Collaborative Divorce Solutions of Orange County
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By CDSOC
A recommended article written by Carol R. Hughes, Ph.D., LMFT, Child Specialist and Divorce Coach
The spread of the COVID-19 virus and the subsequent government shelter-at-home orders have upended “life as normal” for California co-parents and their families. Now more than ever is the time for co-parents to work together, support each other, and model effective problem-solving for their children.
By CDSOC
When you are trying to navigate a divorce, there are many issues you need to address. If you own property in California, your decisions about your real estate can be among the most challenging, and perilous, if you are not fully informed.
One area often overlooked when making decisions about real property are the tax consequences. The tax implications can end up making a significant impact on your financial well-being, especially if you are part of the current wave of “gray divorces” among adults 55 years and older.
Many older couples who own property qualify for a lower property tax rate under California’s original Proposition 13. At the discretion of each county in California, Proposition 60 and Proposition 90 allow qualifying sellers to carry their Proposition 13 tax base on their original property with them towards the purchase of a new property of equal or lesser value. (Prop 60 governs real estate sales and purchases in the same county; Prop 90 governs real estates sales and purchases between two California counties).
Proposition 13 protects longtime homeowners against escalating property taxes as the value of their property increase. Base year values cannot go up by more than two percent per year, keeping the tax increase at a manageable level. Unless there is a change of ownership, or new construction, the base year value does not change. Unfortunately, this discouraged many people from selling property as their family circumstances changed.
Jason, 56, and Julia, 53, want to sell their five bedroom home on a large lot since their children are now grown and have homes of their own. They have lived in their current home for many years. The Proposition 13 base year value of $40,000 from 1975 grew to $66,000 by 2002. Their property tax bill is approximately $700 per year. Their current home assessment value is $400,000. Jason and Julia have found a two-bedroom townhouse for $370,000. But they are unwilling to move because this change of ownership will establish a new tax assessment for the townhouse based primarily on their purchase price, and their tax bill will jump from $700 to approximately $3,700 per year. They are on a fixed income and cannot afford the additional $3,000 per year in taxes.
To resolve this problem, Propositions 60 and 90 permit people over age 55 to sell one home and buy another of equal or lesser value within two years and take the Proposition 13 base value with them. Using the above example, Jason and Julia could move to the townhouse and still pay $700 per year in property taxes (tax rate and fees may make the total bill smaller or larger), plus the future increase of no greater than two percent. There are many requirements to qualify for the tax base transfer, and it can be used only once.
Why is this important in a divorce situation? It can only be used once and it cannot be divided between the spouses. This is the real kicker: family courts do not have this issue on their list of items requiring resolution. In all of my years of practice, I have never heard a judge ask about the tax base transfer.
In recent years, California has seen a sharp increase in gray divorces. Many of these couples are retired or near retirement age. This issue rarely came up in early years since most divorcing couples did not meet the age qualification.
We live in a different world today. What happens if this issue is not resolved or even addressed in your contested, mediated, or Collaborative divorce? The first person to apply for the transfer will get the transfer.
Real Estate Agent Julaine Wagonner of ReMax College Park Realty says often the ex-spouse won’t know his or her ex filed the application first until as late as the end of the year or until they receive their own rejection notice. It can take several months before the county updates the tax records to reflect a reduced/carried over tax base.
This is just one of several financial risks often missed during a divorce. Others include how to allocate any capital gains tax, for example. It is easy for even the most experienced family law attorney to overlook these issues. Confer with a financial professional who can assess your personal circumstances and work with your family law attorney to address and resolve these issues before you sign any judgment or make any requests for orders of the judge related to your real estate. Get the information from the expert to make sure your decisions are as complete as they can be, to set yourself on a path for a successful future.
By CDSOC
You will work with a team of legal, financial, and mental health professionals who are specifically trained in the Collaborative Process. They agree to work with you to reach a settlement outside of court.
In the Collaborative Process, the parties do not go to court. They resolve their differences through cooperative negotiation. Thus, all orders are made with both parties’ agreement.
While all cases are different, studies show that a successful Collaborative case is less expensive than a litigated case, even one which settles before trial.
In a full team Collaborative Divorce, each party will work with an assigned mental health professional acting as a coach. Among other things, the coach will assist the party to avoid the type of communication which will further divide the parties, and make settlement more costly and difficult.
The child specialist’s role is to be the voice of your children at the Collaborative negotiation table. The child specialist speaks to the children at age-appropriate levels. This enables both parents to have a clearer perspective on what their children really think and feel.
Because you are not in court, your case does not become a public record. The only documents filed with the court are those absolutely necessary to make your agreement legal. You will not file declarations telling the world your private business.
Because Collaborative Divorces are processed outside of court, you will not be subject to court rules, except those necessary for the court to process your judgment. You will not have to give public testimony in court. You will not have to miss work, or other important functions, to attend court on a date which may be inconvenient for you. You can go as fast or slow as you choose, and not be subject to the delays which budget shortages increasingly cause in litigated divorce cases.
The court is bound by California statutes dictating what must be done in terms of property division, support, and custody. In a Collaborative Divorce, the parties are free (and assisted) to reach a result which uniquely fits their family.
The Collaborative Process requires the parties to work together in order to solve the issues in their divorce. Working together is a skill which many couples facing divorce have lost. It is exactly what they will need to do in order to effectively co-parent their children after divorce. Thus, going through the process helps the parties with the skills they will need post-divorce.
There will be many events for the rest of your lives which a couple will both want to attend post-divorce without making it awkward for everyone else who is there. When you have children, these events include graduations, weddings, and grandchildren events.
Even when you do not have children, there are often overlaps in family and friends. Events with these people can be much less awkward when the divorce process itself has not driven the parties even further apart. This may be the best – and most lasting – reason to do your divorce collaboratively.
By CDSOC
New board named to serve 2016-2017 term August 4, 2016 Contact: Gayle Lynn Falkenthal, APR
619-997-2495 or gayle@falconvalleygroup.com
(Irvine, California) – Tracy McKenney, CDFA, CFP, has been named President of Collaborative Divorce Solutions of Orange County for the 2016-2017 term. McKenney is a Certified Financial Planner and Certified Divorce Financial Analyst in private practice based in Irvine, California.
Joining McKenney on the 2016-2017 Board of Directors are:
“It is important to me to be involved in an organization like Collaborative Divorce Solutions of Orange County. Collaborative Divorce represents a significant advancement in resolving divorce respectfully,” said McKenney. “Going through a divorce is in some ways harder than dealing with the death of a loved one. It worsens when the process is dragged out through contentious, time-consuming and costly litigation in court. In so many cases, couples can avoid the damage of a court battle, even when they aren’t sure they can cooperate. Our approach makes it possible.
“Collaborative Divorce keeps decision-making in the hands of the couple. It spares them and especially their children the duress from an acrimonious divorce, preventing lasting harm, and preserving the family relationships for a healthier future,” said McKenney. “In most cases, it is less expensive than a litigated divorce.”
“Our goal for the coming year is to make more couples in Orange County aware of Collaborative Divorce,” said McKenney.
About Collaborative Divorce Solutions of Orange County
Collaborative Divorce Solutions of Orange County (CDSOC) was founded in 2003 to advise couples in Orange County about out of court options to traditional divorce litigation. Our group consists of experienced family law attorneys, licensed mental health professionals, and credentialed financial professionals, all of whom are specially trained in Collaborative Practice, mediation, and conflict resolution. Working under the Collaborative Practice model, the result is a divorce guided with respect and compassion in a non-adversarial way so families can make the best possible decisions about their future.
CDSOC is online at https://cdsoc.com/, and Facebook.
CDSOC