In most cases, one of the parties will purchase the other’s interest and continue on managing the company.  This process should always, if nothing else, include hiring the expertise of a business appraiser to value the business.  This appraisal will be used to determine how much cash or value in assets must be exchanged in order to buy-out the spouse exiting the business.  Anytime a business is involved in the divorce process, it is important to keep in mind that the process of valuing a business is considered more of an art than a science.  If you were to hire two business valuation experts, you are almost guaranteed to receive two different valuations in return.  As a result, we encourage clients to remain flexible when negotiating a buy-out settlement.  In all likelihood, a business valuation 12-months after the settlement date will provide a very different picture, whether good or bad.

However, only you and/or your business partner(s) are fully aware of not only the current cash flow, but also any future potential cash flow that may be necessary in correctly valuing the business.  You must be aware of the on-going business practices to ensure you get what is rightfully yours.

All too often we hear about cases where one party feels they were left short changed.  Take for example, the McCourt family in Los Angeles.  During their divorce, the McCourt’s were the majority owners in the Los Angeles Dodgers Major League Baseball team.  When the settlement was awarded in 2011, the wife, Jamie McCourt, was awarded $131,000,000 in cash and several pieces of real estate.  The husband, Frank McCourt, retained interest in the Dodgers together with the stadium and surrounding parking lots.  Shortly after the divorce settlement was reach, Frank sold his portion of the family business (LA Dodgers) for $2,000,000,000.  Needless to say, Jamie was not pleased with this result and later contended that Frank intentionally misled her about the value of the family business.

The biggest complication in this case came from the valuation of the Los Angeles Dodgers and their ongoing business deals.  At the time of the settlement, the team had listed $1,000,000,000 in assets and $500,000,000 in debt.  On the surface, Jamie should be very pleased with her original settlement, as it is unlikely she would have come out with $131,000,000+ after taxes and fees.  What was not accounted for in the bankruptcy filings; however, was the potential future value of the broadcast rights.

In a later court decision, they disagreed with Jamie’s request to throw out the initial settlement, stating that, paraphrased, ““Jamie McCourt had the information, knowledge, experience and evidence that the value of the Dodger assets was greater than what she indicated in her moving papers which she relied upon in entering into the settlement of this matter.  Further, there is no credible evidence that Frank McCourt misrepresented the valuation to her in this case.”

 Here are a few questions that Jamie, and others like her, should be sure to ask before signing on the dotted line of the settlement:

1. How would you feel if the family business sold for significantly more than the agreed upon amount in the future?
2. Could you foresee yourself regretting this decision?
3. Is the settlement enough money to support your lifestyle moving forward and through retirement?
4. Is that a relevant question?
5. Lastly, always try to evaluate the costs, both financially and emotionally, of making this decision.

1. Home Insurance:
a. Rental Property – It is common in divorce for one spouse to move out of the home, often into an apartment unit as a temporary residence. It is important that a renter’s insurance policy is obtained to ensure coverage over all persona property within the rented home. This will also prevent against any negligence claims.

b. Primary – Although one spouse may have moved out, it is recommended that both spouses remain on the primary home policy until a final decree has been issued. Once a final decree has been issued, and assets have been divided, there are two common ways in which the primary property is handled.

i. If per the decree, it is decided that one spouse will remain in the primary residence, it is extremely important that the house is refinanced in their name ONLY and that the title to the house is updated to their name as well.               This is most important to the other spouse to ensure that they are not liable for any future payments due on this property

ii. If per the decree, it is decided that the house will be sold, the proceeds from the sale of the house will be divided according to the decree.

2. Car Insurance: If the two parties are able to handle the divorce process amicably, it is recommended to leave auto insurance policies in place as is to receive the lowest, multi-vehicle, rate. If the two parties are unable to handle the process amicably, it is recommended both spouses obtain separate insurance policies on their respective vehicles. Regardless of the circumstances, once the decree has been finalized, both parties should obtain separate insurance policies on their respective vehicles. Similar to real estate, it is important to confirm each spouses name has been removed from the other policies to avoid any future obligations.

3. Life Insurance: This is one of the most important, and often overlooked, details during the divorce process. In the unfortunate situation where the payor of support were to pass away, without a life insurance policy on their life, the payee spouse and family would be left with zero support. A life insurance policy should always be put in place on the life of the payor until support is no longer required, at which point the insurance policies should end.

FL-142 is a four page Schedule of Assets and Debts. Here are the instructions written on the form.

“List all your known community and separate assets or debts. Include assets even if they are in the possession of another person, including your spouse. If you contend an asset or debt is separate, put P (for Petitioner) or R (for Respondent) in the first column (separate property) to indicate to whom you contend it belongs. All values should be as of the date of signing the declaration unless you specify a different valuation date with the description.“

The general idea is that the State of California wants to act as the first line of defense when it comes to spouses playing “fair” with financial information in their divorces. In the absence of disclosure requirements unrepresented litigants would likely have no mandated process for discovering and analyzing the family’s current financial circumstances leaving the holder of the information with an unfair advantage.

Disclosure forms take the first step towards leveling the playing field.  Legal counsel generally consider these forms to be the first step in the discovery process. Discovery loosely refers to the legal process of uncovering information about the parties to a divorce. In this instance we are looking at financial information. As a financial expert I will review these forms and the back-up accompanying and build a set of Issues, Concerns and Questions I would like addressed in additional discovery requests. Declarations of Disclosure are a very important step in piecing together the family financial picture.

Non-compliance with the disclosure rules can lead to a variety of outcomes and punishments. In re Marriage of Rossi the court ruled Husband was entitled to 100% of lottery winnings Wife had failed to disclose. This is an extreme example with extenuating circumstance including Wife attempting to conspire with lottery officials and co-workers to hide the winnings.  Other cases have resulted in sanctions or fines to the no-complying party.

Understanding concepts such as these could play a significant role in your post-divorce future. Hiring an experienced CDFA will ensure a more secure, comfortable future for YOU.  Make sure you sit down with us at Pacific Divorce Management before finalizing your settlement agreement.

While the article itself mostly discusses the high net-worth clients that would be enticed to use an offshore account, it brought up a few good points that got us thinking about some things that all individuals going through divorce should keep in mind if they are concerned that their divorcing spouse may be playing this hide and seek game.

1. Always keep in mind, while gathering data and compiling a complete picture of your family’s finances may be difficult, it is not impossible.

2. With the advent of electronic discovery, combined with the skills of a forensic expert, the trouble with tracing electronic data has been significantly reduced. Thus, making it more possible to catch a cheating spouse who may have opened a separate bank account to pay for their new girlfriend/boyfriend’s apartment, car, or other gifts.

3. Take advantage of social media and the booming smart phone industry.

1. 81% of American Academy of Matrimonial Lawyers surveyed said they have seen an increase in the use of evidence from social networking sites such as LinkedIn and Facebook
2. 92% saw an increase in evidence from smart phones

4. However, be warned, accessing your significant others password-protected accounts may be against the law. So be sure to seek advice from an attorney before proceeding.

Issues such as these could play a significant role in your post-divorce future. Hiring an experienced CDFA will ensure a more secure, comfortable future for YOU.  Make sure you sit down with us at PDM before finalizing your settlement agreement.

What is Long Term Care Insurance?

Long Term Care (LTC) Insurance is a relatively new form of health insurance designed specifically for long term care in a nursing home, home based health care and other expenses not covered by Medicare, Medicaid and traditional Medicare Supplemental insurance.

Long Term Care Insurance is purchased from one of many insurance companies offering coverage in your state.  Generally policies provide a daily maximum benefit amount for a specified period of time. Ultimately this provides a benefit pool from which future benefits will be drawn. At $200 per day for 1,080 days (3 years) you would receive a total benefit pool of $216,000. If you draw less than the $200 per day maximum, your benefits will last longer. Policies come with a myriad of options and choices outside the scope of this article such as daily benefit amounts, benefit periods, elimination periods and cost of living adjustments. These choices should be made with the assistance of an expert in the available products.

In order to qualify for benefits a person, generally, must need help completing at least two activities that are necessary for daily functioning, such as:

1. Personal hygiene and grooming
2. Feeding oneself
3. Dressing and undressing
4. Functional transfers like getting out of bed
5. Voluntarily controlling urination and bowel movements
6. Ambulation

OR need substantial supervision to protect the individual from harm due to cognitive impairment.

Why do you need it after a Gray Divorce?

Any friend or family member who has ever played the role of caregiver knows how physically demanding and emotionally taxing it can be.

Long Term Care insurance will pay for a skilled nurse or caregiver to come visit a home and provide in-home care up to 24 hours a day. The caregiver might cook meals, clean the house or just offer assistance with bathing and other daily activities to avoid accidents and insure quality of life is not compromised. Most importantly, it will provide peace of mind to those who care most about your health

We feel obtaining Long Term Care Insurance is one of the most important financial planning decisions to be addressed in post-divorce planning for a newly single person in their 50’s or 60’s. This age range is considered to be the ideal time from a cost benefit perspective to purchase coverage and the loss of the built-in caregiver should be the catalyst to motivate.