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Attorney Wayne
Attorney Wayne, Lawyer
Category: Family Law
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Experience:  Practicing Law Since 2000
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One aspect of the mediation process is looking at a business

Resolved Question:

One aspect of the mediation process is looking at a business partnership involving property co-owned by husband and his mother. Prior to separation, my husband and his mother co-owned a mobile home. I contend he inherited the half of the mobile home his mother owned when she died. Is this a reasonable assumption when the legal documents of ownership of the mobile home have both their names? Since we did maintenance on the mobile home for her prior to separation and following separation before her death do I have a legal interest in the mobile home?

My husband has an interest in the mobile home park where it is mandatory that the partners own their own mobile home. Following his mother's death he moved into the mobile home and had the business partnership continue in his name. We made payments on the business partnership with community property dollars from our joint account using community property funds following separation. He currently lives there and plans to buy a home and sell out his interest in the partnership and sell the mobile home.

Do I have a claim on the business partnership since it was not inherited but is linked with the mobile home? Can we have the mobile home appraised and then the business partnership appraised to determine the value of each in listing assets to be divided upon divorce?
Submitted: 1 year ago.
Category: Family Law
Expert:  Attorney Wayne replied 1 year ago.

 

Attorney Wayne :

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Hello. Thanks for contacting us.


This really depends on the manner in which the home was jointly titled.

 

While the interpretation offered shows some insightful thinking, it can only be a hypothetical argument until and unless it is applied to the particular manner in which the property in question was titled.

 

If it was a "Joint Tenancy" form of ownership, for instance, the deceased person's interest simply disappears while the other owner's property remains. There is no change in ownership in any legal sense, so if it was personal property before marriage, then it remains so. If it was acquired during marriage, then, unless it is an inheritance, it is arguably community property, subject to division during divorce.

 

 

Attorney Wayne41427.0889198495
Attorney Wayne :

While in California, this tenancy of the entirety title does not exist, other methods create the same unchanged ownership. Joint Tenancy is one method in California. Another is to have the property in a trust, where it maybe controlled by one instead of two people after death, but it is legally an unchanged ownership interest.

Attorney Wayne :

What this means practically is that if something was premarital property and not part of the community property created during a marriage, then it is not community property that can be divided at divorce. It is the same as any property owned before marriage -- not divisible as part of a divorce..

Attorney Wayne :

So before wasting time on a legal theory that attributes value in the property to something arising during marriage, it is a good idea to first check how the property is legally titled.

Attorney Wayne :

You can read more about the different forms of titling in California at this site http://www.jancummins.com/Forms_of_Title_in_California.pdf.

Attorney Wayne :

Unless it is not titled in a way that essentially eliminates one of the ownership interest at death without changing the title, then the argument suggested will be very difficult to pursue.


 

Customer:

I will check out the reference you forwarded. Thank you. However, the other part of inquiry deals with the business partnership not just the mobile home. One of the mediators said that a wife has an interest in any business activitiy of the husband prior to separation. In addition I paid some of the business costs associated with the business partnership using community property dollars from our joint account. It is complicated as your response suggests and may not be worth pursuing but I am asking about the law associated with the support given to the business partnership using community funds following separation. The value is substantial potentially for determining offsets and is very important to me to look at since I have been very supportive financially in the marriage and following separation. We used community property funds to support the investment following separation. He has separate property funds but did not use for this business partnership.

Expert:  Attorney Wayne replied 1 year ago.
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Expert:  Attorney Wayne replied 1 year ago.
Thanks for the clarification.

You seem to have a good grasp of the issues involved. As you know, the community property concept in California law does create a joint interest in the value of a business created during the marriage with marital assets. But arguments will arise if there is not a clear documentary money trail showing the origin of the wealth used to create an asset.

This is a key analytic point -- and one that could be a point of litigation if the money trail is not clear. To help, let me put this into a series of questions that may identify issues:

(1) What is the source of the money or other assets that formed the business?
-- if formed wholly using assets from either before the marriage or that were inherited by only one of the spouses, then that weighs heavily toward the business interest NOT being part of marital property in a Community Property state.
-- If only assets (for instance, savings, investments on savings, lotter winnings, etc) that were created during the marriage were used, then the case is very strong that the business investment constitutes Community Property subject to being divided up between the splitting spouses.

Remember -- assets that changed from (for instance, stocks sold and bonds bought, house sold, bank account deposit made etc) do not become Community Property because they were transformed during marriage. The origin of money that created the asset is the key. If it dates back before the marriage, it is not a marital asset, no matter how much the investment grew or changed during marriage!

(2) If a mix of assets -- both pre-marital and those from the marriage -- contributed to the business, this is called "commingling." Commingling separate, premarital assets and marital (community) assets in an investment during marriage, absent evidence of origin, will lead to a legal presumption that the resulting investment is Community Property that is divided equally between divorcing spouses. But a legal presumption is just a default position -- absent other evidence. Evidence of the origin of the investment seed money does change the calculus. A spouse that wants to have all or part of the investment treated as a separate pre-marital asset, can produce evidence (often documents showing transfers and transformations of assets involved) showing that investment in question was created without any marital assets. Money-trail documents can be entered as evidence to undermine the presumption of community property. Likewise, evidence that marital assets went into an investment can help sow that some or all of investment is actually Community Property.

-- Evidence might include bank records, investment house records, real estate title records or anything else that shows the money trail.
-- Sweat Equity can play a role. But, it is more likely to do so in a real estate context, where something like a house addition can be quantified, even if the house was owned by one of the spouse before marriage. (If one spouse does all the carpentry on the house addition, and there is proof, then that part of the home's value can qualify as Community Propery -- although other evidence that there was a "gifting" of the older parts of the house to the Community Property pool would be helpful to get more of the house into the category of asset that gets divided equally.

BotXXXXX XXXXXne: when there is a commingling of separate, premarital and marital assets in an investment, it is a good idea to gather evidence that marital assets went into the investment. Undermining the assumption would the require the other side to present evidence of its own that no marital assets went into the investment -- or to limit the amount that gets divided as Community Property.

In essence, while the presumption that commingled assets are Community Property can help create a division of the asset at divorce, evidence seals the deal.

Attorney Wayne, Lawyer
Category: Family Law
Satisfied Customers: 1506
Experience: Practicing Law Since 2000
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