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.

      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.

     Divorce mediation should be your first step in the 21st century.  A trained and experienced family law mediator can make your divorce less emotionally painful and certainly much less expensive than litigation.  There is nothing wrong about saving money.  Ask yourself this question: Do you want to spend tens of thousands of dollars on attorneys and expert witnesses, such as custody evaluators and forensic accountants, or would you rather spend that money on yourself and/or your children’s futures, such as their college education?  Most middle and upper middle class families do not have the money for both, and at the end of a long and expensive litigated divorce they are not only emotionally spent, they are also financially wrecked.

     Of course, not every case is suitable for mediation.  A marriage which includes a history of domestic violence or recent domestic violence, drug and/or alcohol abuse and psychological disorders are problematic for mediation at best.  Fortunately, these types of cases are the distinct minority.  The overwhelming number of divorces involve people who simply do not get along anymore and want out.  We even have a word for this in California: “Irreconcilable Differences,” which underscores our State’s no-fault divorce law. 

      Couples in mediation may be angry and/or disappointed, but these emotions are not insurmountable obstacles to reaching a mediated agreement.  When appropriate and needed, I will suggest the parties include counseling as part of the mediation process.  The counselor will assist the mediator in acting as a third party neutral to help facility an agreement, usually in issues regarding custody and parenting.

     Like it or not, we are living in the 21st century.  Mediation should be the first choice of divorcing couples in this new century, and 20th century thinking about divorce should be left in the past, where it belongs.

 Mediation is a process where parties work with a trained family law mediator to resolve their issues rather than litigate those issues in court.  It involves confidential meetings with a trained family law mediator who acts as a neutral to assist and empower the parties to resolve issues in dispute.

How does the process work?

 Initially, I conduct an “introduction to mediation” session with both parties where I explain the mediation process and answer any questions about the mediation process.  This “introduction” is non-substantive and only deals with the process of mediation.  Specific issues are addressed in mediation. 

What is your training and background as a family law mediator?

 I have taken more than 120 hours of both basic and advanced mediation training, which includes 40 hours of training in collaborative divorce.  In addition, as a licensed attorney, I also practice law at the courthouse.  This gives me a perspective of how family law judges deal with issues that often come up in mediation, which I share with the parties when applicable. 

Family Law Mediation is Confidential.

 Whatever is said in mediation is confidential and can never be used in litigation.  However, in litigation everything becomes part of the public record, even matters that you might not want to become public.  Most mediation is successful and an agreement is reached without the parties ever stepping inside of a courtroom.  However, in the few cases where mediation does not succeed, neither party can force the mediator to testify in the divorce case. 

Can I still have an attorney if I choose mediation?

 Yes.  You and your spouse can both have attorneys during the mediation process.  Sometimes parties feel more comfortable having an attorney they can contact before and/or after each mediation session to ask legal advice.  I allow attorneys to be present during mediation sessions, but only as long as both parties have attorneys.  I do not allow one party to have their attorney present and the other party to be without an attorney during mediation sessions.

What if I decided I don’t want to mediate anymore?

 Family law mediation is a completely voluntary process.  You cannot be forced to continue mediation if you feel it is no longer working for you.

Do we have to go to Court if we reach an agreement?

 No.  If you reach an agreement, the mediator will write up your agreement and file it with the Court.  You will never see the inside of the courthouse.     
How can I be sure the mediator won’t take sides?

 It is normal for people going through a divorce to be defensive, suspicious, and sometimes even a little paranoid.  However, in order for mediation to work, the mediator must be neutral.  This does not mean that the mediator must be passive.  It is fair for a mediator to tell a party that the other party is being reasonable.  This is because too often, parties going through a divorce don’t actually hear each other.  As one wise mediator said, “listening isn’t the same thing as obeying.”  The neutral mediator asks that both parties listen to each other and understand what is being said, before moving on to exploring resolutions to problems.
What if I don’t want to mediate, but I don’t want to litigate?  Are there other choices?

 Yes.  There is a relatively new process called Collaborative Divorce.  In Collaborative Divorce, both parties have attorneys but they have pledged not to litigate their divorce.  If either party decides to litigate, the attorneys must disqualify themselves.

Mediators “seek to create a solution that saves time, saves money and shortens or does away with litigation.”

 The words of former NY Gov. Mario Cumo, as quoted in the Wall Street Journal on March 3, 2011.

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.

 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.

     Divorce is not a game of poker.  You don’t get to “hold” your financial cards.  Instead, you must disclose, disclose and disclose.  Think of divorce as a game of poker where all the cards are face up.  Failure to disclose may result in you being hit with serious monetary sanctions.

     In this article, I will give a brief overview of the disclosure requirements regarding income.   Future articles will deal with property, debts and investment opportunities, business opportunities and income-producing opportunities.

     Family Code section 2102 ( c) states: “From the date of separation to the date of a valid, enforceable, and binding resolution of all issues relating to child or spousal support and professional fees, each party is subject to the standards provided in Section 721 as to all issues relating to the support and fees, including immediate, full, and accurate disclosure of all material facts and information regarding the income or expenses of the party.”

     What does this mean?  Simply put, as you are going through the divorce process you must immediately disclose to your spouse all material facts and information regarding any change in your financial circumstances and that disclosure must be full and accurate.  With regard to income, if if pending your divorce you receive a raise, you must report that raise to your spouse fully, accurately, and immediately.  Failure to report may result in monetary sanctions against you.  Likewise, you would report any drop in income or loss of employment, but nearly everyone is quick to report that.

     The duty to disclose income continues from the date of separation through the date your divorce is final.  Some even argue that in cases where child and spousal support are involved, this duty to disclose income continues after the divorce is final—until support is no longer an issue.  I do not share that view because the California Family Code allows each party to demand an exchange of income and expense information and tax returns from the other party once per year after a divorce is final.  You can also build this requirement into your divorce agreement or ask the Court to order the other party to report their income more than once per year, if the circumstances warrant that.  Still, even if your divorce is over and you receive a big raise that would impact support, you might want to consider giving your ex-spouse the information voluntarily, rather than wait until she/he finds out and takes you back to Cour for more child support.  You may be able to settle out of Court and save money that way.

     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.