QUOTE:
TAKING CONTROL OF YOUR FINANCIAL AFFAIRS IS NOT ONLY IMPORTANT, IT CAN HAVE A POSITIVE EFFECT ON A RELATIONSHIP OR MARRIAGE OVER THE LONG TERM, AND CAN, IN MANY INSTANCES, MAKE A DIVORCE LESS PAINFUL.
Let me give you an example of a situation I deal with all the time. The law in California states that putting someone’s name on a deed of trust does not mean that person receives half the equity in the ownership of the property. A typical circumstance would play out this way: A happy couple decides to marry. The groom promises the bride that on their first wedding anniversary, he will transmute his separate property residence (owned free and clear) to the community as a “gift.” At their one-year anniversary, true to his word, the husband asks the wife’s estate planning attorney to draft the documentation necessary to transmute the property. At the time of the transmutation, the residence is worth
$4,000,000, with no debt. The attorney prepares a deed and an agreement transmuting the husband’s separate property to community property. Fast forward five years. The happy couple is no longer happy and decides to divorce. The residence is now worth $5,000,000. Does the wife receive $2.5 million, or $2 million, or $500,000? The reality is that the wife receives $500,000 because, five years earlier, her attorney did not get the husband to sign a written document waiving his right to claim his reimbursement (under Family Code Section 2640). Thus, only the $1,000,000 increase in the value of the residence is community property, entitling the wife to 50% of that increase. The
husband, however, is entitled to reimbursement for his $4,000,000 contribution. In the absence of a waiver in writing to the right of reimbursement, the anniversary “gift” may be nothing more than one-half the asset’s appreciation since the date of the gift – if there is any appreciation. Relationships aren’t easy. Making them work or having them fail are two of the most difficult challenges anyone can face. Whether you are newly in love, happily married, contemplating separation, in the midst of a divorce or regrouping in its aftermath, there is one pot of gold that everyone wants: peace of mind. Protecting your wealth goes a long way toward achieving that. end
C-Suite Advisory - Stacy Phillips
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CSQ SPRING 2017
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