The most important aspects in a divorce are the marital property settlement and support issues. In order to arrive at a fair level of support and a fair division of marital property and debts, a divorce financial disclosure is needed by both sides. In California the document is called a declaration of disclosure, and the forms used are a declaration of disclosure, income and expense declaration, and a schedule of assets and debts. These documents are usually provided early in the divorce proceedings (preliminary declaration and disclosure) and again toward the middle or end of the proceedings (a final declaration of disclosure), as the parties may not have full information at the beginning of a case, or their financial situations may have changed since they first filed for divorce. The final declaration can be waived by mutual agreement if the parties are confident everything has been disclosed. In any event, once the parties have accurately filled out these divorce financial forms, it is much easier to meaningfully discuss settlement options. For divorce mediation, the negotiations can begin in earnest once the parties are both aware of the community property and separate property issues and incomes. Divorce mediation does involve a certain level of trust between the parties, so it is important to be honest when filling out the financial disclosure forms for divorce. In California, the court retains jurisdiction to divide so called “omitted assets.” So if one party is hiding a community asset and the other party finds out after the divorce is final, they may still be able to get their fair share, or even more, if the court decides to sanction the non-disclosing party. Considering the downside of an omitted asset, and the fact that many couples still need to deal with each other after a divorce, it is a good idea to be fair and honest on the financial disclosures to preserve good will and a working relationship with the other parent.
How to divide a family business can be one of the most complex property issues in a California divorce. The business represents not only the livelihood of one or both parties, but often is a significant asset of the marriage.
Who Should Get the Business?
Usually, the party who actually runs the business is awarded it. During the pendency of the divorce, however, the spouse who runs the business (called the “in spouse”) may keep terrible income records or actually manage it poorly so that it appears less valuable. Such tactics could be considered a breach of fiduciary duty to the spouse who does not run the business (the “out spouse”). A good divorce attorney with the aid of a forensic accountant may be able to determine the value of such breaches and charge the breaching party with the resulting loss to the community, often by using an alternate valuation date to some time before the bad acts took place. There’s a moral in there somewhere.
Another issue that often comes up is when one party owned the business before marriage. If he or she did not have enough foresight to have the parties sign a prenuptial agreement assuring the business remains separate property, then some portion of the business will probably be owned by the community. This is because the labor of the parties during marriage is considered to be a community asset. It can be a complicated analysis to determine the separate property versus community property interests in a business. Generally parties seek the help of forensic accountants to do this.
If one spouse gets the business, the other spouse will be awarded the value of half of the community’s interest in the business. Often businesses are quite valuable and a large marital asset, such as the family residence, could be used to offset the value on the marital balance sheet to make the property division a fair one. If there are not sufficient assets, then often the equalization payment can be financed and appropriately secured.
Sometimes both spouses are equally involved in the business. If they are fortunate enough to be able to continue to work together amicably without damaging the business, then they may opt to continue to work together after the divorce. They would simply continue to be business partners (and still owe each other the duties business partners owe each other). Alternately, one spouse may wish to buy out the other spouse for a fair price. If no agreements can be made, then the decision will be left up to the court, who may decide to award it to one spouse entirely or to sell the business and divide the value equitably.
How Do You Know What the Business is Worth?
Valuing a family business in a divorce is another difficult issue. If there is enough money available, the spouses usually use a forensic accountant who will go through the business accounting records, banking records, and tax returns for a certain time period and then make an opinion as an expert as to what the value is. Often there is a cash flow analysis done, which may be used to help determine alimony and child support issues that may exist between the parties. If a forensic accountant cannot be utilized for some reason, then business brokers or the parties themselves may give evidence as to the value of the business. Obviously the Court may be inclined to be a little skeptical of any opinions of value a party might offer without substantial corroboration from the business records.
Can You Mediate the Division of a Family Business?
If the parties have sufficient knowledge of the value and cash flow of the family business, it is possible to mediate a fair property division and support order. Often businesses that both parties agree have little value are no obstacle to mediating a fair property division. Sometimes a family business is little more than a job that one party owns. One approach may be to use a forensic accountant in the mediation. Although forensic accountants typically work with divorce lawyers in litigating issues of value and cash flow, there is no reason the parties cannot retain a joint forensic accountant to investigate the business and determine its value and cash flow and then use the valuation report in their own negotiations. A forensic investigation of a business, however, usually takes a considerable amount of time and the divorce mediation may be “on hold” with the parties unable to finalize the property division in their divorce until the report is complete. If parties choose this approach, they may be able to make temporary agreements about support or any other issue while waiting for the valuation report and negotiating a final resolution of their divorce.
The hardest thing about going through divorce has got to be dividing the children. Of course you can’t divide them a la King Solomon, but you can divide the time they spend with each parent. The cardinal rule in determining the timeshare that each parent will have is called the “best interests of the child” rule. That is the one principle that courts apply universally in any Orange County child custody case.
In a child custody case, it is sometimes quite simple to determine what is in the best interests of the child. One parent might be abusive or an uncontrolled alcoholic or drug addict. Obviously, that can’t be a good thing for a child. As long as sufficient evidence is shown, the abusive parent may not get a large timeshare, or may even be subject to monitored visitation in order to protect the children. Time (and therapy) heals all wounds, and even a parent who initially has minimal or monitored visitation can gradually increase his or her timeshare, provided it is in the best interests of the children.
The more difficult custody situations are often where both parents are involved with the children and are positive influences in the children’s lives, but circumstances, such as long distances or other logistical problems keep the parties from coming to a balanced timeshare. Sometimes one parent ends up having a greater timeshare during the school year and makes up time in the summer. More often, the solutions are not perfect, and one parent “loses out” by having considerably less time with the children than does the other parent. Unfortunately, it is an “either or” situation where one parent “wins” and the other parent “loses,” and, although it is probably a close call, the children can only live primarily in one place when a daily or weekly commute is just not possible. This typically happens in “move away” cases.
For most parents, especially those who choose to mediate their custody issues, keeping the best interests of their children in mind (and not necessarily what is most convenient for the parent) helps tremendously when negotiating over child custody and visitation, and working out a parenting plan.
If you have Orange County child custody and visitation issues, either in a divorce, a paternity action, or a post-judgment modification of visitation, why not try using mediation to negotiate a stipulated custody order before you file in court?
Child custody mediation may help to keep matters civil between parents, too. All too often, when filing for a court order, the supporting declaration filed by one parent only serves to inflame the other parent and put them in a fighting frame of mind, which lowers the possibility of negotiating a settlement out of court. Better if the parents try mediation before filing any request for court orders to attempt to negotiate a solution and avoid hard feelings that may come about from the inevitable mudslinging that occurs in court.
Divorce Mediation Orange County California
Not all divorce and family law cases involve bitter custody disputes or “all out” war between the spouses. Many cases are moderately or lightly contested and the main points of contention can be worked out between the parties themselves with the assistance of a trained family law mediator. For such cases, if the parties are both agreeable, they may meet with a family law mediator to “iron out” the terms of a marital settlement agreement to be used for inclusion with their judgment.
Mediation – A Cost Effective Divorce Solution
The high cost of divorce can be seen generally as a function of the degree of litigation involved with the divorce. Numerous orders to show cause (now called “Requests for Orders”), extensive discovery requests and discovery motions, depositions, etc., all culminating in an epic divorce trial come at a heavy cost, not only in terms of actual money spent, but also in terms of the emotional price paid by the parties themselves and their children to wage such a war. Mediation, one of the methods of alternative dispute resolution, can empower the parties to find workable solutions to the issues in their divorce and to avoid costly litigation. Communication is the key to negotiation, and with the help of a trained family law mediator like Derrick Taberski, the parties may be able to quickly resolve their divorce issues for a fraction of the cost of a litigated divorce.
The Divorce Mediation Process
The divorce mediation process involves the parties’ meeting generally 2 to 3 times with their divorce mediator. Typically during the first mediation session the parties discuss custody and visitation issues, and their mediator will provide the financial disclosures with some general guidelines about how to fill them out. Between the first and second sessions, the parties prepare and exchange their financial disclosures with the mediator’s assistance. During the second mediation session, the parties focus on support and resolving issues related to the division of community property, debts, and support issues. If issues remain unresolved the parties schedule additional sessions. The number of mediation sessions in divorces with complex or unusual issues can vary, and often take 3 or more sessions. Most often the parties’ marital settlement agreement can be finalized in as little as two to three sessions. Once the marital settlement agreement is reached, the mediator will prepare the judgment packet for the parties to review and sign and then submit the documents to the court.
The mediation office will assist the parties with preparing their financial disclosures, which should happen before property and support issues are discussed.
Please contact our office to discuss your options for a mediated divorce.