Law Office of Lily L. Huang
More Than A Decade Of Family Law Experience

San Jose Family Law Blog

Understanding amicable divorce

At the Law Office of Lily L. Huang in California, we know that more and more of today’s couples prefer to end their marriages amicably rather than via a traditional litigated divorce. If you and your spouse fit that description, you should realize that you have two options: a mediated divorce and a collaborative divorce.

Greenbush Financial explains that mediation and collaboration both represent out-of-court processes by which you and your spouse negotiate with each other to resolve your own issues in a nonthreatening and cooperative atmosphere. They are, however, two separate processes with some distinct differences.

What happens to the family home in a divorce?

When you and your spouse go through a California divorce, your family home often represents one of your biggest issues. You may wish to stay there with the kids while (s)he wishes to sell it, or vice versa. Or there may be a good reason why one of you needs to stay there, at least for a few years, before selling it becomes more practical. As reported by the Orange County Register, you and your spouse have several options when it comes to what to do with your family home when you divorce.

Keep in mind that California is a community property state. This means that if you and your spouse purchased your home during your marriage, each of you has a 50 percent ownership interest in it. On the other hand, if one of you owned the house prior to your marriage, the court may well consider it his or her separate property. Even then, however, if the other has contributed to the mortgage payments or otherwise contributed to the home’s increase in value, determining each of your precise ownership interests can quickly become complicated.

What are some tax considerations in a divorce?

As you probably know, California is a community property state. This means that if and when you and your spouse divorce, each of you is entitled to 50 percent of your marital assets. How you go about dividing up those assets, however, and the manner in which you do it, could have negative tax consequences for one or both of you.

The Tax Adviser explains that, in general, the Internal Revenue Code does not treat divorce as a taxable event per se. Both Section 1041 pertaining to income taxes and Section 2516 pertaining to gift taxes make this quite clear. Nevertheless, you need to be very careful in crafting your property settlement agreement so that transfers from one of you to the other and vice versa do not themselves create taxable events.

2 key financial considerations for divorce

Divorce is something that you probably never thought you would end up going through. Now that your relationship is ending with your spouse, you have to figure out how to divide everything evenly without causing yourself financial distress. Separations are often tricky, especially when there is so much at stake. 

Though you live in the San Jose area, which is a community property jurisdiction, there are ways you can reach an amicable divorce settlement with your soon-to-be ex-spouse. Here are some key considerations you should keep in mind as you go through the divorce process. 

What is the acceptance of benefits doctrine?

If you face an impending California divorce, you may wish to familiarize yourself with the acceptance of benefits doctrine. Why? Because it could impact if and to what extent you may be able to modify your court-approved property settlement agreement after your divorce.

The acceptance of benefits doctrine precludes you from challenging, i.e., attempting to modify, a court judgment in circumstances where you already benefitted from the judgment. The Texas Supreme Court addressed this doctrine in the 2017 case of Kramer v. Kastleman

Is legal separation more advantageous than divorce?

If your California marriage or registered domestic partnership is considerably less than ideal, but you are not yet ready to face the prospects of a divorce, you may wish to consider a legal separation. As FindLaw explains, it may help you psychologically to think of a legal separation is a marital timeout

You and your spouse or partner remain legally married while legally separated, but you have the advantages of living apart from him or her with enforceable court documents setting forth the rights and responsibilities of each of you regarding such things as the following:

  • Child custody, visitation and support
  • Spousal support
  • Health and life insurance coverage
  • Joint income tax filing
  • Opportunity for reconciliation

Studies show joint custody may be best

Parents who separate or file for divorce in California face the difficult task of determining custody of the children. While some parents are able to work out an agreement between the themselves, others require the involvement of a court-appointed judge to determine custody in the best interest of the child. Traditionally, sole-custody is given to one parent, usually the mother, to enforce stability in a child’s life. However, studies show that joint-custody situations may be more beneficial to children.

Children who spend a significant amount of time with both their mother and father tend to do better socially, developmentally, emotionally and intellectually, according to a meta-analysis published in the Journal of Family Psychology. During the study, kids in joint-households displayed a higher self-esteem, and received higher grades in school. Sole-custody tends to be given to the mother in many situations. However, evidence shows the importance of fathers in children’s’ lives. Not only do children with highly involved fathers do better academically, but they show less aggression, more self-direction, develop stronger relationships and have more successful careers.

What constitutes community property in California?

Filing for divorce in California can be an emotional ordeal. In addition to dealing with issues involving child custody, alimony and child support payments, you’ll have to separate the community property that was accumulated during the time you were married. Also referred to as marital property, community property, consists of a myriad of different items and assets. Some you may not have thought about when it comes time to negotiate the terms of the divorce settlement. By understanding what constitutes community property, you can ensure you receive everything you are entitled to in the settlement.

In addition to the family home, vehicle, furniture and bank account, other items that may be considered community property include the following:

  •          Lottery ticket winnings and tax refunds.
  •          Memberships to exclusive country clubs and golf courses.
  •          Travel miles and other rewards from programs.
  •          Intellectual property, such as patents, trademarks and copyrights.
  •          Assets and equity gained from a business you owed with your spouse.
  •          Stocks, 401k plans, pensions and deferred compensation.

3 factors to consider when kids are involved in divorce

As a parent, you never want to see your kid go through something that causes them stress or unhappiness. This is exactly why divorce is often such a daunting prospect. You may know that separation is the best option for you and your spouse, but perhaps the idea of harming your child keeps you from taking the next step. There are a few things to consider when you have kids and are considering divorce.

There are some vital considerations that parents in this situation should think about. Divorce can be a great opportunity for growth and new beginnings—for both you and your child—so rather than focusing on the negatives, focus on the following when you are considering divorce

Who gets the retirement accounts in a divorce?

When you divorce in California, the pensions that you and your spouse own can be more valuable than all the other assets you acquired during your marriage. As Reuters reports, dividing up these retirement accounts is tricky at best. If you fail to do it properly, you and/or your spouse could face thousands of dollars in taxes and penalties.

Before deciding to split up your retirement accounts and deal with the complications and expenses associated therewith, each of you should decide if you really want to do this. If you are a high-asset couple, perhaps you have other options for equally dividing your marital assets.

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