Every New Year, many people make resolutions so they can have a fresh start. For some, this includes filing for divorce. Resolving to divorce is a significant decision which involves lots of planning and thought. The emotional decision may be made; now it is time to plan and take action to help smooth out the bumpy road ahead.
- 2013 Tax Returns. An important New Year decision faces people who are divorcing: whether to file a joint or separate tax return. This is a critical decision for many reasons; and, even if an extension request and not an actual return is filed at this time, a decision on filing status must be made. This is because once a joint extension or a joint tax return is filed, it cannot be amended to allow for a separate tax return. The decision is critical because, while married-filing-jointly results in lower taxes than filing as married-filing-separately, a joint return has joint liability. This can make it difficult to contest in divorce the accuracy of your spouse’s income or deductions.
- Your Current Estate Plan or Will. If you have a trust or a will at the time you decide to divorce, consider revoking the trust and will in conjunction with a general review of your estate plan. If these documents do not represent your current wishes now that a divorce is imminent, and if you die during the divorce process, your estate will be distributed as set forth in the documents. This could mean that the same spouse you are fighting to keep certain assets from in the divorce may in fact receive those very assets after your death. If this is not what you want, then you need to revise your documentation to ensure that your separate property and your one-half of the community property are passed to another person of your choosing.
- Restraining Orders and Funding a Trust. After any divorce action is filed in the State of California, Standard Family Law Restraining Orders are issued. One of the restraining orders prevents the funding of a trust. This means that, upon notice to the other party, you are allowed to revoke an existing trust and can even create a new trust; however, you cannot actually fund the new trust. You will thus need an interim will which is meant to operate if you die during the divorce. The interim will allows you to provide for the distribution of your separate property and your one-half of the community property. Upon the conclusion of the divorce action, the restraining orders no longer operate and a trust can be funded with the property (community and separate) awarded to you in the divorce judgment.
- Restraining Orders and Beneficiary Designations. Another Restraining Order issue involves beneficiary designations on bank accounts, retirement accounts and life insurance policies. Once a divorce action is filed there is no question that, in accordance with the Standard Family Law Restraining Orders, these beneficiary designations cannot be changed during the divorce proceeding. Whether or not such beneficiaries can be changed before actually filing a divorce action is an open question in the law. Many lawyers (and probably judges) believe that changing the beneficiary designations near the start of a divorce may be a breach of a fiduciary duty that spouses owe to each other. It is best to discuss this issue with a family law attorney before changing the beneficiary designations.
- Advanced Health Care Directives, Powers of Attorney and Financial Directives. If at any time you have used these documents to name your spouse as the person who has decision-making power over your health care, financial and other similar decisions if you are incapacitated, you may want to reconsider this designation when divorce is imminent. If you have not documented these rights, then you may want to do so and designate the person you choose. Otherwise, your spouse will be legally the person allowed to make these decisions on your behalf.
- Real Property Held as Joint Tenants With the Right of Survivorship. Many married people hold a title to real property that lists their spouse as joint tenant with rights of survivorship. This means that when one spouse dies, the other spouse receives the entire property. As with other assets discussed above, you may not want your spouse to receive your one-half interest in the property if you die during the divorce. In California, upon giving notice and even without the consent of your spouse, title can be changed so that it is held as “tenants in common.” By doing this, each person is allowed to provide in their will who will receive their one-half interest in the property if they die. It is not sufficient to just have title changed; an interim will must also be prepared stating what will happen to your interest in the house or other real property to which title has been changed.
- Ensure Your Privacy. Your lawyer will want to send you information via mail and email. For physical documents that are mailed, consider opening a Post Office (PO) Box and make sure to check it frequently each week. In addition, it is critical to open a separate and new email account with a unique password to use to communicate with your lawyer.
- Gathering of Information. As part of every divorce, it is important to identify and value all assets and liabilities. A good starting point in this process is to (1) obtain copies of documents and/or to be otherwise able to identify all assets and liabilities; (2) obtain your own credit report; and (3) photograph/video/inventory the contents in the home.
In addition to the above, it is critical to seek legal advice as soon as possible. The guidance of a lawyer in setting the overall approach to the divorce is important to identify realistic goals and a strategy to achieve those goals.