Complex Financial Situations in a Divorce

Almost all divorces are complicated in one way or another. Even if you manage to avoid the most common divorce mistakes, there are still quite a few details and decisions to sort through. These primarily relate to finances for many people.

At Bansmer Law, our CA divorce attorney Erica M. Bansmer has over 10 years of experience helping clients navigate complex financial situations in a divorce.

That is why we put together this guide with tips on navigating the situations we most commonly see. Below, you will also find answers to some of the questions we hear daily regarding divorce and finances.

1. Property Division

Property division can be one of the most nebulous parts of the divorce process. Real estate plays a large role, but you also cannot overlook things like luxury items and investments.

Other common examples of marital property include:

• Cars
• Furniture
• Boats
• Artwork
• Antiques
• Country club memberships

Appraisals can be extremely helpful in valuing and dividing property in a California divorce.

You may also hire a forensic accountant and/or other financial experts to help sort through everything. As a skilled CA divorce attorney with over a decade of experience, our attorney Erica M. Bansmer is always willing to collaborate with any financial experts you choose to work with.

2. Pensions and Retirement Accounts

IRAs and 401(k)s may be a sizeable portion of the assets owned by you and your soon-to-be ex. Any amount of growth these funds incurred during the marriage will need to be divided as part of your divorce. The same is true of pension benefits earned by either of you before your date of separation.

You will also need to address any other forms of executive compensation and benefits. A few examples include stock options, bonuses, and deferred compensation.

The specific method by which these funds are divided is important too. If not done correctly, you may face penalties and other problems—which ultimately add up to financial losses.

The best way to avoid these is typically by using a Qualified Domestic Relations Order (QDRO). This is a legal document designed for this exact purpose. It is used to give instructions on how to distribute these funds without incurring fees or tax penalties.

3. Business Valuation and Division

Divorce can get even more complicated when one or both spouses are business owners or entrepreneurs. Especially if there are additional shareholders or partners involved, valuation and division are complex processes.

In this situation, working with a financial expert like a forensic accountant is a good idea. As neutral third parties, these professionals are committed to presenting clear, accurate breakdowns of both parties’ finances. This, in turn, makes the division process much more straightforward.

There are three typical paths we see when it comes to business division during divorce:

1. Selling the business – Your business will need to be prepared for sale. Then, potential buyers have to be identified, and the transaction must be fair and favorable. After the sale, you and your ex will divide the profits.
2. A buyout – One spouse will purchase the other’s interest in the business. This can be done through payments made in installments or by compensating the spouse with other assets. This route is particularly common for family businesses.
3. Co-owning the business – If you two are cordial, you may be able to continue as business co-owners. This should always include putting together an in-depth, comprehensive agreement that defines each party’s role, responsibilities, and rights.

4. Tax Implications

You may feel driven to have your divorce be finished and over with as soon as possible, but it is crucial not to rush at this stage. Doing so can lead to serious tax implications and financial losses—especially if you are navigating a high net-worth divorce.

Suppose you decide to sell the family home as a result of your divorce. Per Publication 504 from the IRS, you will likely owe some amount in capital gains taxes. Selling stocks or other investments often carries tax implications as well.

Another thing many people do not consider is their filing status. For some people, it is beneficial to continue filing a joint tax return until the divorce is completely finalized. You will also need to consider child tax credits and deductions if you have children.

5. Spousal Support

Was there a significant difference between your and your spouse’s income during your marriage? If so, alimony or long-term spousal support may be a factor in your divorce. Whichever of you has the higher income would be required to provide some amount of financial support to the other for a set amount of time post-divorce.

Typically, the length of your marriage directly impacts how long the spousal support payments will last.

The usual baseline is that support lasts for half of the marriage if it was shorter than 10 years. It can last many years if you were married for longer than a decade.

Working with a knowledgeable San Joaquin County divorce attorney like Erica M. Bansmer is the best way to ensure your rights are protected throughout this process. These types of divorces tend to be extremely complex, and it is far too easy to overlook important details without expert help.

FAQs on Complex Financial Situations in a Divorce

How is property division handled in a divorce in San Joaquin County, California?

In a divorce in San Joaquin County, California, property division is handled according to Cal. Fam. Code § 2550, which states that community property will be divided 50/50 between both parties.

Said another way, the family home and other property are typically split equally between you and your ex.

But it all depends on the specific details of your marriage. For example, maybe you both paid the mortgage on your family home together while the down payment came from money one of you earned before marriage. This would impact how the division of property is handled in your divorce.

How is community property defined in a California divorce?

Community property in a California divorce is defined as “everything you earned while married, everything you bought with money earned while married, and any debt taken on while married.”

But there are a couple of exceptions to this definition. Any property you received but did not earn, such as an inheritance or a gift, is not considered community property.

That said, many people do not realize how all-encompassing this definition is. Money accrued via retirement and pension plans during the marriage counts as community property in a California divorce.

How do I protect my assets in a divorce?

There are several ways to protect your assets in a divorce, such as:

• Opening any new accounts in your name only
• Updating your will as soon as possible
• Getting a clear picture of your finances and the value of your assets
• Hiring professionals to make sure both your rights and assets are protected

All in all, California law regarding finances in a divorce is both complicated and somewhat open-ended. The fact that CA is a community property state is fairly cut and dry. But valuing and dividing that property is much more complicated and intricate.

If you are facing complex financial situations in a divorce, contact us at Bansmer Law now or call (209) 474-2400 to schedule your consultation. The sooner you get in touch, the sooner we can start fighting for what is rightfully yours.