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Collaborative Divorce Solutions of Orange County

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  • The Collaborative Process
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Capital Gains

The Effect of California Propositions 60 and 90 on Your Divorce

October 10, 2016 By CDSOC

by Diana L. Martinez Collaborative Lawyer and Mediator, Law and Mediation Office of Diana L. Martinez

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.

Consider the following example:

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.

Filed Under: Collaborative Divorce, Divorce and Money, Divorce and The Law, Financial Tagged With: California, Capital Gains, Diana Martinez, Divorce, Divorce and Real Estate, Divorce and Retirement, Divorce and Taxes, Gray Divorce

Children Must Be Heard and Not Seen During a Divorce: The Advantages of the Child Specialist

August 11, 2016 By CDSOC

by Bart Carey, Family Law Attorney

Law Office of Bart J. Carey, Mediation and Collaborative Family Law

“Divorce is a different experience for children and adults because the children lose something that is fundamental to their development – the family structure. The family comprises the scaffolding upon which children mount successive developmental stages, from infancy into adolescence.” — “Second Chances: Men Women and Children a Decade After Divorce”

How many times have you taken your child through a divorce? Helped your child navigate an emotional and transitory life experience that is difficult and opaque for you? Successfully rebuilt the family structure in ways that support your child? And all at a time when you and your spouse are not on the same page.

When it comes to helping your child through a divorce, consider turning to a child specialist to get the best advice and counsel based on the advantages of their specialized education, training and experience.

Here are nine reasons why you should have a child specialist assist you through your divorce process:

  1. It’s not therapy. No one is going to mess with your child. The child specialist’s role is to listen to you and your child and provide you with assistance with developing the best co-parenting plan to meet your child’s needs during and after the divorce transition process.
  2. You don’t know what you don’t know. The child specialist can help you uncover and identify your children’s unspoken needs and concerns, so they can be acknowledged and addressed. A child specialist can help your child navigate the uncertainties of the family transition and illuminate deeper insights for you regarding all of your child’s needs and concerns.
  3. Parents often disagree. Your child specialist works to increase parental consensus building by centering and keeping discussions focused on options that address the child’s needs and concerns.
  4. The devil’s in the details. There are many intricacies to tailoring co-parenting plans to best serve your child an experienced child specialist understands. Your child specialist can educate and expand your knowledge of the ins and outs and the options available.
  5. Children should be heard and not seen. A child is always ‘present’ in the room during negotiations. The child specialist gives your child an independent voice in the room and provides you as parents the insights you might otherwise miss.
  6. You know what you know – until you know better. Your co-parenting plans will go much deeper and be more durable than simply laying out a ‘schedule,’ and you and your co-parent will share a deeper understanding of how the plan serves your child’s best interests.
  7. Your child specialist is the child specialist so your Collaborative attorneys don’t have to be. The Collaborative child specialist is neutral in their relationship to a child’s parents and is only interested in your child’s long term well-being. Need we say more?
  8. Parents become the experts. You learn and develop new and diverse co-parenting skills tailored to your new family structure and circumstances from an expert.
  9. Tomorrow is just a day away. Your child specialist will be available post-divorce for consultation, on as needed basis, as kids grow up and the family changes with new relationships, new spouses, step children and blended families.
  10. It’s all upside. There is no risk. All consultation is confidential, for your use only. You ultimately control decisions and neither the child specialist nor their work may be used in court now or in the future.

It’s not just about a schedule. Decisions about your child’s future have significant and lasting consequences. It’s time to consider your Collaborative child specialist as indispensable to your family’s divorce as your Collaborative attorney.

Filed Under: Child Custody, Child Specialist, Child Support, Co-Parenting, Collaborative Practice, Divorce and Emotions, Family Issues, Mental Health Tagged With: Capital Gains, Divorce and Children, Divorce and Families, Divorce and Stress, Parenting Plan

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