Financial Disclosure in Divorce

During the pendency of a divorce in California, each divorcing party is required to exchange full and complete financial information with the other.

Family Code Section 2100 requires full disclosure of all assets and debts, income and expenses to the opposing party, from the date of filing of the Petition until the Judgment of Dissolution is entered. The requirement is intended to provide each party with full transparency of all financial matters that may affect their position in settlement or trial, and to assure fairness in the process. The courts take this obligation very seriously.

Failure to adhere to the requirement of transparency can have serious adverse consequences to the party who has failed to disclose, including payment of attorney’s fees and other costly sanctions, including setting aside of the Judgment. In the case of fraud in the disclosures, punitive damages may be awarded to the other party. In one famous case, a wife who failed to disclose her lottery winnings to her husband was required by the court to turn over her entire winnings – over a million dollars – to her former husband. The courts have held that attempts to circumvent disclosures are sanctionable even if the other party was not harmed. Therefore, diligence requires strict attention to preparation of financial disclosures.

The Declaration of Disclosure is not filed with the Court, but it is signed under penalty of perjury, and is one of the most important documents involved in any Dissolution of Marriage in California.

  1. Preliminary Declaration of Disclosure

The Preliminary Declaration of Disclosure is required to be exchanged between the parties within 60 days of the filing of the Petition for Dissolution of Marriage and Response. The Preliminary Declaration of Disclosure typically includes two attached forms, the Schedule of Assets and Debts and the Income and Expense Declaration.

  1. Schedule of Assets and Debts

This form requires all assets and debts to be listed, whether in the name of the disclosing party, their spouse’s name, or both names, whether the assets were acquired before or during marriage, whether or not they are in the party’s possession or in the possession of a third party, and in some cases, even when the party believes the asset has no value. The most recent back-up documentation must be attached, including deeds, titles, and account statements, for example. Diligence in preparation of this document is essential.

  1. Income and Expense Declaration

As one might guess, this form requires disclosure of all the party’s income and expenses. For a business owner, this requires disclosure of a separate schedule showing the income and expenses of the business. When a business is involved, a forensic accountant may be necessary to assist to adequately prepare the Income and Expense Declaration. This document, as are the other disclosure documents, is signed under penalty of perjury and must be complete and accurate.

  1. Final Declaration of Disclosure

Prior to settlement or trial, the parties are required to serve on each other a Final Declaration of Disclosure. The Final Declaration requires that the parties disclose to each other all material facts and information regarding characterization and valuation of assets and debts and the facts and information contained in the Income and Expense Declaration. Certain investment opportunities must also be disclosed.

Exchange of the Final Declaration may be waived under certain circumstances. Your attorney may advise against such waiver. Even if the Final Declaration is waived, the Preliminary Declaration must be fully updated.

  1. Conclusion

This brief summary provides an introduction to the disclosure process but is not intended to cover all the details of each spouse’s obligations. Your attorney will answer any questions you may have and guide you through the disclosure process to help you protect your interests.

Divorce is stressful for all parties. If you are in need of a family law attorney, contact a compassionate and experienced attorney at Schneiders & Associates.

By: Claudia Silverman, Family Law Specialist, Certified by the State Bar of California Board of Legal Specialization

Characteristics (and Red Flags) to Look for When Buying a Business

An entrepreneur is one who organizes, manages, and assumes the risks of a business or enterprise. Being an entrepreneur means taking financial risk for economic profit, it doesn’t have to mean building a completely new business. For those with an entrepreneurial spirit who don’t have the latest and greatest idea for an app or new technology, acquiring and improving an existing business is just as entrepreneurial as starting a new company. When buying a business, there are myriad issues that you need to look out for, as well as a few red flags.

  1. Asset vs Stock Acquisition. For the majority of entrepreneurs, an asset acquisition is the ideal method of buying a company because it provides tax benefits and shields you from existing corporate liability, such as a pending lawsuit or one yet to be brought. When looking to buy a business, the seller’s openness to an asset acquisition is a preferred characteristic. A seller only offering a stock sale should be a red flag. By limiting the sale to a stock sale, the seller is transferring legal liability to you – the red flag. However, for certain opportunities, a stock acquisition may be preferable to an asset acquisition, for instance when there are governmental licenses required for the operation of the business that may be difficult to transfer to a new corporation.
  2. Seller Indemnity. Regardless of whether you choose to conduct an asset or stock acquisition, receiving a seller indemnity helps to shield you from legal liability going forward. If a seller refuses to grant a broad indemnity for claims related to the business that arise prior to the closing, they are refusing to take responsibility for any unlawful conduct they engaged in while owning the business, which should be a red flag.
  3. Orderly Books and Recordkeeping. An often-overlooked characteristic of a business, even one in dire need of saving, is a clear history of recordkeeping. The business should be able to show cash flows into and out of accounts, current accounts receivables, etc. Without clear records, you could be acquiring a business that has failed to properly account for its debts – a liability you could be taking on.
  4. Proof of Tax Payments. Similar to orderly books and recordkeeping, the seller should be able to prove that all sales tax, payroll taxes, and any other outstanding taxes have been properly paid. Failure of the business to pay these required taxes could mean liability for you. Even in an asset acquisition, outstanding tax owed for those assets or for employees can become your problem.

In the end, entrepreneurial ventures may be risky, but they also offer the potential of significant profit.  If you are considering buying a business, the attorneys at Schneiders and Associates can help you protect yourself from liabilities of the seller.

By: Ted Schneider, Esq.

New Sexual Harassment Prevention Training Laws in 2019

California employers with at least five employees must now provide sexual harassment prevention training and education to all supervisory employees and non-supervisory employees in California.

Since 2005, employers with at least 50 employees have been required to train and educate all personnel in supervisory positions in California in the prevention of sexual harassment.

SB 1343 lowers the number of employees to five and includes non-supervisors in the mandate.

The new law also requires covered employers to provide at least two hours of sexual harassment prevention training and education to all supervisory employees and at least one hour of such training to all non-supervisory employees in California, by January 1, 2020. Training and education must be provided once every two years thereafter.  There are also new requirements for seasonal and temporary employees.

The new legislation mandates the DFEH to develop and make available online on its website the one-hour and two-hour anti-sexual harassment training courses.  Employers may develop their own training programs.

There are other rules and matters to consider this year for employers to be in compliance with SB 1343.  We anticipate claims for harassment of all kinds will be on the rise.

By: Roy Schneider, Esq.

Do Not Be Foolish With Your Heirs’ Future

If you own real property in California, the California Probate Code almost forces you to create a trust to avoid fettering away your children’s or your heirs’ inheritance.  While trust and probate law is a very complicated area of practice with numerous intricacies that requires the assistance of an attorney well versed in this practice area, below are some of the reason why it is so important in California to create an estate plan, which most likely would need to include a living trust.

Although there are some exceptions, if your home, other real property, and other assets have a combined gross value of over $150,000.00, and you do not have a trust or other vehicles for your assets to be transferred upon your death, such as “payable on death accounts”, then your assets will be required to go through probate before they can be distributed to your heirs[1].

Probate is time consuming, expensive, and the information disclosed therein is part of the public record.  Even a simple probate concerning a home with a value of over $150,000.00 takes at least six months to be completed, but typically longer.  Almost all of the documents filed in a probate are part of the public record and can be viewed by anyone.  However, the greatest determent to your heirs and family is   the cost of probate. California law imposes statutory fees to be paid to both the attorney that probates your estate and your personal representative (the person appointed by the Court to handle your assets and debts during the probate process).  Pursuant to California Probate Code section 10810(a), these fees are as follows:

“(1) Four percent on the first one hundred thousand dollars ($100,000).

(2) Three percent on the next one hundred thousand dollars ($100,000).

(3) Two percent on the next eight hundred thousand dollars ($800,000).

(4) One percent on the next nine million dollars ($9,000,000).

(5) One-half of 1 percent on the next fifteen million dollars ($15,000,000).

(6) For all amounts above twenty-five million dollars ($25,000,000), a reasonable amount to be determined by the court…”

Thus, if you have an estate consisting of a home with a gross value of $550,000, the statutory fees to probate your estate would be $14,000 to the attorney and $14,000 to the personal representative.  Thus, your heir will automatically lose $28,000 of their inheritance if your estate has to be probated.

To avoid these extensive fees, a person should consider creating a trust.  A trust in California can be as simple or as complicated as your particular assets, desired distributions, and tax needs require. However, whether you need a relatively simple trust or a complex trust, these instruments provide you with possible asset protection, privacy, and expedite the distribution of your assets following your death.  Unless there is litigation, the administration of a trust is not done through the courts and is not part of the public record.  Also, the creator of the trust, the settlor, can decide how his or her assets are to be distributed and to whom. Such benefits are not available if your estate is probated.  While a Will allows an individual to decide who will receive his or her estate, it will not avoid probate, nor does it provide the assets protection associated with a trust.

Further, the cost of preparing a trust should be far less than the cost of probate.  While there can still be some attorney’s fees associated with administering a trust upon the creator’s death, these attorney’s fee are typically far less than those mandated by statute for a probate.  Also, the creator of the trust can decide the fees that will be paid to the person they choose to administer the trust, the trustee.

Therefore, through estate planning, including a trust, a person or couple, can avoid time consuming, costly probates and ensure that their heirs and beneficiaries receive as much of their estates as possible.  Thus, it is imperative for people to discuss their estates with an estate planning attorney before it is too late to avoid the pitfalls set forth above.

Eric A. Hirschberg is an attorney with Schneiders & Associates, L.L.P., who focuses his practice on estate planning, trust administration, and probate.  If you have any questions about how to best protect your estate, please do not hesitate to contact Mr. Hirschberg and schedule a consultation.

By: Eric A. Hirschberg, Esq.

[1] If your real property is held as “community property with right of survivorship” or in Joint Tenancy, then the property will go to your spouse or joint tenant.  However, if your survivor passes without a trust then the property would have to be probated.

How the CA Supreme Court Changed the Rules on Independent Contractors

On April 30, 2018, the California Supreme Court issued its much anticipated ruling in Dynamex Operations West, Inc. v. Superior Court that makes it more difficult for companies to label workers as independent contractors rather than employees and overturns nearly 30 years of legal precedence. The Court tossed out a more flexible standard that had been in place since 1989 and, instead, embraced a standard presuming that all workers are employees instead of contractors, and placed the burden on any entity classifying an individual as an independent contractor establishing that such classification is proper under the newly adopted “ABC test.”

Under the ABC test, a worker will be deemed to have been “suffered or permitted to work,” and thus, an employee for wage orders purposes, unless the putative employer proves:

(A) that the worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact;

(B) that the worker performs work that is outside the usual course of the hiring entity’s business; and

(C) that the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed.

Each of these requirements needs to be met in order for the presumption that a worker is an employee to be rebutted, and for a court to recognize that a worker has been properly classified as an independent contractor.  With respect to satisfying the requirements of (C) above, it Is not enough that the worker works outside of the principal’s place of business or works for other, the worker must have independently decided to engage in an independently established business.  This decision will have a significant impact on California’s growing Gig economy.  As of now, this standard seems limited to wage and hour matters and other tests may still be useful for workers compensation and tax matters.

If you would like more information on how this ruling could affect your business, contact Schneiders & Associates, L.L.P. today

By: Roy Schneider, Esq. 

How to Avoid Family Conflict In Naming Your Trustee

Choosing a trustee or financial fiduciary to handle your estate upon death or incapacity is very personal decision and varies from family to family.  Some families prefer to name their children as their successor trustees or financial fiduciaries.  However, consider the “explosiveness” potential of requiring all your children to agree on every decision.  On the face of it, the desired effect of “forcing them to agree” can also force them to fight.  Appointing just one of two or three or whatever number of children may really impose more of a burden than necessary on such one child and places that child in a “family hot seat” leading again to family conflict that parents wish to avoid.

To avoid the potential for family fights and unnecessary burdens, consider naming an independent trustee or financial fiduciary.  There are private, licensed and bonded fiduciaries, and there are excellent financial institutions, who serve in the role of successor trustee or financial fiduciary and who simply follow the terms of the trust without the potential drama that comes from family.

If you would like to discuss your estate plan and the options regarding who is the financial matters at the proper time, please make an appointment with the estate planning attorneys at Schneiders & Associates, LLP.

Umbrella Insurance: What It Is and Why You Need It

Umbrella Insurance: What It Is and Why You Need It

Lawsuits are everywhere. What happens when you are found to be at fault in an accident, and a significant judgment is entered against you? A child dives head-first into the shallow end of your swimming pool, becomes paralyzed, and needs in-home medical care for the rest of his or her lifetime. Or, you accidentally rear-end a high-income executive, whose injuries prevent him or her from returning to work. Either of these situations could easily result in judgments or settlements that far exceed the limits of your primary home or auto insurance policies. Without additional coverage, your life savings could be wiped out with the stroke of a judge’s pen. The legal fees spent defending any such claim could be devastating to your finances.

Typical liability insurance coverage is included as part of your home or auto policy to cover an injured person’s medical expenses, rehabilitation or lost wages due to negligence on your part. The liability coverage contained in your policy also covers expenses associated with your legal defense, should you find yourself on the receiving end of a lawsuit. Once all of these expenses are added together, the total may exceed the liability limits on the home or auto insurance policy. Once insurance coverage is exhausted, your personal assets could be seized to satisfy the judgment.

However, there is an affordable option that provides you with added liability protection. Umbrella insurance is a type of liability insurance policy that provides coverage above and beyond the standard limits of your primary home, auto or other liability insurance policies. The term “umbrella” refers to the manner in which these insurance policies shield your assets more broadly than the primary insurance coverage, by covering liability claims from all policies “underneath” it, such as your primary home or auto coverage.

With an umbrella insurance policy, you can add an additional $1 million to $5 million – or more – in liability coverage to defend you in negligence actions. The umbrella coverage kicks in when the liability limits on your primary policies have been exhausted. This additional liability insurance is often relatively inexpensive compared to the cost of the primary insurance policies and potential for loss if the unthinkable happens.

Generally, umbrella insurance is pure liability coverage over and above your regular policies. It is typically sold in million-dollar increments. These types of policies are also broader than traditional auto or home policies, affording coverage for claims typically excluded by primary insurance policies, such as claims for defamation, false arrest or invasion of privacy.

If you like to learn more about umbrella insurance and how it may be beneficial to you, please make an appointment to speak with an attorney at Schneiders & Associates, L.L.P. today!

By: Roy Schneider, Esq. 

Protecting Your New Family With An Estate Plan

Becoming a new parent is a life changing experience, and caring for a child is an awesome responsibility. This is also the time to think about your child's future by asking an important question: who will care for your child if you become disabled or die? The best way to put your mind at ease is by having an estate plan.

The most basic estate planning tool is a will, which enables a person to determine how his or her assets will be distributed after death. Without this important estate planning tool, the state's intestacy laws will govern how these assets will be distributed. In addition, the court will make the decisions about who will care for any minor children. Therefore, it is crucial for new parents to have a will or living trust naming guardians for minor children.

Selecting guardians involves a number of important considerations. Obviously, it is important to name individuals who are emotionally and financially capable of raising a child. At the same time, a trust also provides funds to be used to provide for the child's support and education. Guardians should share the same moral values, and childrearing philosophy of the parents. In some instances, it may be appropriate to appoint a different person as guardian and as trustee overseeing the financial support of the child. Perhaps you have a family member that would do a fantastic job raising the child, but who is not very financially savvy or responsible.

In addition to naming guardians in a will or trust, it is also critical to plan for incapacity by creating powers of attorney and advance medical directives. A durable power of attorney allows a new parent to name a spouse, or other trusted relative or friend, to handle personal and financial affairs during a period in which you may be incapacitated. Further, a power of attorney for healthcare, or healthcare proxy, designates a trusted person to make medical decisions about minor children in accordance with the parent's preferences.

New parents should also obtain adequate life insurance to protect the family. The proceeds from an insurance policy can replace lost income, pay household and living expenses, as well as any debts that may have been owed by the deceased parent. It is also important to ensure that beneficiary designations on any retirement accounts are up to date so that these assets can be transferred expediently.

Having a child is a time of joy, but also one that requires careful planning. The best way to protect your family is by consulting with an experienced estate planning attorney at Schneiders & Associates, who can help you navigate the process.

By: Roy Schneider, Esq.



What Nonprofits Need to Know about Charitable Gifts

Tax exempt organizations may accept contributions of cash or property.  A tax deduction is allowed for any charitable contribution of which is made within the taxable year under IRC Section 170(c).  The organization has an obligation to substantiate contributions for the donor’s income tax deductions purposes.  A gift acceptance policy will serve as a guideline and help board members and staff to determine what gifts are acceptable and establish the organization’s role.

Substantiation Requirements

Federal law imposes strict substantiation requirements for donors and disclosure requirements for charitable organizations.  Charitable organizations should provide a written statement to its donors that will be used by the donor for income tax deductions.  A donor can deduct a charitable contribution of $250 or more only if the donor has a written acknowledgement from the charitable organization.  Additional substantiation requirements generally apply to contributions of real and personal property.  Failure to comply with these requirements may subject the tax exempt organization to monetary penalties and jeopardize the income tax deduction of its donors.

Gift Acceptance Policy

Organizations should avoid a “make policy as needed” approach and establish a gift acceptance policy.  Gift acceptance policies maintain discipline in accepting gifts to prevent acceptance of gifts that will cost the non-profit time, money and possibly its reputation.  It will also establish guidelines and understanding of when to say “no thank you.”

There are many factors for nonprofits to consider when accepting a charitable contribution.  Contact our nonprofit attorneys at Schneiders & Associates to assist you with handling charitable gifts and drafting a gift acceptance policy.

By: Roy Schneider, Esq.

How To Avoid Common Errors In Employee Handbooks – Episode 2

Here is another quick tip from Attorney Ted Schneider on avoiding common errors in employee handbooks: overly detailed discipline procedures. Subscribe to our YouTube channel to keep seeing tips like these.

Schneiders & Associates, LLP is a premier Ventura County law firm successfully counseling individual and business clients in matters relating to business transactions, business litigation, employment law, estate planning, real estate law, bankruptcy, homeowners associations, non-profit law, family law, intellectual property, land use and entitlements.