As an author, a Certified Family Law Specialist, and a nationally renowned Certified Financial Planner, Violet P. Woodhouse is active in a wide range of endeavors. From serving as a media consultant addressing issues pertaining to divorce, relationships, marriage, and personal finance to speaking as a guest lecturer and seminar presenter, her expertise is in constant demand. On this page, we present important announcements pertaining to Ms. Woodhouse’s speaking engagements as well as news items addressing various family law matters and other issues affecting your financial future. To learn more, feel free to contact our Newport Beach office directly. Serving Anaheim and all of Orange County, our family law attorneys are committed to providing the exceptional service you would expect from a premier legal firm.
Mariposa Women & Family Center (May 22 at 6:00 and 7:00 p.m.) Violet will cover financial and legal issues faced by couples who are living together, married, or contemplating divorce. To RSVP for the event or for more information, please contact Vivian Chan at (714) 573-0899 ext. 35 or via e-mail at Vivian@echomediapr.com.
As a trial attorney, public speaker, media consultant, and Certified Financial Planner, Violet P. Woodhouse is available speak on a wide range of topics related to the legal and financial aspects of relationships and divorce.
Often family law attorneys do not object to a motion for early termination of marital status under Family Code §2337 because courts routinely grant them; it is difficult to overcome the “compelling reason” standard permitting the court to deny the request. Unfortunately, no case law exists addressing the ability of the court to grant these motions when it is opposed because of the service of an inadequate preliminary declaration of disclosure (hereafter “PDD”). This article explores whether an accurate and complete preliminary declaration of disclosure (hereafter “PDD”) is a compelling reason for the court to deny these motions.
A motion to bifurcate marital status will be granted if an opposing party does not demonstrate to the court a compelling reason to deny such a request. Gionis v. Superior Court, (1988) 202 Cal. App.3d 786. Generally, the service of a preliminary declaration of disclosure meeting the requirements of Family Code §2104(b), (c)(1), (2), (e) is a condition precedent to granting the motion terminating the marriage.
Unless the parties stipulate otherwise, before or at the time of filing a Family Code §2337 motion, the moving party must serve a PDD which, by definition includes a completed schedule of assets and debts and income and expense declaration on the nonmoving party. See Family Code §§2104(e), 2337(b). These disclosure documents are not filed with the court; absent objection by the opposing party, the court has no independent duty to determine the adequacy of disclosures served. The court confirms service of a PDD, and assumes, for all practical purposes, it complies with Family Code §2100 et seq., if it finds the moving party filed a declaration re service of declaration of disclosure. If the served PDD is inadequate, the nonmoving party’s opposition to the motion should specifically set forth the PDD’s deficiencies.
The duty to disclose during divorce under Family Code §§2100, et seq. simply implements the process, breadth, and scope, of the fiduciary duties between spouses that arise by statute at marriage and are articulated in Family Code §§721, 1100, et seq. Nearly every issue in a divorce (property, taxes, health and life insurance, child and spousal support, attorney’s fees, except arguably custody) is affected by the disclosures made. Family Code §2102(a)(1), requires “the accurate and complete disclosure of all assets and liabilities in which the party has or may have an interest or obligation and all current earnings, accumulations and expenses, including an immediate, full, and accurate update or augmentation to the extent there have been any material changes”.
Specifically, under Family Code §2104, a preliminary declaration of disclosure must “set forth with sufficient particularity” allowing a person of “reasonable and ordinary intelligence” to ascertain all of the following: 1) The identity and percentage of ownership in each, all community, quasi-community, or separate assets and liabilities in which the declaring party has or, may have an interest, and is or may be liable, regardless of characterization. Characterization may be set forth but is not required. Family Code §2101(a) defines assets as “any real or personal property of any nature, whether tangible or intangible, and whether currently existing or contingent. Family Code §2101(f) defines liability as including, “but is not limited to, any debt or obligation, whether currently existing or contingent”. 2) A completed income and expense declaration must also be served unless one previously provided, is current and valid. To be complete, it should include earnings and accumulations and expenses. Family Code §2101(c) defines earnings and accumulations as including income “from whatever source derived, as provided in [Family Code] Section 4058” even if child support is not an issue. Family Code §2101(d) states expenses “includes, but is not limited to, all personal living expenses, but does not include business related expenses”.
The service of a compliant preliminary declaration of disclosure is not a form over substance matter. It is clear the legislature intends detailed disclosure. The current Family Code §2337 provides the court with options to minimally address the consequences of divorce on a surviving former spouse. The orders available to the court include issuing interim orders dividing defined benefit plans until a final judgment on reserved issues is entered, i.e., property orders. Absent good cause, “no judgment shall be entered with respect to the parties’ property rights without each party, or the attorney for that party in this matter, having executed and served a copy of the final declaration of disclosure and current income and expense declaration.” Family Code §2106. Thus, the moving party must establish good cause exists for the court to enter a judgment without the service of a final declaration of disclosure. Arguably, a non-compliant disclosure is tantamount to non-disclosure.
On January 1, 2008, an amendment to Family Code §2337 takes effect, which will expand the level of disclosure for the moving party. The amendment recognizes that the termination of marital status has significant consequences, which includes the loss of IRA tax deferral benefits, the loss of surviving spouse rights under most forms of employee benefit plans (health, retirement, deferred compensation, etc.). The amendment includes orders facilitating the ease of a surviving former spouse to enforce his or her community property rights in postmortem proceedings. The court will have the authority to make orders pending a final judgment on reserved issues, which divide community property (up to 100% of the community property interest in some cases), create security interests, and require the moving party to show an ability to pay all medical expenses should health insurance become unavailable due to the termination of marital status, among other things. These are clearly orders affecting the parties’ property rights. The service of a compliant PDD must include detail permitting the court to make reasonable orders; that detail substantively equates to what would be in a final declaration of disclosure.
In addition to the current statutory conditions, courts will be able to order the moving party to: 1) demonstrate an ability to pay all health and medical care for dependents if those benefits end because of the dissolution of marital status, 2) make beneficiary designations (disclosure of which is not required on current forms) for half and up to all of a nonprobate transfer asset (i.e., by trust, insurance policy, payable on death accounts, joint tenancy, retirement benefit plan designations, etc.) until a judgment concerning characterization, division and distribution of that asset has been entered; 3) transfer half and up to all the community interest in the moving party’s IRA, preserving tax deferral benefits, and 4) permit a specific security interest to lessen the burden of the surviving spouse to enforce his or her community property rights in a postmortem enforcement proceeding. The court can order) an undertaking, b) a security interest by QDRO, c) the creation of a trust, d) other orders reasonably necessary and feasible, and e) an interim order for payment of survivor benefits and to post a bond as security, where a retirement plan is not subject to an order.
To assist the court in fashioning these options, the party opposing the motion should request the court make specific orders to manage the risks their clients face as a surviving former spouse. To do so will require a level of disclosure beyond the minimum requirements of Family Code §2104. Without detailed financial disclosures, the court is unable to determine, much less make, appropriate orders. Ergo, the disclosure on the PDD rises to the level of a final declaration of disclosure under Family Code §2105 requiring statements of material facts about all income, expenses, assets, liabilities, and investment opportunities presented or taken.
In the era of full and accurate disclosure, the compelling reason standard to oppose these motions as articulated Gionis v. Superior Court, (1988) 202 Cal. App.3d 786 may be largely irrelevant. In Gionis, supra, 202 Cal. App. 3d 786, Wife filed a dissolution of the parties’ one year marriage in June 1987. In January 1988, Husband moved to terminate the parties’ marital status because he did not want, among other things, 1) marital status to affect his selection of investments, 2) to be required to seek a quitclaim deed if he decided to invest in real property or other business ventures, 3) to obtain Wife’s consent to make application for and sign any loan documents regarding his finances, 4) to run the risk that any business deals he wished to make be construed as community property, and 5) to be constrained in his financial endeavors because the parties were only married for approximately a year. Gionis v. Superior Court (1988) 202 Cal. App. 3d 786. Today, Mr. Gionis would not only have to disclose all material financial transactions, but he would have a continuing duty to immediately update material changes. If he did not disclose at the time of filing, the court could not grant his motion to terminate marital status. Family Code §§2104, 2106, 2337.
In conclusion, without the service of a compliant PDD, the court cannot perform its duty to protect the community estate as mandated by Family Code §2100(a). Nor can the nonmoving party’s attorney manage the risks to their client resulting from a termination of marital status. An inadequate PDD does not provide opposing party, or the court with the information needed to fashion relevant orders protecting the former spouse from the financial consequences of a marital termination. If Gionis is applicable, surely the court should find the service of an inadequate preliminary declaration of disclosure a compelling reason upon which to deny a motion for termination of marital status.
At our Newport Beach firm serving Anaheim, our family law attorneys are dedicated to preserving your child custody and spousal support rights and helping you to protect your property and assets during a divorce or legal separation. In order to provide exceptional service, we endeavor to keep clients informed of important news and announcements that may benefit them. To learn more or to schedule a consultation with one of our experienced family law attorneys, contact Violet P. Woodhouse, APC.
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