FAMILY LAW ARTICLES
Have you been wondering about the differences between a contested vs uncontested divorce in California? John Castellano, a partner with Hartley Lamas, sheds light on the key distinctions between contested versus uncontested divorce cases.
Whether you’re navigating the complexities of family law or simply seeking a deeper understanding of divorce proceedings, this video is here to provide valuable insights. In any divorce case, the ultimate goal is to reach a final judgment. This encompasses critical aspects such as property and debt division, child custody and visitation orders, child support, spousal support, and potential restraining orders.
These provisions can be achieved through two primary methods: an agreement-based approach or a contested process, often referred to as litigation, which eventually leads to a trial conducted in court.
If you have any questions or want to speak with a skilled family law attorney about your divorce case, contact Hartley, Lamas, Et Al today at (833) 647-2377. From custody laws to settlement agreements, we provide comprehensive legal support tailored to your needs.
So, you or your spouse is a very high-earning professional. They have a great job or you have a great job. One of you does. And with that job, they have not just their base salary, but they have benefits. They have vacation time, restricted stock units, stock options, performance options or performance units, bonuses, a variety of different things that are all designed to make them happy employees.
My name is Carla Hartley. I have practiced primarily in the family law and probate spaces through most of my career. I’m licensed in both California and Texas, and I hope to help you today to figure out what happens with the above and beyond portion of that income.
Base Salary and Child Support
So let’s start with your base salary. Your base salary is your base salary. It’s probably coming to you on a W-2 and that part is easy to figure. So, the base salary is not all of the income you have available for support. It’s not all of the income you have in either state available for support. And for the most part, I’m going to be discussing child support. Now, there are different rules regarding spousal support in both states. As in, Texas doesn’t have spousal support as rehabilitative maintenance. So, right now I’m talking just about child support.
Bonuses, Stock Options, and Restricted Stock Units
Is that bonus that you’re going to get every year? Is that available for distribution, for support? Or is it property, post-separation property? What about the restricted stock units? Restricted stock units can be very, very interesting when you’re trying to divide them in a dissolution proceeding. You have to be careful with any stock options, but particularly restricted stock units because the distribution is going to be governed by the terms of the employee’s contract with the employer. So, if the employee is not permitted to roll these over without a taxable event, then the only way that the out-spouse, the spouse who is not the employee, is going to be able to get his or her share of these stock units is going to be a taxable event. Well, who should pay those taxes?
Divorce Law in California vs. Texas for High Net Worth Divorce
So much of this is going to depend on the state that you are in. This is coming down to where we’re starting to look at choice of law, in some cases. We have so many clients going back and forth between California and Texas, people with homes in both. Military people who have gone between both places may have a home in one and are presently stationed in the other. Now, military doesn’t deal with the bonuses we’re talking about. But what I want to make the point here is, increasingly we have this choice of law happening between two different states, and we have people who have the ability to get divorced in either state. This, for a higher wage earning spouse, becomes one of the things that you need to consider and where you’re going to try to pursue your divorce.
So, we’ve talked about the stock options, restricted stock units, performance bonuses. Again, depends. We’ve talked about the difference between the way Texas treats spousal support as rehabilitative maintenance only and what California regards spousal support as something that can continue in the case of a long term marriage for a very long time, whereas Texas puts limits on that. All of this can get very complicated and you need to talk to someone who knows the law in both states, if you’re one of these people who has a choice of jurisdiction.
Brokerage Accounts, Private Equities, and 401(k)s
Now, brokerage accounts, your standard brokerage account. If you are liquidating assets in your brokerage account, how is that going to be affected in the dissolution? How is that going to be treated for support? Is it income or is it just a liquidated asset? If you simply liquidate the asset and then reinvest, do you get some type of credit for that? Again, now we’re talking federal law and how federal law interacts with different state laws.
Private equities, I think, are going to track mostly with the stock options. I did do a little bit of a dive on the private equities because that is something that interests me. As you know, from a prior presentation I gave, if they’re hard to find, they’re more interesting to me. So the private equities tend to be harder to find. But once found, they are going to track with these other types of brokerage accounts.
401(k)s, fortunately 401(k)s, are also governed by federal law and so are IRAs. So for the most part, these don’t become income until you start having to take the required minimum distributions. However, how does each state treat as a deduction from your income, your contribution to the 401(k)? How does Texas and how does California treat the employer’s contribution, if your employer is making a contribution to your 401(k)? Does either state treat contributions from the employer differently if the employer is a government entity or if the employer is a private corporation or a private business? These are things you need to know and these are questions you should be asking yourself.
The reason I’m throwing out this video, this series of questions, is because there is no way for me to break a topic this large down into a five-minute or a three-minute discussion. These are questions you should be asking yourself and you should be looking for someone who can give you the answers. Especially if you have a choice about where you’re going to get divorced. And that is increasingly true.
Duty to Disclose
Now, how do the states, Texas and California, treat the duty to disclose the assets and liabilities of the parties? Well, that tracks pretty similarly. Both states require, as a matter of statute and supporting case authority, that each spouse has an affirmative duty to disclose to the other spouse all assets and debts for which either may be liable. This is something that is often misunderstood. And a lot of times people are looking at the stuff that’s on their paycheck stub. The RSUs, the stock options, the 401(k) contributions and thinking they– that that’s sufficient. They don’t have to also list the account that’s holding all this stuff in their disclosures. You do.
If you have an interest in it, that means your spouse may have an interest in it. Both states are community property states. Both states are going to require this type of disclosure. Both states are not going to track what they do with this information the same way. And both states are going to penalize you for failing to disclose fairly heavily. It’s something you don’t want to run into.
High Net Worth Divorce Lawyer in California and Texas
So, hopefully I’ve given you some stuff to think about. If you are the high wage earning spouse or you have a high wage earning spouse, there’s a lot of fringe benefits and a lot of other stuff going on with their pay stub. You need to be asking some questions and you need to find an attorney, if you have a choice of jurisdictions, who has the answers to these questions.
If you don’t have an attorney, if you don’t have the ability to choose which state you’re going to divorce in, you still should be asking yourself some questions and you should know before you get started on any type of settlement procedure, how your state is going to deal with these various, various assets. I’m Carla Hartley and I hope this has been helpful.