July 9th, 2010
In Re Marriage of Buie-Neighbors – Community Versus Separate Property Appealed
Colleagues of mine, Jim and Tony Dunne of Dunne and Dunne Family Law, recently won a reversal of an interesting property division issue on appeal to the Fourth Appellate District of California. The case was certified for publication and Filed December 1st 2009. Following is my summary of the details and important points.
The couple, Tatia Buie (Wife) and Walter Neighbors (Husband), were married in 1999. During the marriage, Husband purchased a 2001 Porsche 996 using a check written from Wife’s bank account. Wife’s bank account held funds derived from the sale of her separate property residence. Husband argued the $60,000 expended for the Porsche was a gift since the purchase occurred in close proximity to his birthday. The family court agreed with Husband at trial and actually awarded the Porsche to him as his Separate Property.
Ms. Buie disagreed with the Family Court decision and appealed contending 1) the Porsche was community property and 2) that she was entitled to reimbursement under section 2640 for the use of her separate property funds to acquire the Porsche on behalf of the community.
The appeal court ruled there was no transmutation from community property to Husband’s separate property citing there had been no express declaration of intent to gift the property to Husband. Transmutation of real or personal property is not valid unless made in writing by the spouse whose interest is adversely affected. According to the appeal court, there are sections of California code that allow for gifts to be made from spouse to spouse without express written documentation but they must be a “tangible article of a personal nature” and not be “substantial in value”.
The appeal court found 1) that there was no evidence of a written document stating intent to gift the Porsche and 2) the automobile did not fall under the definition of “tangible article of a personal nature”. They did not discuss the issue of substantial value in their decision but I imagine it would be easy to convince the court a Porsche carries substantial value.
In short, the Court of Appeal concluded the Family Court had erred in awarding the Porsche to Husband as his separate property and therefore must be included as community property.
Ms. Buie went on to argue that she should be reimbursed as part of the division of the community estate for her separate property funds used to purchase the Porsche since it was confirmed as a community asset. Section 2640, subdivision (b) provides: “In the division of the community estate under this division, unless a party has made a written waiver of the right to reimbursement or has signed a writing that has the effect of a waiver, the party shall be reimbursed for the party’s contributions to the acquisition of property of the community property estate to the extent the party traces the contributions to a separate property source.” I am often hired to provide the necessary tracing to prove or refute such a claim. Wife was able to prove that 100% of funds used to purchase the Porsche were her separate property and the Court of Appeal ruled she had a right to reimbursement of the separate property funds under section 2640. They did not render opinion as to how much the reimbursement should be. That is a question for another day.
Justin A. Reckers can be reached at:
Telephone: 858-509-2329
E- Mail: jreckers@pacdivorce.com
Twitter: www.twitter.com/JustinCFPCDFA
LinkedIn: http://www.linkedin.com/in/JustinCFPCDFA
Facebook: http://www.facebook.com/Pacific.Divorce.Management
_________________________________________________________
Our firm does not provide legal or tax advice. Be sure to consult with your own tax and legal advisors before taking any action that would have tax consequences. The information provided herein is obtained from sources believed to be reliable; but no representation or warranty is made as to its accuracy or completeness.
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Tags: asset division, California Divorce Dictionary, Community Property, Divorce Financial Planning, Justin Reckers, Pacific Divorce Management, Section 2640, Separate Property, Transmutation
Posted in California Divorce Dictionary, Community Vs. Separate Property, Consumer Education: Divorce, Divorce Financial Planning, asset division | No Comments »
July 8th, 2010
The Institute for Divorce Financial Analysts recently completed a survey of it’s membership. Almost two hundred members responded from around the United States.
69% of Certified Divorce Financial Analysts said they had seen clients who could not afford to get divorced because of recession-related financial problems.
When asked to assess the difference that current economic conditions have made to the number of new divorcing clients coming through their doors, 39% say that the recession has not affected the number of cases, and 25% say that the recession has increased the number of new cases they’re seeing (these numbers compare with 43% and 19% respectively the previous year.
The most common reason cited for an increase was the clients’ desire to reduce the cost of their divorce. Other common responses included:
- Economic climate is straining marriages
- People are exploring the financial feasibility of being able to divorce before they file or see an attorney
- An increase in mediated and Pro Se divorces using CDFAs as financial neutral.
The most common reason cited for the decrease was fear: fear of the economy, job loss, losing (or not being able to sell) their homes, and of not being able to make ends meet without their spouses. Other common responses included:
- People are afraid to divorce while they’re unemployed
- Clients can’t afford to divorce until the economy improves
- Not enough money to hire a financial expert
- People just can’t afford to live apart – especially if the matrimonial home is “underwater” (meaning that they owe more on the mortgage than the house is currently worth).
22% percent of respondents said that the number of clients whose matrimonial homes were “underwater” has increased dramatically over the last year. An additional 34% said that the number had increased slightly, and 24% said that the number had remained the same. Eighteen percent of respondents do not presently have clients with underwater houses, and only 2% report a decrease in the number from the same time last year.
Sixty-seven percent of respondents said that the current housing market has forced them to come up with creative solutions to property-division problems when the matrimonial home fails to sell – or would sell for less than what clients still owe on the mortgage. This number is down from 73% the year before. The most common solution is for ex-spouses to retain joint ownership and continue to live in the house (often, he moves into the basement and she lives upstairs) until the market improves, agreeing to postpone final division of assets until after the house is sold.
Fifty-eight percent of respondents said that the current economic climate has affected the type of assets their clients wish to receive as part of their divorce settlement (compared with 63% the year before). The most common request was for liquid assets only: their clients want cash rather than stocks, investments, real estate, or retirement plans. In other words, “Cash is King.”
According to the survey, Mediation and Collaborative Divorce proved to be the most cost-effective ways for clients to process the financial aspects of their divorce in 2009-2010. Many CDFAs work in two or more models, and they were able to paint a pretty clear picture of expenses incurred by their clients in each.
“These survey results are copyrighted and are used with permission from the Institute for Divorce Financial Analysts. www.InstituteDFA.com”
Justin A. Reckers can be reached at:
Telephone: 858-509-2329
E- Mail: jreckers@pacdivorce.com
Twitter: www.twitter.com/JustinCFPCDFA
LinkedIn: http://www.linkedin.com/in/JustinCFPCDFA
Facebook: http://www.facebook.com/Pacific.Divorce.Management
_________________________________________________________
Our firm does not provide legal or tax advice. Be sure to consult with your own tax and legal advisors before taking any action that would have tax consequences. The information provided herein is obtained from sources believed to be reliable; but no representation or warranty is made as to its accuracy or completeness.
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Tags: Collaborative Divorce, Division of Retirement Accounts, Divorce Financial Planning, Financial Life After Divorce, Institute for Divorce Financial Analysts, Justin Reckers, Pacific Divorce Management, Post divorce financial planning
Posted in Attorney Education, Collaborative Divorce, Consumer Education: Divorce, Divorce Financial Planning, Professional: Neutral Financial Professional, Uncategorized | No Comments »
June 28th, 2010
Would you pay $28 for a $20 bill. Some people would. Learn how Behavioral Finance can help us understand why.
“Research shows that there are conditions under which an individual is willing and quite happy to pay $28 for a $20 bill at auction. Some have written about how we can apply Einstein’s theory of relativity to human decision-making processes. The technology now exists to help us analyze the neurocognitive effect of receiving expert financial advice.”
The quote above has been excerpted from the most recent article in a series I am writing along with Robert A. Simon, Ph.D. discussing the application of Behavioral Finance to Financial Decision making processes. These articles are written specifically for the Financial Planning and Advisory community. Please click the picture below to be directed to MorningstarAdvisor.com and read the whole article.
Stay tuned for more information on upcoming articles planned for individuals, families and Family Law practitioners. Feel free to comment on the MorningstarAdvisor.com website.
Justin A. Reckers can be reached at:
Telephone: 858-509-2329
E- Mail: jreckers@pacdivorce.com
Twitter: www.twitter.com/JustinCFPCDFA
LinkedIn: http://www.linkedin.com/in/JustinCFPCDFA
Facebook: http://www.facebook.com/Pacific.Divorce.Management
_________________________________________________________
Our firm does not provide legal or tax advice. Be sure to consult with your own tax and legal advisors before taking any action that would have tax consequences. The information provided herein is obtained from sources believed to be reliable; but no representation or warranty is made as to its accuracy or completeness.
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Tags: Behavioral Finance, Divorce Financial Planning, Financial Life After Divorce, Justin Reckers, Pacific Divorce Management, Post divorce financial planning, post divorce wealth management
Posted in Behavioral Finance, Divorce Financial Planning, MorningstarAdvisor.com, Professional: Neutral Financial Professional | No Comments »
June 8th, 2010
“Experience as financial advisors has taught us that truly meaningful and productive advisory relationships are created when we place ourselves as architects of the client’s financial decision-making process rather than as the judge and jury of the best and most-rational economic outcome.”
The quote above has been excerpted from most recent article in a series I am writing along with Robert A. Simon, Ph.D. discussing the application of Behavioral Finance to Financial Decision making processes. These articles are written specifically for the Financial Planning and Advisory community. Please click the picture below to be directed to MorningstarAdvisor.com and read the whole article.
Stay tuned for more information on upcoming articles planned for individuals, families and Family Law practitioners. Feel free to comment on the MorningstarAdvisor.com website.
Justin A. Reckers can be reached at:
Telephone: 858-509-2329
E- Mail: jreckers@pacdivorce.com
Twitter: www.twitter.com/JustinCFPCDFA
LinkedIn: http://www.linkedin.com/in/JustinCFPCDFA
Facebook: http://www.facebook.com/Pacific.Divorce.Management
_________________________________________________________
Our firm does not provide legal or tax advice. Be sure to consult with your own tax and legal advisors before taking any action that would have tax consequences. The information provided herein is obtained from sources believed to be reliable; but no representation or warranty is made as to its accuracy or completeness.
CONTACT US
Tweet This Post
Tags: Behavioral Finance, Divorce Financial Planning, Financial Life After Divorce, Justin Reckers, Pacific Divorce Management, Post divorce financial planning
Posted in Behavioral Finance, Divorce Financial Planning, Post divorce financial planning, Professional: Neutral Financial Professional | No Comments »
June 1st, 2010
1) IRS rule 72(t) allowing hardship withdrawals without the 10% penalty from 401(k) plans during divorce can help cash flow problems during dissolution proceedings;
2) The Government Pension Offset and Windfall Elimination Provision are federal Social Security rules that often unexpectedly reduce Social Security retirement benefits in divorce situations and may cause inequity;
3) An apples to apples comparison may not be possible for before tax and after tax dollars from an individual brokerage account versus an IRA. Agreeing to an equal offset of accounts with different tax ramifications may result in inequity;
4) Comparing the present value of a currently available liquid asset such as a savings account versus the future value of a non liquid asset such as a pension may result in inequity;
5) Child contingency and Alimony recapture laws are hard to analyze and often missed in setting support awards but can cause unexpected tax ramifications of great magnitude if left without review;
6) Unrealized capital gains that may cause future taxes should be included in estimates of value when considering asset division. Agreeing to a division where each party receives an asset of equal value but one has a large capital gain built in will result in inequity;
7) Dependency exemptions and tax filing status may have real cash value now and in the future and can be used as bargaining chips for financial settlements;
8) Life insurance placed as security for support payments should be positioned before a final settlement is reached to ensure a policy will be available with an efficient cost structure;
9) Qualified Domestic Relations Orders necessary to divide retirement plans should be drafted and approved by the plan administrator prior to the divorce being final to avoid delays common post divorce;
10) Always consider alternative dispute resolution models if available. Alternative models such as Mediation and Collaborative Divorce can save the family thousands of dollars and months or years of emotional turmoil.
11) Consider the advantages of deferring capital gains taxes on real estate assets by using a 1031 exchange or converting a rental property to a primary residence for tax purposes.
Justin A. Reckers can be reached at:
Telephone: 858-509-2329
E- Mail: jreckers@pacdivorce.com
Twitter: www.twitter.com/JustinCFPCDFA
LinkedIn: http://www.linkedin.com/in/JustinCFPCDFA
Facebook: http://www.facebook.com/Pacific.Divorce.Management
_________________________________________________________
Our firm does not provide legal or tax advice. Be sure to consult with your own tax and legal advisors before taking any action that would have tax consequences. The information provided herein is obtained from sources believed to be reliable; but no representation or warranty is made as to its accuracy or completeness.
CONTACT US
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Tags: capital loss carry-forward, Dependency Exemption, Division of Retirement Accounts, Divorce Financial Planning, Justin Reckers, Pacific Divorce Management, Qualified Domestic Relations Orders
Posted in Consumer Education: Divorce, Consumer Education: Estate Planning, Consumer Education: Health Care, Consumer Education: Retirement Planning, Consumer Education: Taxes, Divorce Financial Planning, Post divorce financial planning, Professional: Neutral Financial Professional | No Comments »
