Income of a Self Employed Party

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When one party is either self-employed or has an ownership interest in a business, there are two issues that arise in a divorce case. The first is the parties actual income for child support and spousal maintenance purposes, and the second is the value of the business interest for property division purposes.

Frequently it is critical to determine the income issue first, as it is not uncommon to go to court within a few weeks of filing to determine child support and spousal maintenance in temporary orders. Support is primarily based upon the need vs. ability to pay, and the parties income is a critical component to the ability to pay.

It is not uncommon for a self employed person to understate their income. This can be done in a number of ways, including:

• Payment of personal expenses from the business (such as auto expenses, phone and other utility bills, insurances, entertainment, food, etc.).



• Unreported income like cash payments.



• Money paid from the business to someone else (like parents, children, girlfriends, etc.) for services never rendered, that may eventually be given back.

It is critical to get as much information and documentation as soon as possible. It the client has access to business records, this is quickest and least expensive method. If not, the information can be subpoenaed (income statements, balance sheets, statement of accounts, tax returns, check registers, bank statements, etc.). Also the personal bank records can show unaccounted for deposits (presumably unreported income). Loan and credit card applications are also useful, as the parties state under oath what their income is (and for loan purposes, they tend to overstate the income while for court purposes they will understate their income).

Determining the income of a self employed person can be difficult, because they frequently have a lifetime pattern of hiding their income. There is a wealth of information contained within the financial documents that an experienced business mind can help organize and asses. If your spouse is self employed and has potentially hidden their income, you should consider discussing your case with an experienced family law attorney.

In my next post, I will talk about small business valuation.

The Renton law firm of Mogren, Glessner & Roti, represents clients in a variety of family law cases. Please visit our web page at Renton Divorce Lawyers for more information.

Equal vs. Equitable

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In Washington, the legal standard for the division of property and debts is not to divide things equally. At first glace, you might think that it should be. However, the legislature has determined that is not the standard to be used by the courts. An equal division of assets could result in the forced sale of assets and and unfair result considering all of the circumstances of the parties.

In Washington the legal standard is the division of assets and liabilities that results in a fair and equitable division. If the parties cannot decide what this is, then the court will divide things as the court deems fair and equitable.

If the two spouses have equal standards of living (income and expenses) at the time of divorce, and equal division of assets may be fair. If however they do not have equal standards of living (one has been a homemaker while the other has advanced their career), one may require a greater share of the property to cushion the income loss they will suffer at divorce. In that situation, the court may deem it fair and equitable to give that spouse a greater than equal division of the assets.

The Renton law firm of Mogren, Glessner & Roti, represents clients in a variety of family law cases. Please visit our web page at Seattle Divorce Lawyers for more information.

Valuation of Assets

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A frequent question that comes up in divorce cases, is what date do we use to value assets. The short answer is the court will want to use the date of trial, however for settlement purposes, we will use the date of the settlement. There are always exceptions to the rule however.

For a house, the court will usually use the date of trial fair market value, and also the date of trial balance on the mortgage to calculate the equity. Frequently the person living in the house will have been paying down the mortgage during this time. The court usually assumes that that is offset by living in the home "rent free" during that time.

A more difficult issue can be 401(k)'s or IRA's. The asset at separation is community property. Earnings after separation are separate property. Therefore, contributions after separation (either by the employee or employer) are separate property. The difficult issue to determine, is if the value goes up, what portion of the increase is due to increase in market value (which would be community) versus increase due to contribution (which would be separate). If we have all of the data, we can calculate this, but sometimes it can be difficult or time consuming to do it (especially if there have been changes in investments).

If bank account have not been touched, they would be valued at trial. Typically however, someone has had the use of the checking account, and have made deposits and written checks for bills. In that case, we typically use the date of separation value.

Automobiles are typically valued at trial. An exception would be if you get in an accident or have mechanical problems after separation. Then we would use the value at separation before the problem (as that is the individuals responsibility, not the community's).

Valuing assets can be a difficult challenge, not only in determining the value, but in deciding the timing to do so. A good family law attorney can help you navigate through this process.

The Renton law firm of Mogren, Glessner & Roti, represents clients in a variety of family law cases. Please visit our web page at Bellevue Divorce Lawyer for more information.

How to Prepare for a Settlement Conference

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Frequently in a divorce, the parties engage in a settlement conference prior to trial in hopes of settling the case and avoiding a trial, saving the financial and emotional cost of trial. Settlement conferences usually have a settlement master who is independent (often a retired judge or practicing family law attorney) and assists the parties in reaching a settlement. The following are some ideas that help the parties reach a settlement at a settlement conference.

First, do your homework in advance. Complete all discovery so that everyone knows all the facts. Next, present this information to the settlement conference master in an organized fashion. This should include a cover letter that gives the background of the case, and all the necessary information on all the relevant issues (parenting plan, incomes of the parties, child support, spousal maintenance, property and debt division, restraining orders, etc.). You should include a spreadsheet of the division of the assets, and documentation showing the value of all assets. You should income income verification and Child Support Worksheets. You should include your proposed Parenting Plan.

You need to organize and present all the information necessary to prove your case. While it is not a trial, you need to document your position. All of this information should be submitted to the settlement conference master (and the opposing party/attorney) at least 2 days in advance of your settlement conference. You should also receive the other party's documents and letter at the same time. This will give you some time to understand their position and prepare arguments and find documents against it.

Once you have submitted your documents, you then need to prepare yourself mentally for settlement. This is not a trial, and to settle a case, usually both sides must do some "give and take". It is also important to try to understand what your objective is and what the other sides objective is. Sometimes there are emotional issues that are more important than the dollar amount. If you know what they are, and are willing to "think outside the box", sometimes you can be creative and find a solution that meets both sides objectives.

One of the most important suggestions is to listen to your settlement conference master. He will have read both sides information and will be approaching it objectively as a trial court would. You need to listed to his opinion, because if the case goes to trial, chances are the trial judge will read the case the same way the settlement conference master did. You and your attorney are biased in your favor. The other side is biased in their favor. This is your opportunity to hear a neutral opinion on the case prior to trial. Listen and be willing to settle.

Finally, figure out what the differences are between the two sides, and what the dollar value of that is. Compare that with the cost and risk of trial. Is it worth it to go to trial? It may be, but don't assume that going to trial means that the judge will agree with you. After hearing the case, the judge may agree with the other party, and you would have done better with the results of the settlement conference. What will your attorney charge you to prepare for trial, and to go to trial. Trials can be very expensive (more than the value of what your are arguing over). Realistically evaluate the risks.

The Renton law firm of Mogren, Glessner & Roti, represents clients in a variety of family law cases, both contested and uncontested. We have 4 attorneys for you to chose from. Please visit our web page at Washington Divorce Settltement Conference for more information.

Debt Division in Washington Divorce

As part of an action for the dissolution of a marriage, the Court must determine the division of the parties debts and liabilities. The standard the Court uses is not necessarily and equal division of the debts, but a fair and equitable division, considering all of the circumstances.

The Court will usually order one party to pay a debt, and indemnify and hold the other party harmless from the responsibility of the debt. This order however, is between the two parties only, and does not effect the third party creditor. That means that if the obligated spouse fails to pay the debt, the creditor can still come against the released spouse in collection. If this happens, you have a right to get a judgment against the obligated spouse and collect your costs.

The Court will consider many factors in dividing the debts, including the length of marriage, the economic circumstances of each party, the terms of spousal maintenance, if any, and any other relevant factor.

The Renton law firm of Mogren, Glessner & Roti, represents clients in a variety of family law cases, including divorces with the division of debts. We have 4 attorneys for you to chose from. Please visit our web page at http://www.mgrlaw.com/ for more information.

Pet Custody Disputes in Washington

In many divorce or legal separation settlements, the most complicated matters to resolve are child custody arrangements and the division of the couple's assets. In recent years, however, more and more couples have found themselves caught in a legal battle somewhere between the two: custody disputes over pets. Under Washington law, a pet is considered just another piece of property, but many pet owners see their favorite animals as much more than that.

Contrary to popular belief, many animals do not see their human caregivers as interchangeable sources of food and shelter. Dogs, cats, and other animals do have different relationships with different people, including varying levels of closeness and willingness to obey. In other words, it does matter which person a pet ends up living with after a separation. Unfortunately, the law has not been updated to reflect this reality. Many family law judges are unfamiliar with animal behavioral issues, and may not take pet custody disputes seriously. As a result, most divorcing couples with pets are left to settle the matter between themselves.

Some couples agree on a joint custody arrangement; perhaps the pet will alternate homes each week or so, or perhaps one owner will have custody on the weekends. Unfortunately, many pets find this amount of moving around very stressful. The matter can be further complicated if one owner moves out of state or suddenly refuses to let the former spouse visit the pet.

The Renton law firm of Mogren, Glessner & Roti, represents clients in a variety of family law cases, including property division and pets. We have 4 attorneys for you to chose from. Please visit our web page at http://www.mgrlaw.com/ for more information.

Washington No Fault Divorce

In Washington, the legal basis for the dissolution of a marriage is that the marriage is irretrievably broken. It only takes one party to allege this. Unless the court were to find that the petitioner was induced to file by by fraud or coercion, the court must grant the petition. There is nothing else the respondent can do to prevent the dissolution of the marriage.

Other "ground" or behaviors are not a basis for divorce, and therefore not admissible for that purpose. The court will not allow testimony regarding unfaithfulness, affairs or other fault.

Some "fault" may be admissible for other purposes. If it is relevant to the issue of parenting, it could be admissible. Domestic violence is admissible for the purpose of showing the need for restraining orders. When it comes to the issue of property division, the statute specifically states that the division must be made without regard to misconduct. An exception to this can be if a party dissipates community assets.

The Renton law firm of Mogren, Glessner & Roti, represents clients in a variety of family law cases, including the dissolution of marriage and the division of assets. We have 4 attorneys for you to chose from. Please visit our web page at http://www.mgrlaw.com/ for more information.

Dividing Non-Qualified Retirment Benefits in Washington Divorce

Pension and other retirement benefits are generally considered property subject to distribution by the Court in a dissolution action. A qualified pension plan (under the ERISA tax code) can be divided in two primary methods. The first is to determine it's value and awarding it to one spouse. The second is to divide the benefit between the spouses, typically using a Qualified Domestic Relations Order (QDRO). Today, we will look at dividing non-qualified plans.

Individual Retirement Accounts (IRA's) are not qualified so a QDRO is not necessary. They can be awarded or divided in the Divorce Decree with simple language specifying who gets it.

Washington State pensions, including Public Employees' Retirement System (PERS), Teachers' Retirement System (TRS), School Employees' Retirement System (SERS), Law Enforcement Officers' and Fire Fighters' Retirement System (LEOFF), Washington State Patrol Retirement System (WSPRS), Judicial Retirement System (JRS), and Judges' Retirement Fund (JRF), all require special statutory treatment for division, rather than a QDRO. Specific information on these pensions can be found at the following web page http://drs.wa.gov/member.

A family law attorney can advise you on how retirement benefits can fit into a fair division of assets, and help in getting them valued. QDRO's need to be approved by both the court and the pension administrator. Be sure to have your QDRO reviewed by an attorney.

The Renton law firm of Mogren, Glessner & Roti, represents clients in a variety of family law cases, including the division of assets (like a pension) in a divorce. We have 4 attorneys for you to chose from. Please visit our web page at http://www.mgrlaw.com/ for more information.

Dividing a Washington Pension Using a QDRO (Qualified Domestic Relations Order)

Pension and other retirement benefits are generally considered property subject to distribution by the Court in a dissolution action. A pension plan can be divided in two primary methods. The first is to determine it's value and awarding it to one spouse. The second is to divide the benefit between the spouses, typically using a Qualified Domestic Relations Order (QDRO). Today, we will look at the second option.

The second method in awarding a pension is to use a Qualified Domestic Relations Order (QDRO) to divide the benefit now, so that both spouses will share the benefit at retirement age. The QDRO can award either a specified monthly dollar amount to be paid at retirement, or a percentage of the amount accrued or to be paid. This can be done with all qualified retirement plans, such as the Boeing Employee Pension or Boeing 401(k) (VIP), or retirement accounts of other businesses.

The QDRO must be signed by the Court, and a certified copy sent to the pension administrator. They must then decide if it is truly a "qualified" order. If not, they will typically send a letter explaining the problems, and it must be redrafted to meet the requirements of thier plan or the IRS. If it is approved, they will then process it in a timely fashion.

The same can be done with a 401(k) plan, where the QDRO can award a spouse an interest in the retirement benefit in a divorce without incurring any penalty and without any tax, as long as it is rolled over into another tax deferred vehicle (IRA).

A family law attorney can advise you on how retirement benefits can fit into a fair division of assets, and help in getting them valued. QDRO's need to be approved by both the court and the pension administrator. Be sure to have your QDRO reviewed by an attorney.

In my next entry, I will discuss the division of retirement benefits that are not "qualified" under the IRS regulations.

The Renton law firm of Mogren, Glessner & Roti, represents clients in a variety of family law cases, including the division of assets (like a pension) in a divorce. We have 4 attorneys for you to chose from. Please visit our web page at http://www.mgrlaw.com/ for more information.

Valuing a Washington Pension in Divorce Using an Actuary

Pension and other retirement benefits are generally considered property subject to distribution by the Court in a dissolution action. A pension plan can be divided in two primary methods. The first is to determine it's value and awarding it to one spouse. The second is to divide the benefit between the spouses, typically using a Qualified Domestic Relations Order (QDRO). Today, we will look at the first option.

The first method in awarding a pension, is to find the present value of the future stream of benefits, and then giving the benefit in its entirety to the spouse. The pension fund will typically give us the amount of the monthly benefit at retirement (usually age 65), but will not tell us what that is worth in today's dollars. To value the pension, we send the information (payment amount, date of birth, expected date of retirement, date of employment, date of marriage, and pension information) to an actuary, who uses life expectancy tables and projected interest rates to determine its present value in today's dollars. This benefit can then be awarded in its entirety to one spouse. In this case, to have a fair and equitable division of assets, the other spouse would probably be awarded other assets to offset this value (possibly their own pension, the house, or something else).

In the next entry, I will address the second method, of actually dividing the pension between the two spouses, so they both receive payments at the time of retirement.

A family law attorney can advise you on how retirement benefits can fit into a fair division of assets, and help in getting them valued. QDRO's need to be approved by both the court and the pension administrator. Be sure to have your QDRO reviewed by an attorney.

The Renton law firm of Mogren, Glessner & Roti, represents clients in a variety of family law cases, including the division of assets (like a pension) in a divorce. We have 4 attorneys for you to chose from. Please visit our web page at http://www.mgrlaw.com/ for more information.

Division of Pension Plans in Washington Divorce

Pension and other retirement benefits are generally considered property subject to distribution by the Court in a dissolution action, whether or not the benefits are vested. The law considers these benefits to represent deferred compensation. This means they were accrued during the marriage and belong to the marital community, rather than being earned after divorce (at retirement) and belonging to the spouse whose employment generated them.

There are many types retirement benefits to consider in a property division, including IRA's, pension plans, 401K's, government plans, union plans, stock options, sick leave, vacation time and deferred compensations.

A family law attorney can advise you on how retirement benefits can fit into a fair division of assets, help in getting them valued, and determine the best way to divide them.

The Renton law firm of Mogren, Glessner & Roti, represents clients in a variety of family law cases, including the division of assets in a divorce. We have 4 attorneys for you to chose from. Please visit our web page at http://www.mgrlaw.com/ for more information.