A parenting plan is the document that states when children are with each parent. Effective parenting plans sometimes can be difficult to create. Challenges can arise not only when parents do not agree on a schedule; but also when parents in agreement have to synchronize busy schedules into one usable calendar.
Parenting plans are important because they provide both children and parents with consistency and reliability – both of which are critical to preserving healthy relationships between parent and child.
To assist parents with the task of creating a parenting plan, the Supreme Court of Arizona has published a guidebook titled Planning for Parenting Time: Arizona’s Guide for Parents Living Apart. This resource, created by a committee of Arizona judicial officers, mental health providers, and attorneys, provides parents with sample parenting plans based on the age of the child. It also provides sample holiday and school break schedules, and addresses special issue scenarios that may arise. To access this useful resource, please click here.
QUESTION: My Court Order states that I am to split the cost of child care expenses with my child’s other parent. Do I have to pay half of child care expenses even if the amount charged is extremely high?
ANSWER: As is often the answer often in family law matters – it depends on the facts and circumstances of your case. In the explanation below, we shed light on the rationale of the court with regards to this issue.
California Family Code §4062(a)(1) states that “[t]he court shall order the following as additional child support: (1) [c]hild care costs related to employment or to reasonably necessary education or training for employment skills.” This means that the court must order as additional child support (above and beyond base child support) the costs of daycare, preschool, or extended care after school or during breaks from school, which is used while a parent is at work or while gaining skills or training deemed by the court to be reasonably necessary for work. When parties disagree on the selection of the child care provider, courts typically look to the “reasonableness” of the child care costs.
While it is true that no one can predict with certainty how the court will rule, the court routinely takes into consideration the going market rate for child care in the community in which the child attends daycare, preschool, or extended care programs. The court, with the help of the parties’ counsel, often tries to assist the parties in fashioning an agreement selecting a child care provider or facility that is both cost-effective and a safe and nurturing environment for the child(ren) – these are typically the court’s goals.
That said, location and convenience are factors to bear in mind when analyzing your child care situation. When selecting a child care provider, parents may argue over the price of one daycare facility versus another. From our experience, the court is likely to balance child care costs against the convenience and location for the working parents. Provided that the cost of the convenient location does not greatly exceed the cost of the other facility, the court is more likely to select the convenient childcare provider.
In answer to your specific question, and with this background explanation in mind, the issue that the court will consider is not whether an hourly rate charged by a child care provider is especially high, but whether the total monthly child care cost is reasonable given your case-specific facts and circumstances, including location and convenience for both parents. That said, the going market rate for child care expenses in your community will often be the “benchmark” that the court will use when ordering child care expenses.
Child Support in California Generally
California’s Family Code governs issues of child support. When a court orders child support, the Family Code states that the court must adhere to the statewide uniform guideline (usually referred to as “formula” or “guideline”), except in special circumstances as described in the Family Code (Fam. Code §4052).
In California both parents are mutually responsible for supporting their children and the Family Code states that a parent’s “first and principal obligation is to support his or her minor children according to the parent’s circumstances and station in life” (Fam. Code §4053(a)). One’s duty to support his or her children includes the duty to contribute to additional support for the minor children beyond the basic guideline child support order. The Family Code states that there are two categories of additional child support (add-ons) that could be implicated in a case; specifically mandatory child support add-ons and discretionary child support add-ons (Fam. Code §4062).
Mandatory Child Support Add-Ons
There are two types of mandatory child support add-ons that the court must order if requested by a party; 1) child care costs related to employment or reasonably necessary education and/or training and 2) reasonable uninsured health care costs for the minor child (Fam. Code §4062).
Uninsured Health Care Costs for the Minor Child
Reasonable uninsured health care costs for minor children are subject to orders for payment and/or reimbursement from the other parent (Fam. Code §4062(a)(2)). Also, there is a rebuttable presumption that costs actually paid for uninsured health care needs are reasonable (although exceptions exist)(Fam. Code §4063(d)).
Procedures for Reimbursement of Uninsured Health Care Costs
An order made to pay and/or reimburse the other parent for costs incurred from uninsured health care needs (for example co-pays) must conform with the guidelines of Family Code §4063. This section states that the court has a duty to advise the parties of their rights and liabilities and include in the order the time period for a parent to reimburse the other parent (Fam. Code §4063(a)(1)-(2)). The court usually satisfies this requirement by providing the parties with FL-192 form titled “Notice of Rights and Responsibilities – Health Care Costs and Reimbursement Procedures.”
The parent that has paid the costs has a duty to provide an itemized statement of the costs to the other parent within a reasonable time, but not more than 30 days after accruing the cost (Fam. Code §4063(b)).
However, it is important to note that the 30-day accounting rule is not triggered until an order for payment of add-on health care costs exists (In re Marriage of Lusby, Cal.App.4th 459, 475 (4th Dist. 1998)). The Lusby court clarified the 30-day notice rule by stating that “the duty to give such notice is not triggered until there is an order for payment” (Id.).
Unlike uninsured health care costs, childcare expenses as a mandatory add-on do not appear to have to be reasonable (Fam. Code §4062(a)(1)). Nor is there the requirement that the parent paying the costs provide the other parent with an itemized statement; rather, the parent ordered to pay/reimburse has the burden to seek a prospective modification if that parent believes the amount ordered is not the actual cost (Marriage of Tavares, Cal.App. 4th, 620, 628 (2007)).
The time limit for reimbursement of childcare expenses appears to follow the retroactivity rules for child support that state an order can be made retroactive to the date of filing the motion or date of service in some instances. However, in the Lusby case, the court held that Mother was entitled to reimbursement for childcare expenses incurred for an elapsed period that occurred before she filed her motion to requesting add-ons (In re Marriage of Lusby, Cal.App.4th 459 (4th Dist. 1998)). The Lusby court held that the reimbursement order was not a modification to the existing guideline child support order but rather an “amplification” of it and therefore did not contradict the rules regarding retroactivity of child support modifications (Id. at 473).
Discretionary Child Support Add-Ons
Pursuant to the Family Code, discretionary child support add-ons (meaning that the court does not have to order them) include costs related to the educational or other special needs of the children, and travel expenses for visitation (Fam. Code §4062(b)(1-2)). Because the court has discretion when fashioning an order for this second category of add-ons, the facts and circumstances of each case will be the driving force behind this type of order.
Effective January 1, 2013, California Family Code Section 2104 has been amended to add a new subsection (f), which requires family law litigants to serve their Preliminary Declarations of Disclosure within 60 days of filing their initial pleading, whether it be the Petition or the Response. (See Fam. Code §2014(f) at http://www.leginfo.ca.gov/cgi-bin/displaycode?section=fam&group=02001-03000&file=2100-2113.)
Preliminary Declarations of Disclosure consist of the Schedule of Assets and Debts (FL-142) and Income and Expense Declaration (FL-150) forms. The purpose of these forms is to put your spouse on notice of everything you own and owe, separately and together, so you can divide your property and debts. The financial information contained on the Income and Expense Declaration form provides the parties (and the court) with the information necessary to make decisions about child and spousal support. In a marital dissolution case, these forms are critical – you cannot get a divorce without them - and serve as a roadmap for resolution of the entire case. (For more information about these forms, see http://courts.ca.gov/1229.htm#tab8759.)
Previously, there was no time limit for the service of these forms. Now, if a spouse fails to complete his or her disclosure within 60 days, the other spouse will have the option of filing a motion to compel with the court and requesting sanctions. In complex divorce cases, 60 days will likely not be enough time and may result in attorneys or pro per litigants stipulating to a longer period of time for the exchange.
IBM recently announced that it will be delaying its match to its employees' 401(k) plan until December. In December, it will make a lump-sum payment. As a result, the company should save money because it will not contribute to the plan of employees who leave the company before December. The downside for employees is that they may lose investment gains that they would have otherwise had access to during the year. It will be interesting to see whether other technology companies follow suit.
This may motivate IBM employees to file for divorce sooner so as to protect the December employer match from division under community property law. Typically, pre-marriage and post-separation contributions to 401(k) plans are the separate property of the recipient spouse and not subject to community property division.
A good article on the topic appeared this week on Salon.com
Seeley & Madigan, LLP is pleased to announce that partner Kimberly Madigan has been selected for inclusion in the 2012 Northern California Super Lawyers Rising Stars list.
Annually, Super Lawyers recognizes outstanding lawyers who have attained a high-degree of peer recognition and professional achievement. The Rising Stars list names the state's top up-and-coming attorneys and represents no more than 2.5 percent of lawyers in the state. The Super Lawyers Rising Stars list will appear in the September issue of Northern California Super Lawyers magazine and in the August issue of San Francisco magazine.
Allocation of stock options upon divorce generally requires two steps. A court must first determine what portion of the option constitutes marital property, and must then decide the value to apply to this percentage. With respect to the first step, stock options both granted and vested during marriage generally constitute community property subject to allocation upon divorce. When stock options are granted during marriage but do not vest until after separation, some jurisdictions hold that the option is nothing more than an expectancy that is not subject to property division upon divorce. However, in California, stock options owned but not vested as of the date of separation may constitute community property to the extent such options are attributable to services rendered during marriage. See In re Marriage of Brown (1976) 15 Cal. 3d 838, 844 (finding contractual rights to future benefits, though unvested and contingent, are property subject to allocation between community and separate interests). Similarly, options granted before, but vested during marriage, or granted after separation, but awarded for services rendered during the marriage, may also be subject to distribution.
Notably, California courts have broad discretion to fashion any apportionment of interests that is equitable. When a trial court determines property contains both separate and community interests, allocation of such property may be accomplished by any method or formula that will achieve substantial justice. In re Marriage of Steinberger (2001) 91 Cal. App. 4th 1449, 1459. There is thus no precise formula employed to divide spousal stock options, and the community share (if any) of such options will necessarily depend on the circumstances of each case. However, because options are considered community property to the extent they are attributable to work performed during the marriage, California courts attempting to divide stock options have generally relied upon various versions of the “time rule.” Though there is no uniform computation, the time rule formula generally takes into account the number of years the employee spouse has worked for the company, the years of the marriage, the time lapse between granting and vesting, and the relation between such time periods and the date of separation. As a threshold issue, however, the time rule formula considers the nature of the option, or whether it constitutes deferred compensation for past or present services, or an incentive for future services, or a combination of both. An option serving as deferred compensation must be divided in accordance with marital status at the time it was earned. In re Marriage of Hug (1984) 154 Cal. App. 3d 3d 780, 787. Where the option consists of both deferred compensation and future incentive, the apportionment test may be adjusted to focus more on the future services component. In re Marriage of Nelson (1986) 177 CA 3d 150, 153-54.
Senior Partner H. Yvonne Seeley of Seeley & Madigan, LLP was interviewed yesterday on ABC (KGO Channel 7) to discuss the implications of the Facebook IPO on divorce rates in the Bay Area. Ms. Seeley appears at the 1:40 mark of the video below.
The SF Chronicle's Kathleen Pender wrote an excellent article over the weekend discussing the economic ramifications of the impending Facebook IPO. One of the best parts of Pender's article is her explanation of how stock options are valued pre-IPO, and how Facebook's chosen vehicle, "restricted stock units," or RSUs, are also valued. Alternative forms of compensation, like stock options and RSUs, are a significant issue in Bay Area family law, as many spouses in and around Silicon Valley work for or invest in tech startups and have amassed significant portfolios of pre-IPO shares of companies. Pender offers a concise and readable explanation of how RSUs qualify as compensation, which could be a significant issue when establishing spousal and child support in a divorce.
According to Pender, six months after IPO, Facebook will be freeing up about 280 million RSUs to its employees. These restricted stock units are not stock options, which give employees the opportunity to buy shares in a company at a specific price. Rather, as Pender explains, for vested Facebook employees owning an RSU is very much like owning a share in the company, though employees initially pay nothing for the RSUs. But, the RSUs carry a financial "catch." Six months after IPO, Facebook will "net settle" these restricted stock units. At that time, "the market value of all vested shares in pre-2011 grants...will be deemed compensation, just like a bonus, and employees will owe ordinary income tax on this amount, whether they sell the shares or not," Pender explains. Social security and medicare taxes also will be withheld.
In the context of family law, the "net settling" of Facebook's RSUs could have significant implications for divorced or divorcing Facebook employees, in that compensation of any kind, whether in the form of wages, income realized by a spouse from the exercise of options, or in this case bonus income like the "net settling" of RSUs, is income that is available for child and/or spousal support. This impending financial "windfall" could lead to a wave of actions in court to modify spousal or child support awards.
Complex issues like these arise frequently in our practice. Valuing and dividing stock options and their relatives, like RSUs, in a divorce often requires the assistance of a forensic accountant.
Kathleen Pender, "Facebook IPO Will Boost State Revenue"
With tax season coming to a close, many couples who have separated are having issues filing their taxes for 2011. There are many things to consider, such as whether to file jointly or separately, how to divide the deductions and credits if filing separately, and how tax misconduct by one partner may affect the liability of the other. These issues are difficult and can require the advice of an attorney, a CPA, or both.
Recently, Forbes contributing editor Peter J. Reilly published an article that considered the question of why divorcing spouses might file jointly (link). Often parties to a divorce who have filed jointly in the past automatically assume that they will file jointly until their marriage is dissolved. Reilly explains that the option to file separately exists, and for some parties may be preferable to filing a joint return.
For one, filing separate tax returns can allow the spouses to preserve greater financial flexibility with regards to their taxes. Parties can amend their separate returns to create a joint return, but the reverse isn’t possible. This means that once a tax return is filed jointly, it is, to a degree, set in stone and cannot be amended to take advantage of some of the benefits of filing separately.
Second, when married parties separate, each party loses any concrete understanding that person might have had of the other party's financial circumstances. If someone was to sign a joint return that turned out to be fraudulent because of the actions of their estranged spouse, the IRS could hold them responsible for any tax debt. Innocent spouses do have options, but they are not guaranteed.
Third, even if there is no fraud involved, Reilly warns that both parties on a joint tax return are responsible for the total tax, even if their means to pay it are unequal. Married parties filing jointly have what is known as joint and several liability, which means that the IRS has the ability to collect any outstanding tax debt from either party on the return, even if their overall contributions to the tax liability--via capital gains taxes on investment income, for example--are unequal.
Of course, there are considerable benefits to filing a joint tax return, not least among them a generally lower tax rate. A joint return will typically produce a lower tax rate than two married filing separately returns (though often not less than two single separate returns), and standard deductions and some tax benefits may change if the parties choose to file separately. (See IRS Publication 501) As long as parties were still married on the last day of the year, they eligible to file a joint return.
In all scenarios, it is very important for parties involved in a dissolution to get good tax advice, as they are in a unique position and the law is complicated. The family law attorneys at Seeley & Madigan, LLP and their affiliated CPAs have dealt with these issues many times and are able to give advice tailored to an individual situation.