Divorce Strategies for Self Employed Husbands

Divorce Strategies For Self-Employed Husbands

Divorce strategies for self-employed husbands fall into 3 categories - bad, misguided, and what we are writing here - honest and helpful. Why do we write this?

Self-employed husbands often get "preyed" upon by unscrupulous divorce lawyers who care more about their billable hours than help self-employed and married dads reach a reasonable conclusion.

A couple of things you should know.

• First, this article covers a lot of information and is pretty long. But if you are going through a divorce or about to do so, the 20 minutes you spend reading this may be worth it.
• Second, you will have questions. Since this article is not legal advice (no article really is) and you will need a strategy session with a family law attorney, don't stop your due diligence once you read this. That is not smart. You need advice about your specific situation. Get an intelligent, experienced, and honest divorce lawyer to help you.

Yes - we are all of those things, and we are ready to help.

I said a "couple," but there is actually a third. We are obviously only writing for self-employed husbands with pending or future divorce cases in California and no other State. If you have a case outside of California, please consult with a lawyer in your State. This isn't intended for out-of-state readers. Okay, ready? Great.

We have divided this article into four sections. This first part is all about the basics of child custody. Parts 2 - 4 are:

• Part 2 - Maximizing time with the children
• Part 3 - Divorce with logic and without unnecessary emotion
• Part 4 - What are your options with the family residence?

While we write this article for husbands, everything we write here applies equally for self-employed wives.

Part 1: Child Custody Basics in Divorce for Self-Employed Husbands and Dads

Long and unpredictable hours cause difficult challenges

Self-employed husbands are often unprepared for what faces them in child custody and visitation proceedings. Unlike a W-2 employee who typically has a regular schedule, for example, 8 AM to 5 PM or 9 AM to 6 PM, the self-employed husband rarely has that same luxury.

While there are exceptions and certain self-employed husbands can work the same schedule week in and week out, most successful businessmen (and businesswomen) who run and manage their own companies work long and sometimes unpredictable hours. Since hours mean time, Courts must balance this issue with the most important factor in any custody case - the child's best interest.

The best interest analysis starts with stability and continuity in the schedule

Children need stability and continuity. If a parent's schedule with a child constantly changes, it becomes counterproductive to what California considers the most important parenting time factor. However, stability and continuity do not mean some fixed and inflexible schedule.

Does this mean the divorcing self-employed husband cannot enjoy equal parenting time? No.

In fact, if the wife is cooperative and reasonable and both spouses can keep flexibility with each other, there's no reason a self-employed husband cannot enjoy equal or close to equal time with the kids. Is your wife going to be reasonable? Or will your wife be difficult and perhaps use the children as leverage? Keep reading unless you are 100% sure your wife will give you whatever reasonable flexibility you need to maximize your time with the kids.

Beware the status quo and plan for it

Status quote is a term used by California family law attorneys when referring to the current state of things in a child custody and visitation case.

The status quo is important because California courts must place a certain degree of emphasis on it when making child custody orders. The status quo is consistent with the stability and continuity that the Court wants to keep so long as the status quo has been consistent with the children's best interest. It is very easy for a self-employed husband to think that his wife will cooperate and work with him to maximize his time with the children.

If that does not happen and that goes on for a significant time, a status quo could be established that can then be used against the self-employed husband when he wants more time with the children.

Here is a common example:

1. The husband is self-employed, and it is clear that he and his wife will go through a divorce.
2. The wife asks the husband to move out, and he does so.
3. They come to a loose agreement where she agrees to cooperate and, from her perspective, "let him see the kids" as much as he wants.
4. Unfortunately, it doesn't work that way. He obviously is working and likely longer hours than he would like to because he is now over-extending himself due to the divorce, supporting two households.
5. However, his wife is being much less than cooperative in her promises.
6. He still sees the kids but has minimal overnight visitation, and most of the time is spent with the mother and the children.
7. In addition, the mother appears to be speaking with lawyers and is the parent who files. Meanwhile, months or even a year or more go by.

Will the self-employed husband have a harder time getting more overnight visitation?

It is possible. If the children have become accustomed to the routines and this arrangement and the court finds it is not in the children's best interest to change the status quo, the husband may have an uphill battle to make an immediate change.

The younger the children are, the harder this becomes. That doesn't mean he is completely out of luck.

First, Family Code 3046 states (in part): "If a party is absent or relocates from the family residence, the court shall not consider the absence or relocation as a factor in determining custody or visitation in either of the following circumstances: (1) The absence or relocation is of short duration and the court finds that, during the period of absence or relocation, the party has demonstrated an interest in maintaining custody or visitation, the party maintains, or makes reasonable efforts to maintain, regular contact with the child, and the party's behavior demonstrates no intent to abandon the child…"

There is more to the statute; you can read more about it in our California child custody fact versus fiction article.

Second, the husband can step up his time with the children even in the worst-case scenario. Unfortunately, regaining an equal custody schedule with an uncooperative wife (or any spouse) may take more time and money spent on lawyers. Why would a self-employed father who loves the children and wants to spend significant time with them to be an equal parent and have an equal voice in their upbringing ever allow this to happen to him or herself? The question is a rhetorical one. No parent really wants this to occur. How do you avoid it? We discussed this below.

Should you live with your wife during the divorce?

Why are you moving out? Just because your wife asked you to? Or some other reason?

Sometimes, it makes sense to move out. Moving out can be an important financial advantage when you are the higher earner. But there may be child custody disadvantages. Some husbands and fathers are concerned they are going to be victims of false allegations of child abuse or domestic violence, or they move out because they are concerned about their safety in the house.

Whether or not you should move out is an important decision and should not be taken lightly. This article or the one we have written on the general subject of moving out before or during a divorce won't answer the question about your specific situation. That requires a private consultation with an attorney.

Should the self-employed husband have a clear, written agreement before he or she moves out?

If you're going to move out of the house, there has not been any domestic violence of any kind in the house, and there is no need for immediate, emergency family law orders, you can try and get an agreement signed between you and your wife about the custody schedule as well as whatever informal financial contributions will be made.

As a self-employed husband and likely the far greater income earner, you don't want to leave it up in the air and be subject to a court's discretion later about what will happen with your kids and your money.

If you have a written agreement that lays out the most important foundational elements of parenting time as well as financial contributions and responsibility, you will have some reasonable control over such issues.

That control and predictability can then be used as a defense if your wife comes back and wants to change the agreement. It can also be used as a sword when you need to enforce the custody part of the agreement.

Courts are far more likely to agree with you if they see that you and your wife have met of the minds and come to an agreement, so long as that agreement is consistent with the children's best interest. Two things you should know about this agreement.

1. It is not intended to settle your divorce case or custody and financial issues. That should only be done once disclosures have been exchanged by both you and your wife, as required by California law. If you intend to enter into a marital settlement agreement or post-nuptial agreement, seek the advice of an experienced family law attorney immediately before drafting any such agreement.
2. This basic agreement should be drafted by a lawyer even though it is not intended to be anything other than a temporary agreement during the transition. A good lawyer can draft an agreement in a way that does not read too intimidating and does not appear as though a lawyer wrote it.

That way, if your wife does not know you have sought legal counsel, it won't impede her signing. However, there is nothing wrong with hiring a lawyer and nothing wrong with your wife hiring a lawyer to create this informal agreement, although, at that point, it will probably become more formal. At some point, you and your wife must get good California divorce lawyers involved in the case.

It is best to involve them early in the case before you move out of the house.

Part 2: Self-employed husbands and fathers want quality time with their children

Quality time. That is what builds a parent-child relationship. That is what builds a bond. Self-employed husbands sometimes get so caught up in percentages and the quantity of time that they forget about the quality of it. What do children ultimately need from each parent?

Quality time and focused attention.

Children who get dropped off at a family or friend's house regularly during the father's custodial time do not benefit from that time. In fact, any parent who does this regularly is not only doing his or her children a huge disservice but will likely see his or her custodial time modified because parents have priority in family law cases, not others.

This can be a challenge for a self-employed husband going through a divorce, especially if there is going to be a situation where he works unusual hours.

This is where the husband has to figure out whether or not he will make sacrifices at some point to balance the needs of the children with the need to earn income. Many fathers are choosing parenting over careers. While this isn't a condition of enjoying quality time, the trend is clear in our opinion. We will discuss this more below.

A divorcing self-employed husband's work schedule

When you are married, it is easier to balance a busy work schedule for a self-employed husband and quality time with the children. Simply put, when you come home from work, even if it is later than you would like, the kids are usually there, and you get to spend a couple of hours with them or more before they go to bed.

Depending on when you get to work, you can see them every morning and also get the benefit of speaking with them at least once today. In addition, every weekend is your weekend unless you have to spend time away and out of town for some reason.

A self-employed husband's convenience and accessibility to the children go away when separation and divorce occurs

If you and your wife do not live together and your wife plays the role of the restrictive gatekeeper of the children, spending quality time with them can be challenging. That is why you must devise a plan to balance your work schedule with parenting time with the children before you file for divorce or find yourself in Court. Several things you should know:

1. You will have to make sacrifices if you work very long hours and intend to spend quality time with the kids.
2. It is simply not practical to spend 60 or more hours at work every single week, work several evenings, and work on half of the weekends per month and expect that you will enjoy regular and frequent parenting time with the children.
3. The Family Court is not there to accommodate you. The Family Court is there to make orders consistent with the children's best interests. While we are not saying that you must become a 40-hour-a-week John Doe, we are saying that you must bring stability and predictability to your work schedule.

This assumes you want to spend significant time with the children. If you are looking for an every-other-weekend schedule with a weekday dinner visit every week, you may not need to make much of a change to your schedule.

However, if you intend to spend several overnights per week or something that, using percentages, adds up to 30% or more time with children, you will have to plan out the sacrifices that will need to be made unless you end up having a wife and soon-to-be ex-wife who is just going to accommodate your needs on a month-to-month or week to week basis.

Don't be shy about asking for more time with the kids and documenting it

As a divorcing self-employed husband, you will have potentially very busy and more normal months. Hopefully, "crazy" isn't your normal. This is true with many professional husbands, such as accountants, doctors, lawyers, and others within the service industry.

It is also true with self-employed husbands who operate businesses with "cycles" throughout the year that get especially busy. Good planning and preparation means knowing when the cycles are, assuming there is some level of predictability to them, and working out a custody schedule with your wife at a time that will allow you to spend more time with the children during these months to compensate for the time you didn't have to give to your kids before.

This may seem like common sense, but it is actually quite uncommon. Husbands have a tendency to pigeonhole themselves into set schedules throughout the year that do not change. Nothing in any parenting guideline mandates that they should be on the same schedule every month. Courts will not reject agreements because of some fluctuation or flexibility.

While it should not be wild fluctuations where you barely see the children one month and you spend 70% of the time with them on another, fluctuations of 5 to 10% or even more of time depending on the month will give you the flexibility that you need and will also give the children the ability to maximize their time with you.

Ask for more time even after you have a court order

These are your children. While you are obligated to follow court orders, nothing says you should not try to get more time with your children than what is written in a court order. You do not have to rush to court whenever you want to spend an extra day, a weekend, or even an extra week with the kids.

Ask for more time.

Do it in a reasonable and cooperative way.

Give as much notice as you can about the extra time you want. If you know you will have a Thursday and Friday free a couple of weeks in advance, call or email the mother and let her know so you can give her plenty of notice. If she refuses, ask why and document her unreasonableness if the reason is not reasonable.

When you do, remember you are writing for the judge, so be courteous. No cursing, no lashing out, nor temper tantrums. The tone should be calm and child-focused.

Why am I asking you to document your wife's unreasonableness?

I'm doing so because those emails, text messages, or other forms of written communication will be admissible in court when addressing your request for extra time or bringing your wife's uncooperative and unreasonable behavior or frustration with your rights to the court's attention.

It is important that you be fair and courteous for the same reason. Since the court will see what you want to document and any other written or electronic communication you have had, you do not want the court to have a negative impression of you.

Using profanity, making derogatory statements about her parenting or any other characteristic, or coming across as an uncaring husband and father who genuinely does not want to spend more time with the kids will not help your case.

Asking for more time and documenting it is also helpful evidence to show the court that you can handle the time with the children. We have successfully moved fathers and mothers toward equal custody by showing that they are self-employed and have a flexible schedule that allows time for the children.

We have done this by provisions within orders that upon a certain amount of notice to the self-employed husband, he can exercise the time. Of course, the children's ages and the specific case circumstances will factor into whether and how a family law judge will make such orders and what terms and conditions the court will carry out.

Part 3: Divorce for Self-Employed Husbands and How to Think and Act Logically

Oh, those emotions - Anger, frustration, disappointment, and sometimes disbelief. They are all normal. But if you want to hang on to the money in your pocket and save yourself a lot of stress, keep reading.

Leaving emotion at the door

Are you a terrific salesperson? Are you in master in the boardroom? Do you handle your business efficiently? Do you know how to get a deal done? Do you get angry in business meetings, let your emotions take control of your decisions, or otherwise stop using business sense and logic in the day-to-day management of your business? No? I didn't think so. Then why would you do anything different in your divorce?

Divorcing without unnecessary emotion is not easy

I realize that your personal life and family, especially during a marriage break up, can be very difficult on the psychology. However, if you're looking to finish your divorce without unnecessary emotional turmoil and in the most reasonable way, you have to bring that business sense into it.

If that is not something you're interested in and you would rather see the divorce as a time of emotional upheaval that you will gladly take part in, you should stop reading now because nothing I've written below will be helpful to you. Assuming you are still reading, which I know you are, Let's get to it.

Gather financial and other documents from the house

If you are concerned that your wife may destroy important financial documents, personal papers, or even electronic documents containing important data, you should protect them. You can do this by keeping the originals in a safe place.

That doesn't mean you should deprive her of these records. Keeping a copy on hand is important, as are inspection rights of the original. How you handle this is important, and your specific situation may dictate it. You don't want to be accused later of breaching your fiduciary duties. Speaking with an experienced divorce lawyer is important here.

Get your corporate or business books in order

You are a self-employed dad, and you likely have a method by which you organize the financials of the company. These include, for the typical self-employed husband, the following: general ledgers, account receivable and payable ledgers, profit and loss statements, business balance sheets that list the assets, debts, and liabilities of the company, etc.

The types and amount of records may vary depending on whether you are a corporation, limited liability company, or some form of partnership, as well as the size of your business. Before filing for divorce, you should ensure these financial records are current and correct.

This is important because things can move very quickly once the divorce starts. Requests for support and discovery (formal requests) for information make correct and updated information important, and due to the speed at which these issues can head to court, there may not be much time to get unorganized documents in order.

In addition, as we will discuss below, getting these documents in order may give you an advantage. Your divorce lawyer, forensic accountant, and you will be able to get on the same page on income and support issues.

While none of us have a crystal ball, you will at least have a solid idea of your exposure, if any, to support as well as the business valuation issues. Too many self-employed husbands file for divorce without doing this, costing themselves significantly more time and money.

Hiring a divorce lawyer and a forensic accountant

You may be great at what you do, but you do not do what we do daily for a living.

Just as I cannot walk into your business and begin to run it at the same efficiency that you do, you cannot reasonably prepare for a divorce and try to play the role of your own lawyer and your own financial manager without making mistakes, some of them being costly to you beyond what you may realize. Hire an experienced divorce lawyer who is knowledgeable in family law and can help you.

Hire an experienced forensic accountant to help determine your income available for support purposes and a business valuation, if necessary. Together, your retained professionals can answer your questions, save you time and money, and ensure your case starts well.

Get your mandatory family law disclosures done

Self-employed husbands are sometimes surprised that there is an entire disclosure process in divorce cases whereby a husband and a wife have to disclose all known assets and debts and declare all income and expenses to each other. This disclosure process is completed through certain specific forms, including but not limited to a schedule of all assets and debts and an income and expense declaration.

These forms are available online, and you can use them by clicking on the links above. But it is not as simple as filling them out and calling it a day. This is once again where care must be taken to ensure that the information you provide is correct and up-to-date. Even sophisticated business people sometimes misread these forms and provide inaccurate information.

Failing to provide accurate information or update the information when there are changes can adversely affect your divorce case. A full discussion of disclosures in California is beyond the scope of this article. However, contrary to what many family law lawyers believe, ours do not think you have to wait until you start the California divorce process before getting started on these forms.

We prefer this process start even before filing so that by the time you file and serve your wife, all your disclosures are completed and up-to-date. There are many great reasons to do this; possibly the most important one is how quickly you can move your case. This allows you to make early settlement offers to resolve as many issues as possible. Speaking of settlement…

Should you serve your disclosures with a settlement offer?

Why do things in pieces when you can do them all simultaneously? Part of planning and preparing for a self-employed husband is not just to serve your divorce petition and wait for your wife to respond.

Instead, with good planning and preparation, you can serve your wife the divorce petition (not you, personally, but a process server or through other means), all of your disclosures, and a preliminary settlement offer on all the issues.

This, of course, assumes that you have a full grasp of all the financial issues in your case and your wife is not in possession of assets that you do not know about, has little to no management and control of financial issues, and you have far superior knowledge on these issues, compared to her.

If that is not true, then it may be wise to wait until she serves you with her disclosures before making an offer. You may be wondering the best way to serve a divorce petition. We have written an article on this issue and urge you to read it.

You don't have to go the most intimidating way of serving your wife through a process server and doing so through personal service. There are alternatives, especially for a self-employed husband who does not have emergency custody or financial issues. It makes more sense to keep the tension levels of the divorce low, consistent with your best interest and that of the children.

How does the self-employed husband budget for the worst-case scenario

Planning and preparation are not just doing so for the best. It is also doing so for the worse. I don't have a crystal ball, and neither do you.

However, because we are experienced divorce lawyers, we have likely dealt with a situation similar (and possibly the same) to yours in the past in both contested and uncontested matters.

We have a great deal of knowledge about what your reasonable expectation should be if your wife decides to be cooperative and focuses on resolving the issues or is uncooperative and causes litigation.

With that experience, we can work together to plan your budget. We want you to get this divorce behind you, know that you got a good and fair result, and help you move forward with your life.

Whether that is through a quick settlement, a contested case from beginning to end, or something in between, planning out a budget in a divorce will help you prepare your finances so that you are not surprised if the day comes that we really have to go to court and, if it does not, you can look back and say, "at least I was prepared if it went that far."

Part 4: Divorce for Self-Employed Husbands and the Family Home

Let's talk about the family home.

Three common things can happen with the family residence

First, it can be sold.

Second, you can buy out your wife, assuming the home has equity.

Third, your wife can buy you out if there is equity.

There is an occasional fourth scenario where there is no equity in the house or the house is upside down, but one spouse still badly wants the home.

In such a situation, there are a lot of different settlements that you can reach, and that is a bit beyond the scope of this article. We want to talk about preparation for the disposition of the family home.

Good planning goes a long way for self-employed dads

Planning what will happen with the home is always a good idea. The home affects the financial issues through mortgage payments, property taxes, insurance, and so forth, as well as the lifestyle you, your wife, and the children have become accustomed to during your marriage.

Planning starts with figuring out what the support obligations will be. As a self-employed husband, if you are the breadwinner and there is a large disparity in income between you and your wife, chances are you will pay child support and, at least on a temporary basis, spousal support.

Good planning means that we will figure out what these numbers are going to be so that we can see whether it is feasible to get court orders or agreements for your wife to make the mortgage payment as you move out or for your wife to move out while you stay at the house and make the mortgage payments in addition to support.

No matter what, this is about dollars and cents. This is about knowing what your reasonable monthly expenses are, what they are going to become, and whether you can handle them while at the same time paying support.

I don't like any self-employed husband (or wife) I represent to have to pay a mortgage payment on the family residence while they do not live there and pay support on top of it.

In fact, it is a common mistake husbands make during a divorce. I do not tolerate it, and I find it to be entirely unfair unless the income disparity is tremendous and the self-employed spouse we represent will have absolutely no trouble paying it financially.

Stay or go. Should you move out of the family residence?

We have written an article on the subject entitled Divorce and Moving Out. Whether you move out or not depends on a lot of different factors. It depends on the financial situation (and sometimes, there are advantages to moving out) and the custody situation.

If you cannot stay at the house because it is just too emotionally difficult or you are seriously concerned about false allegations of abuse or domestic violence against you if you're alone with your wife, then it might make sense to move out.

But then, if you don't have that problem, you should still consult with an attorney to determine whether it would be financially advantageous or disadvantageous for you to move out, depending on who the higher or lower income earner is.

This may require a balance between these and other issues.

Every factual situation will be different, and you should have a dialogue with your divorce lawyer before you file for divorce to help you plan and prepare for what makes sense for you.

Sell the family home or defer and avoid default

Part of the planning and preparation before the divorce is figuring out if keeping the house while the divorce is pending makes sense financially and for the children.

If there are no problems paying the mortgage payment or, better yet, there is no mortgage payment, and payment of support will not interfere with the mortgage payment, chances are pretty good that the house will not be sold while the divorce is pending.

If the house has significant equity in it and the market is at such a level that selling the house would produce a higher net result to the community, that would be one potential exception to the rule of not selling the home during the marriage, even if you can afford to maintain it. Ultimately, a house is just an asset; the rule with any asset is to buy low and sell high when possible.

When it doesn't make financial sense to keep the house

If it does not make financial sense to keep the house during the divorce, then one of two things generally have to happen.

There are no hard and fast rules, and there will be exceptions. If the house is under immediate threat of default such that mortgage payments have not been made and foreclosure is reasonably likely, you and your wife should come to an agreement and list the house for sale.

Default and foreclosure typically only occur if the mortgage payments are not being made. As such, especially if you have equity in the home, it is dangerous to let he home go through foreclosure because all of that equity could be lost.

Ultimately, the advice of the real estate professional will be necessary, and our law firm can refer you to the right professionals. If your wife refuses to sell the home even in such a situation, we must plan and prepare for court intervention.

A family law judge has the discretion to order the sale of a home during the divorce. Certain conditions must be met, and a home under a reasonable threat of foreclosure qualifies as one of those discretionary reasons so long as the facts support it.

Assets can be offset with other assets

No rule says a home with equity requires a cash buyout.

Assets can be traded for other assets.

One of the things we will speak with you about and help plan is whether it makes sense for you to trade one asset for another.

So, for example, if you have another asset that is arguably one hundred percent community property and has a value of $500,000, and the total equity in the home is $500,000, you can potentially trade assets. Be careful when doing this because it is not as simple as a written agreement. And you should definitely consider the tax consequences. For example, trading post-tax dollars with pre-tax dollars may not make sense.

The specific provisions are important, and our lawyers can help draft the language to protect your needs. A discussion with your financial and tax advisor will also be important, especially when dealing with tax consequences and appreciating versus depreciating assets.

If a buyout does not make sense because neither of you can afford to buy the other one out, there are not enough assets to offset, or there is not any equity in the home, then we have to plan and prepare for the final disposition of the home, especially if you do not intend to keep it.

In such a situation, you may not want to put yourself into a place where your wife gets the family residence and you remain as an obligor on the loan.

What are you gaining in such a situation? Not only have you given up your legal right to the home, but the bank will still look at you for payment if your wife defaults on the loan.

Part of the planning and preparation for the divorce is to come up with terms that make sense so you can be removed from both the title and the loan (if you intend to allow your wife to keep the property as her separate property) and/or you can have the security of knowing that if your wife at any point fails to make the mortgage, property tax, insurance or otherwise places you in danger of default and collection from the bank, the house will be immediately listed for sale.

Under certain circumstances, we can even craft provisions that allow you to make the mortgage payment if your wife fails to do so and deduct that from her alimony or equalization payment if you are making one for your wife.

Here is some great reading from our site:

1. Our Family Law Articles page is updated regularly with new featured articles about various family law and divorce issues. It is written for spouses and parents and is easy to read (lawyer jargon kept to an absolute minimum, we promise)

2. The word "alimony" can make a husband cringe. Guess what? It may not be as bad as you think; knowledge is power here. Check out our California spousal support page.

Contact our experienced divorce attorneys if you have any questions. We are ready to help.