Wednesday, February 18, 2015
Differences between Post-Nuptial Agreements, Prenuptial Agreements, and Marital Settlement Agreements
I am often asked about the differences in different types of agreements in California Family Law.
Although the differences between Prenuptial agreements and Post-Nuptial agreements may seem minor, there are actually significant differences that can affect the validity and enforceability of the agreements. I will details the differences within this article.
Prenuptial Agreements. These are done by parties before the marriage. Since the parties are unmarried when these documents are drafted and executed (signed), the parties are dealing as most unrelated parties would in most business transactions. In other words, there is NO fiduciary duty to the other party to be "fair" as would occur with married parties. Although the parties generally need to see the draft document no less than seven (7) days before the marriage (Unless represented by lawyers as a result of recent case law), the parties can waive alimony, community property rights, inheritance rights and other rights. There still should be honest disclosure by the parties as well as an understanding of rights in the document for it to be enforceable, but the requirements are less demanding that those of a Post-Nuptial agreement.
Post-Nuptial Agreement. These are done by married persons after they are married. Also, these agreements need to be done before divorce or legal separation are contemplated. Family Code Section 721 imposes a fiduciary duty between both parties to be fair and to fully disclose all assets, liabilities, and business prospects between each other. It is important for both parties to be represented by their own attorneys so they understand they have full disclosure, the agreement is reasonable, and the parties understand what they are signing for the agreement to be enforceable in the event of divorce or separation.
Marital Settlement Agreements. There seems to be confusion that people can draft marital settlement agreements (MSA's) before the parties have contemplated divorce, filed for divorce and without attorneys. While attorneys are not required for MSA's, a key difference is that an MSA is drafted and signed in contemplation for divorce, and usually after the parties have filed for divorce or separation and are using the MSA as a contract "in place of" a formal stipulated judgment. Full disclosure is still required and the parties still owe a fiduciary duty to each other, however the agreement generally may be "uneven" or unfair" and still enforceable as long as the parties make the division knowingly and without duress or coercion.
THE BOTTOM LINE. Many people try to make "agreements" while contemplating divorce or separation, before an action is filed and without lawyers or without proper, fiduciary disclosure. They are surprised and upset when they find out the agreements are generally unenforceable because the parties made the agreement without the proper disclosures and without the proper representation or interpretation. It is best if you first consult a competent Family Law Attorney or Divorce Lawyer that can advise you. Kevin J. Kensik 310-891-2300, 310-704-0879.
Although the differences between Prenuptial agreements and Post-Nuptial agreements may seem minor, there are actually significant differences that can affect the validity and enforceability of the agreements. I will details the differences within this article.
Prenuptial Agreements. These are done by parties before the marriage. Since the parties are unmarried when these documents are drafted and executed (signed), the parties are dealing as most unrelated parties would in most business transactions. In other words, there is NO fiduciary duty to the other party to be "fair" as would occur with married parties. Although the parties generally need to see the draft document no less than seven (7) days before the marriage (Unless represented by lawyers as a result of recent case law), the parties can waive alimony, community property rights, inheritance rights and other rights. There still should be honest disclosure by the parties as well as an understanding of rights in the document for it to be enforceable, but the requirements are less demanding that those of a Post-Nuptial agreement.
Post-Nuptial Agreement. These are done by married persons after they are married. Also, these agreements need to be done before divorce or legal separation are contemplated. Family Code Section 721 imposes a fiduciary duty between both parties to be fair and to fully disclose all assets, liabilities, and business prospects between each other. It is important for both parties to be represented by their own attorneys so they understand they have full disclosure, the agreement is reasonable, and the parties understand what they are signing for the agreement to be enforceable in the event of divorce or separation.
Marital Settlement Agreements. There seems to be confusion that people can draft marital settlement agreements (MSA's) before the parties have contemplated divorce, filed for divorce and without attorneys. While attorneys are not required for MSA's, a key difference is that an MSA is drafted and signed in contemplation for divorce, and usually after the parties have filed for divorce or separation and are using the MSA as a contract "in place of" a formal stipulated judgment. Full disclosure is still required and the parties still owe a fiduciary duty to each other, however the agreement generally may be "uneven" or unfair" and still enforceable as long as the parties make the division knowingly and without duress or coercion.
THE BOTTOM LINE. Many people try to make "agreements" while contemplating divorce or separation, before an action is filed and without lawyers or without proper, fiduciary disclosure. They are surprised and upset when they find out the agreements are generally unenforceable because the parties made the agreement without the proper disclosures and without the proper representation or interpretation. It is best if you first consult a competent Family Law Attorney or Divorce Lawyer that can advise you. Kevin J. Kensik 310-891-2300, 310-704-0879.
Wednesday, June 11, 2014
How Courts "Apportion" Separate vs. Community interests in businesses owned before Marriage
Two very old cases dictate the approaches used by California Courts to determine interest and appreciation of a Separate Property Business (Owned or started before marriage). The two (2) cases are Van Camp v. Van Camp (1921) 53 Cal. App.17, and Pereira v. Pereira (1909) 156 Cal. 1.
PEREIRA ANALYSIS
Frank Pereira and Anna Pereira were married in 1900. Frank previously owned a Saloon and Cigar business that were highly profitable. Frank claimed the business, started before the marriage with his separate capital, was entirely his separate property. The Court disagreed, stating "It is true that it is very clearly shown that the principal part of the large income was due to the personal character, energy, ability, and capacity of the husband. This share of the earnings was, of course, community property."
Based upon the evidence presented, the Court believed that the great success of the business was the result of Frank's actual work efforts and labor, and his physical presence, decision making, and day-to-day involvement in the business. Therefore, the Pereira analysis usually involves small businesses wherein the management and efforts of the owner is significant in the success of the business, and it is assumed the business would not have the same success without the owner's efforts.
VAN CAMP ANALYSIS
The Van Camp case came from the well-known family that canned foods and sold them in markets throughout the country. Frank Van Camp arrived in Los Angeles in 1914 from Indianapolis to open a sea food cannery in San Pedro. He had a successful packing company in Indianapolis and arrived with money to start his new venture and buy property. The Court stated he "brought to California property of great value, consisting largely of cash and stock securities." Van Camp at 20.
He was married in 1916 to Euphrasia, whom he had met in the local post office. Aside from the various other factual claims made in the case, the Court examined Frank's work time at the new company during the marriage, and how that time impacted the appreciation of the business.
The wife relied on the holding of the Pereira case, that the Sea Food Company "was a mere agency through which defendant conducted his business, and since its enormous income was due to the skill and ability with which defendant conducted the business, the community estate should be accredited with all the profits derived therefrom" Van Camp at 27.
The Court disagreed, and stated "In our opinion, the circumstances attending the Pereira case are not *28 applicable to the facts involved herein. While it may be true that the success of the corporation of which defendant was president and manager was to a large extent due to his capacity and ability, nevertheless without the investment of his and other capital in the corporation he could not have conducted the business" Van Camp at 28.
The Court determined that because of the large initial investment Frank made in the Sea Food Company before marriage and with his separate property funds, the business increased in value due to the initial investment, various assets and employees of the business, and not because of Frank's work efforts alone during the marriage.
SUMMARY
The two (2) different approaches look to the need of the actual efforts of the spouse during the marriage, and whether or not those were significant to the growth or success of the business. Other issues also occur in marriages as to whether or not employment during a marriage is really a business at all. (See In Re: The Marriage of McTiernan and Dubrow (2005) as to what is a "business". Court found Director's company was not a business with value at all, but instead his employment)
Call Torrance Divorce Lawyer Kevin J. Kensik at 310-704-0879 to find out more about your particular business valuation or property valuation issue.
PEREIRA ANALYSIS
Frank Pereira and Anna Pereira were married in 1900. Frank previously owned a Saloon and Cigar business that were highly profitable. Frank claimed the business, started before the marriage with his separate capital, was entirely his separate property. The Court disagreed, stating "It is true that it is very clearly shown that the principal part of the large income was due to the personal character, energy, ability, and capacity of the husband. This share of the earnings was, of course, community property."
Based upon the evidence presented, the Court believed that the great success of the business was the result of Frank's actual work efforts and labor, and his physical presence, decision making, and day-to-day involvement in the business. Therefore, the Pereira analysis usually involves small businesses wherein the management and efforts of the owner is significant in the success of the business, and it is assumed the business would not have the same success without the owner's efforts.
VAN CAMP ANALYSIS
The Van Camp case came from the well-known family that canned foods and sold them in markets throughout the country. Frank Van Camp arrived in Los Angeles in 1914 from Indianapolis to open a sea food cannery in San Pedro. He had a successful packing company in Indianapolis and arrived with money to start his new venture and buy property. The Court stated he "brought to California property of great value, consisting largely of cash and stock securities." Van Camp at 20.
He was married in 1916 to Euphrasia, whom he had met in the local post office. Aside from the various other factual claims made in the case, the Court examined Frank's work time at the new company during the marriage, and how that time impacted the appreciation of the business.
The wife relied on the holding of the Pereira case, that the Sea Food Company "was a mere agency through which defendant conducted his business, and since its enormous income was due to the skill and ability with which defendant conducted the business, the community estate should be accredited with all the profits derived therefrom" Van Camp at 27.
The Court disagreed, and stated "In our opinion, the circumstances attending the Pereira case are not *28 applicable to the facts involved herein. While it may be true that the success of the corporation of which defendant was president and manager was to a large extent due to his capacity and ability, nevertheless without the investment of his and other capital in the corporation he could not have conducted the business" Van Camp at 28.
The Court determined that because of the large initial investment Frank made in the Sea Food Company before marriage and with his separate property funds, the business increased in value due to the initial investment, various assets and employees of the business, and not because of Frank's work efforts alone during the marriage.
SUMMARY
The two (2) different approaches look to the need of the actual efforts of the spouse during the marriage, and whether or not those were significant to the growth or success of the business. Other issues also occur in marriages as to whether or not employment during a marriage is really a business at all. (See In Re: The Marriage of McTiernan and Dubrow (2005) as to what is a "business". Court found Director's company was not a business with value at all, but instead his employment)
Call Torrance Divorce Lawyer Kevin J. Kensik at 310-704-0879 to find out more about your particular business valuation or property valuation issue.
Thursday, June 5, 2014
Understanding the impact of Name on Title vs. ownership of Real Property in a California Divorce
Title on real property can be held in many forms in California. Particularly, title on deeds can be held by individuals, couples and other entities. Many married couples often take title to deeds as either "Joint Tenants" with right of survivorship, or as community property.
Often, the deed will state that both parties are "married". In these cases, the property is commonly "community" in ownership nature and there may not be a dispute as to the extent of ownership by either party. A more common problem occurs when one party either takes title during the marriage, as "a married person as their sole and separate property", or when a person owns property before marriage as "a single person."
Even if the title is in one spouse's name, that may not mean that the property is 100% theirs.
Starting with a line of family law cases in the 1980's, the California courts have analyzed a common problem- that if "community earnings during the marriage" are used to pay-down the mortgage on a property belonging to one spouse, the other spouse can actually gain an interest, or what is known as
a "pro-tanto community interest". This theory is based upon the cases of Marriage of Moore (1980)288 Cal 3d. 366, and Marriage of Marsden (1982) 130 Cal. App.3d. 426, now more commonly known as the "Moore/Marsden" interest.
The Moore/Marsden theory basically looks at the percentage the mortgage or encumbrance was paid down during the marriage as well as the increase in property value, and "awards" the community (both spouses equally) a fractional share in the property.
This effect has been compounded over recent years because of the case of Marriage of Branco (1996)
47 Cal. App.4th. 1621, which states that if a property is refinanced "by the community" instead of by the spouse individually, the community gets an even larger interest in the property proportional to the new "community" encumbrance or debt.
Many people are surprised to learn of this situation, but they are common in divorce cases. If you have a question about title to real property or your interest in property during the marriage, contact Torrance Divorce Lawyer Kevin J. Kensik at 310-704-0879.
Often, the deed will state that both parties are "married". In these cases, the property is commonly "community" in ownership nature and there may not be a dispute as to the extent of ownership by either party. A more common problem occurs when one party either takes title during the marriage, as "a married person as their sole and separate property", or when a person owns property before marriage as "a single person."
Even if the title is in one spouse's name, that may not mean that the property is 100% theirs.
Starting with a line of family law cases in the 1980's, the California courts have analyzed a common problem- that if "community earnings during the marriage" are used to pay-down the mortgage on a property belonging to one spouse, the other spouse can actually gain an interest, or what is known as
a "pro-tanto community interest". This theory is based upon the cases of Marriage of Moore (1980)288 Cal 3d. 366, and Marriage of Marsden (1982) 130 Cal. App.3d. 426, now more commonly known as the "Moore/Marsden" interest.
The Moore/Marsden theory basically looks at the percentage the mortgage or encumbrance was paid down during the marriage as well as the increase in property value, and "awards" the community (both spouses equally) a fractional share in the property.
This effect has been compounded over recent years because of the case of Marriage of Branco (1996)
47 Cal. App.4th. 1621, which states that if a property is refinanced "by the community" instead of by the spouse individually, the community gets an even larger interest in the property proportional to the new "community" encumbrance or debt.
Many people are surprised to learn of this situation, but they are common in divorce cases. If you have a question about title to real property or your interest in property during the marriage, contact Torrance Divorce Lawyer Kevin J. Kensik at 310-704-0879.
Monday, May 12, 2014
Unbundled Legal Sevices - Limited Representation of Lawyer
Traditionally, clients hired a lawyer for a specific case or in a specific are of law (i.e. Divorce).
The lawyer was retained and either filed the documents or "substituted into the case." Either way, the lawyer was "Attorney of Record" for all aspects of the case. This was good for many clients because the lawyer handled all aspects of the case, communications with the other party, etc. However, many clients, particularly those with limited financial means found this practice cost prohibitive.
Many clients were looking for lawyers to only handle limited parts of the case, because they could handle the balance of tasks, making the Divorce Lawyer more affordable.
In the early 2000's, the California Bar created rules for "Limited Scope Representation" in a divorce or family law matter. In Limited Scope cases, the Attorney and client can decide which "parts" of the case the lawyer should work on, and whcih court appearances (if any) the lawyer should make.
By clearly spelling out the terms of the representation, both the lawyer and client understand each others roles. This practice can save time, save money, and allow the litigant a way to receive affordable legal care for their case. If you are interested in "Unbundled Legal Services" or Limited Scope Representation for your family law matter, please contact Palos Verdes Divorce Lawyers and Torrance Divorce Lawyer Kevin J. Kensik at 310-704-0879.
The lawyer was retained and either filed the documents or "substituted into the case." Either way, the lawyer was "Attorney of Record" for all aspects of the case. This was good for many clients because the lawyer handled all aspects of the case, communications with the other party, etc. However, many clients, particularly those with limited financial means found this practice cost prohibitive.
Many clients were looking for lawyers to only handle limited parts of the case, because they could handle the balance of tasks, making the Divorce Lawyer more affordable.
In the early 2000's, the California Bar created rules for "Limited Scope Representation" in a divorce or family law matter. In Limited Scope cases, the Attorney and client can decide which "parts" of the case the lawyer should work on, and whcih court appearances (if any) the lawyer should make.
By clearly spelling out the terms of the representation, both the lawyer and client understand each others roles. This practice can save time, save money, and allow the litigant a way to receive affordable legal care for their case. If you are interested in "Unbundled Legal Services" or Limited Scope Representation for your family law matter, please contact Palos Verdes Divorce Lawyers and Torrance Divorce Lawyer Kevin J. Kensik at 310-704-0879.
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