Property Transfer within a Dissolution

Dissolution

Property Transfer within a Dissolution

The court subjects married individuals to the general rules governing fiduciary relationships. Pursuant to those rules, each spouse owes the other spouse the duty of highest good faith and fair dealing. It prohibits either spouse from taking unfair advantage over the other. These duties usually arise in the context of the transfer (or transmutation) of community property to separate property or separate property to community property during the marriage. When a transfer has taken place, the court presumes that one party has taken advantage of the other party. The party who gained an advantage in the transaction must prove that the transaction was fair and that the advantaged party did not assert any undue influence over the disadvantaged party.

Sometimes in a divorce action, one party would like to stay in the family residence. Usually if one party wants the home sold, the court will order the sale of the home even if there are minor children who have only lived in that home. In order for one party to keep the family home, the market value of the real property must be proven to the court and the person that would like to keep the home must be able to refinance the home and pay the other party for his or her interest in the home. If this is not possible, the court will order the sale of the home and the proceeds from the sale of the home will be equally distributed between the parties if the real property was solely community property.

Oftentimes during a marriage, one party will contribute his or her separate property for the down payment of a house or to infuse capital in to a business. If that house or business is community property, then the court must decide whether or not party who contributed the property is entitled to a reimbursement. In some divorce situations in California, both parties remember the contribution as to amount and character. In those instances it is easy for the parties to agree on the amount of the reimbursement. In other circumstances, however, the parties do not remember the source of the funds or the amount of the funds. If the parties cannot agree, then the party requesting the reimbursement must prove to the judge the amount of the contribution and the character of the contribution.

In a divorce in California, a family law court will not order the sale of any community property or separate property unless there is good cause for the sale of the asset. California Family Code 2108 allows the sale of an asset if there is unreasonable market or investment risks given the size, extent, and nature of the community estate. An order for the sale of property cannot be completed until the moving party has filed a declaration of disclosure.

When one party has exclusive use of a community property asset in Orange County after the date of separation, that party may be charged for the reasonable rental value for the use of that community asset. This situation usually arises when one party continues to live in the family residence and the other party has moved out of the home. In family law courts, it is considered Watts Charges. The person living in the home must pay the community the reasonable rental value of the home. If the party who lives in the home is also paying the expenses of the home such as the mortgage and property taxes, the court may consider that payment for the reasonable rental value of the home.

When spouses own a company together as community property, the value of the company must be divided between the spouses. The value of the company is usually determined by an expert. The spouses can each hire their own expert, hire a joint expert, or hire a joint expert and their own expert to determine the value of the company.

Any expert hired to value a business must use acceptable methods in analyzing the company’s value. The expert may use a mixture of methods to value a company combining the guideline public companies method and the industry acquisitions method to establish the market value under the market approach. The court does require that the analysis be sufficient to value the company and consider factors such as the value of comparable companies, prior sales of the same type of companies, past performance in the industry, the economic outlook both locally and nationally, as well as challenges to the business.

If you need a divorce attorney in the Orange County area to discuss a transmutation issue or any other dissolution matter such as child support, custody, spousal support and property division, contact Treviño Law. Conveniently located off of the 5 and 405 freeway at Lake Forest.

Please note that this blog is advisory only. Facts and circumstances may alter the divorce trial outcome. Please contact a family law attorney in Orange County to discuss your case in detail.

The court subjects married individuals to the general rules governing fiduciary relationships. Pursuant to those rules, each spouse owes the other spouse the duty of highest good faith and fair dealing.

The court subjects married individuals to the general rules governing fiduciary relationships. Pursuant to those rules, each spouse owes the other spouse the duty of highest good faith and fair dealing.

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