, pots, pans, etc.  Normally, these items would be given “garage sale” or “swap meet” value.  Likewise, the big screen television that you bought last year is probably now obsolete and not worth anywhere near what you paid for it.

     What happens if you fail to disclose?   You don’t want to go down that road.  In the case of Marriage of Feldman (2000) 153 Cal.App.4th 1470, Mr. Feldman was sanctioned $250,000.00 by the Court for his failure to provide his wife with information regarding his financial dealings during their divorce.  He was also ordered to pay her $140,000.00 in attorney fees. 

     During the divorce process, nearly everyone who is paying child and/or spousal support immediately calls their attorney if they lose their job or their pay is reduced, because they want to make sure the support they are paying is likewise reduced.   Attorneys rarely hear from a client when they get a raise or bonus during the divorce process.  However, California law requires that you must disclose to the other party immediately upon a significant change in your income.  If your spouse discovers that during the divorce process you failed to disclose a significant change in your income  you could be sanctioned and also ordered to pay all of your spouses attorney fees and costs.  What is a significant change in income?  Unfortunately, we don’t have any guidance on that yet, so just to be safe…disclose.

      Can you have shared custody of a dog or cat?  Here in California, pets acquired during marriage are presumed to be community property.  This means that in a divorce, the family court will divvy up pets similar to dividing furniture or vehicles.  One spouse gets the pet, the other doesn’t.   In my experience, California family courts will not order a shared custody arrangement of a pet if the parties cannot agree.  California family courts have not adopted a best interest standard for pets, which is used to determine custody of children.  Children are almost always subject to some type of shared custody arrangement between divorced spouses or domestic partners, and custody can be modified when circumstances change.  However, with pets, one side wins and the other loses forever.  Still, family courts should not put a pet into a situation where it is likely to be mistreated.  Family courts should therefore consider the psychological attachment which each party has to a pet before making a decision on who gets Fido or Fluffy.  

      In at least one area of California law affecting families, pets have gained important legal rights.  The victim of domestic violence can obtain a restraining order that will award them the sole possession, care and control of their animals.  The victim can also obtain an order that the perpetrator of domestic violence stay away from the animals and not “take, sell, transfer, encumber, conceal, molest, attack, strike, threaten, harm or otherwise dispose of the” animals.  The heading for this order states:  “Animals:  Possession and Stay-Away Order.”  Although this law extends protections to animals, it does not use the words “sole custody” to describe that protection.  This seems to put animals somewhere between property, such as a vehicle or residence and children.  Or does it?  Consider that the restraining order states that the alleged committer of domestic violence is ordered not to “molest, strike, threaten, or harm” the animal.  This language is the same language that is used to protect the victim of domestic violence and their children. 

      Is the California legislature’s decision to extend protection to our animals in domestic violence cases a harbinger of expanded rights for our pets in future divorce cases?  That is a difficult question to answer.  With the exception of the aforementioned restraining orders, there is no California law that deals with pet custody in divorce.  A family court should, however, consider whether awarding a pet to one party would subject the animal to abuse, before making that award. 

     While there is no published California Appellate Court case that directly deals with pet custody in divorce, the emotional link between humans and pets was recognized by former California Supreme Court Justice Armand Arabian in his dissenting opinion in the case of Nahrstedt v. Lakeside Village Condominium Ass’n (1994) 8 Cal. 4th 361, 393, 394.  At issue was a condominium association’s restrictive covenant which banned pets.  Justice Arabian wrote:

“The value of pets in daily life is a matter of common knowledge
 and understanding as well as extensive documentation.  People of
 all ages, but particularly the elderly and the young, enjoy their
 companionship.  Those who suffer from serious disease or injury and
 are confined to their home or bed experience a therapeutic, even
 spiritual, benefit from their presence.  Animals provide comfort at
 the death of a family member or dear friend, and for the lonely can
 offer a reason for living when life seems to have lost its meaning.  In
 recognition of these benefits, both Congress and the state Legislature
 have expressly guaranteed that elderly and handicapped persons living
 in public-assistance housing cannot be deprived of their pets.
 (12 U.S.C. §170r-1; Health & Saf. Code,§19901.) Not only have children
 and animals always been natural companions, children learn responsibility
 and discipline from pet ownership while developing an important sense
 of kindness and protection for animals.  Single adults may find certain pets can   afford a feeling of security.  Families benefit from the experience of sharing that having a pet encourages.”

     Even the Court’s majority agreed with Justice Arabian when it came to the emotional bond between humans and pets, but decided the case against the pet owner on the narrow issue of whether the restrictive covenant was legal.  The reasoning of former Justice Arabian might be the starting off point for a party who seeks joint physical custody of a family pet in a divorce.   Meantime, the idea that pets are merely property is being challenged in family courts across the nation.  Combined with numerous cases on pet custody from other States, so-called secondary legal authority that California Courts may consider, the time may be ripe for a California Appellate Court to consider pet custody. 

      To avoid a pet property or custody dispute, parties might want to consider a pet prenup, which will dictate who gets Fido or Fluffy in a divorce.  Or, if you received your pet as a gift from your spouse or a third party, make sure you get that in writing and keep the writing in a safe place. 

     A final note about sharing pets.  Animal experts tell us that if divorced parties decide to share a pet, they should make sure the pet eats the same food at each residence to avoid stomach upset and that the disciplinary rules should be the same at each residence.  Animal experts also tell us that shared custody may work for a dog, but not a cat.  Cat fans might disagree.

      One of the biggest problems in divorce is determining the actual income of a sole proprietor.  This person owns a small business, and takes draws from the business rather than W-2 income.  Usually, this person also pays for their car and other expenses through their business.  All of this can get very messy if there is a divorce because the other spouse will usually claim the self-employed sole proprietor is “hiding cash,” and “paying for everything through the business.”  This can lead to a long and expensive discovery process, including but not limited to depositions, subpoenas and the hiring of forensic accountants and financial investigators.   So, how do you avoid this?  A little preventive medicine is the answer, whether or not you ever get divorced.  The following are some suggestions for the self-employed sole proprietor.  These are only suggestions and should not be considered legal advice. Further, I make no representations that these suggestions will work, because the old saying in the world of computer programers applies here:  “Garbage in, garbage out.”  You should always work with a CPA and/or tax attorney to make sure you avoid putting in “garbage.”  With that in mind, here are some tips:

1. Hire an elite CPA.  You need to make sure your business is set up properly, and that your taxes are prepared properly.

2. Hire a bookkeeper and get everything into QuickBooks or some other accounting software with back ups.  You want to do this for reasons that I will explain, below.

3. Don’t “shuffle” or “shift” your income.  Depositing money into a personal account and then transferring the same money into a business account does not pass the smell test.  YOU NEED TO HAVE A SINGLE BUSINESS ACCOUNT WHERE YOU DEPOSIT ALL OF YOUR INCOME!   You take your draws from your business account after you pay your expenses.  Further, there is an accounting presumption that any checks you write from your business account are for expenses, unless they are draws.  This is a rebuttable presumption.  In my experience, having a single business account makes everything clean and tidy, provided you keep it that way.

4. You may find that your business account is low on funds.  When that happens, avoid the temptation to simply pay business expenses form your personal account.  Take the extra step of writing your business an advance and when you get more funds into your business account, then you need to repay yourself.

5. You need to hire a bookkeeper.  YOU DO NOT WANT TO DO THIS YOURSELF.  Why?  Because if the other side takes your deposition, you don’t have to defend each and every entry and withdrawal.  All you need to say is: “I give everything to my bookkeeper and she/he reconciles my books, etc.”  This forces the other side to take the deposition of your bookkeeper as well, and assuming your books are in order, the other side won’t get anywhere. 

6. Stop being cheap.  Seriously, you’ve got to become financially sophisticated and buckle down and pay for professional services like an elite CPA and a bookkeeper.  It is not that expensive and it provides you with a clean record if you ever end up in court.

7. You never want to be in the position of explaining your deposits.  Only your earnings/income go into your business account.  If your parents give you a gift of money that should be placed into your personal checking or savings account.  If your parents or other parties lend you money for your business, discuss how to deal with that with your CPA and/or tax attorney.

 8. If you are getting divorced, make sure your CPA adds back your perquisites and that you account for those perquisites on your QuickBooks or other accounting software profit and loss statement so YOU can tell the Court what you believe your perquisite add backs are, rather than let the other side take the high ground on this.

     It is invariable that a party paying child support thinks they are paying too much and the party receiving child support thinks they are not receiving enough.  California has a statewide uniform guideline which determines the presumptively correct amount of child support.  It is a rebuttable presumption, but family law courts rarely deviate from the guideline.  The guideline begs the question: How much does it really cost to raise a child in the United States?  Obviously, the answer depends on which State the child lives in.  For example, the cost of living here in California is much higher than Iowa.  Since 1960, the United States Department Agriculture (USDA) has been providing estimates of how much it costs to raise a child from birth through the age of 17.  Those costs consist of the following categories: Housing, food, transportation, clothing, health care, child care, education and miscellaneous expenses.  Importantly, the reports only cover through age 17.  In California, child support continues until a minor child reaches 18 and graduates from high school.  You can find the USDA’s report at the following web site:

 www.cnpp.usda.gov/calculatorintro.htm

     The bottom line is what every parent already knows:  Children Are Expensive and that expense doesn’t go away because parents are getting divorced.

     You should expect that anything you post on social networking sites such as Facebook, MySpace, Twitter, etc., can and will be used against you in your divorce case or post-divorce case.  However, you don’t need to delete all your social networking profiles, provided you understand that a family law judge may read them one day.  If you are comfortable with that, keep using social media.  However, you should probably limit your social media to photos, videos and matters that are innocuous, i.e. matters that are not controversial or offensive.  Dull is good when it comes to social networking sites and divorce matters.

     I recall one former client who testified in court that she never drank alcohol.  However, her social network profile had a picture of her partying with her friends and clearly having a drink.

      A number of attorneys now search social networking sites to get background information, i.e. “dirt” on their client’s spouse or ex-spouse.

     What about e-mail?  Assume that your spouse is able to read all of your e-mail.  So, if you are starting the divorce process, get a new e-mail account. Better yet, if you can afford it, get a new computer—preferably a laptop so you can take it with you.  If you are sharing a computer with your soon to be ex-spouse, assume that you have no privacy and that he/she can and will not only read and copy all of your e-mails, but they will also know each web site you have visited.

Finally, if your spouse leaves the residence, you should still get a new computer or have your computer swept for spyware.  I know of one case where a husband left a very specific type of spyware on the home computer and he could read every e-mail that his wife wrote or received and every web site she visited, even though he no longer lived at home.

This all may sound a bit paranoid, but forewarned is forearmed.

An ounce of prevention in the digital age—where information travels at the speed of light—can be worth a pound of cure.

I recently attended a conference where I listened to adult children of divorce.  Here is some of their wise advice: 

“Don’t let or allow your children to lose their childhood in your divorce.”

“You don’t have to have 50/50 custody to be a 50/50 parent.  Quantity of time is less important than the relationship you build with your child.”

“Don’t abdicate responsbility for your bad behavior to your lawyers.”