Under California Family Code §760, most property acquired during a marriage is community property. Community property must be divided equally and any judgment dividing property between the parties is final. However, awards for spousal support are based on equitable considerations. A court usually retains jurisdiction so the order can be modified later, as may be necessary and appropriate. This is especially true for a long-term marriage. (See In re Marriage of Morrison, 20 Cal. 3d 437, 453 (1978)).
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A superseding rule is found in FC §4330 which states that a court may order support payments from one party to the other only in an amount, and for a duration, that the court determines in just and reasonable, based on the standard of living established during the marriage. A court has wide discretion in awarding spousal support. The goal is for the supported spouse to be self-supporting within a reasonable period of time. For short-term marriages, a reasonable period of time under CFC §4320(1) is generally one-half the length of the marriage. For long-term marriages, as defined under CFC §4336, other factors must be considered.
Under CFC §§4320 and 4325, anytime there has been a criminal conviction for an act of domestic violence, a court may reduce or eliminate any award of temporary or permanent spousal support to the abusive spouse.
Spousal Support Factors
General factors to consider for spousal support can be found in CFC §4320(a)(1)-(k) which were discussed In re Marriage of White, 192 Cal. App 3d 1022. 1026 (1987). They are:
- The extent to which the earning capacity of each party is sufficient to maintain the standard of living established during the marriage, taking into account the marketable skills of the supported party and the job market for those skills.
- The extent to which the supported party contributed to the education, training, or licensing of the supporting party.
- The ability of the supporting party to pay spousal support, taking into account the supporting party’s income, assets, and standard of living.
- The ability of the supported party to engage in gainful employment without unduly compromising the interest of dependent children.
- The age and health of the parties.
- Any documented evidence of domestic violence.
- The immediate and specific tax consequence to each party.
- The balancing of hardships to each party.
- Any other factors the court determines are just and equitable.
Determining Spousal Support
Under CFC §4338, property used to determine the amount of spousal support is considered in the following order:
- The earnings income, or accumulations of a spouse while living separate and apart that would have been community property if the spouses had been living together.
- The community property.
- The quasi-community property.
- The other separate property of the spouse making the support payments.
An equalization payment to one spouse is often necessary when a community property or family business is awarded to the other spouse. This often occurs when a business is awarded to one spouse who ran it during the marriage. In order to equalize the community property division, the spouse awarded the business will have to buy out the other spouse’s interest.
To determine the buyout amount, the business must be valued and the present value of the future cash flow must be calculated. Present value, also known as present discounted value, is a future amount of money that has been discounted to reflect its current value, as if it existed today. The present value is always less than or equal to the future value because money has interest-earning potential, a characteristic referred to as the time value of money. The present value of the business is then divided among the parties. The spouse-owner can then buyout the other spouse’s half interest. This settles the division of community property but not spousal support.
Spousal Support Obligations
Spousal support obligations will be determined based on the entire income stream produced by the business. A supporting spouse who purchased the other spouse’s half interest will pay support based on the income stream which includes the half interest purchased. The same can be said of any income-producing asset such as a pension or annuity when its value is based upon a projected, future income stream and assigned to the earner spouse after an equalizing payment to the non-earner spouse.
In Marriage of White, 192 Cal. App 3d at 1027, the court said; it is possible to treat a pension as marital property, award it entirely to the earner spouse (with off-setting award of marital property to the non-earner spouse) and then to take the earner spouse’s receipt of pension benefits into account in determining whether there should be any alimony award to either spouse.
It may be beneficial to consider an equitable division of a business or pension instead of buying-out your spouse’s half interest to avoid the consequence of “Double-Dipping.”
Double-Dipping occurs when there is an award of spousal support to one spouse who has been bought out of an income-generating community property business or asset by the other spouse. Although the bought-out supported spouse has received some compensation for the transfer of an anticipated future income stream, the court may consider the future income stream earned by the supporting” spouse in awarding spousal support.
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