Author Archives: Caroline

Cross Border Views on Inherited Wealth

This article looks at how inherited funds are treated from a cross-border perspective. To the surprise of many, inherited wealth in a divorce may be treated differently depending on the jurisdiction in which you file for divorce. Location is therefore an important factor to consider when divorcing. To unpack this topic, let’s explore and contrast how inherited wealth is treated in Hong Kong vs. the United States of America, in particular the community property state California.

1. Inheritance in Divorce in California: California, like many other states, is a community property state. This means that in a divorce, all property acquired during the marriage is divided equally between the divorcing parties. An exception to this rule occurs when an individual receives an inheritance during the course of the marriage. In those circumstances, under California law, an inheritance is separate property and therefore will be excluded from the division of assets and debts in a family estate (Family Code Section 770).

It is important to note that when an individual receives an inheritance, the monies received must be traceable to the source so there is no confusion as to whether the money is separate property or community property. That is why it is always a good idea to open a separate bank account and deposit inheritance monies into this separate account to identify them and keep them separate. Otherwise, by depositing inheritance funds in a joint community bank account, you are commingling funds. When monies become commingled, it can become very difficult to trace monies back to the separate property source and your former spouse may have an argument that all inherited funds were already spent during the marriage and therefore all remaining funds in the joint account are community property and must be split equally. When in doubt, always keep clean records of any inherited funds and keep records of how these monies have been spent. If you don’t keep track, a tracing expert may be enlisted but tracing can become quite expensive and time-consuming thereby stalling the divorce.

2. Gifts Are Separate Property in Divorce in California: Another exception occurs when an individual receives a gift. For example, if you receive a beautiful piece of jewelry from your spouse for an anniversary or birthday, this gift is generally excluded from the division of assets and debts in a family estate. If, however, the gift could be considered of substantial value, the courts will then look at the asset more carefully and it may be subject to division taking into account the parties’ wealth and finances.

If the asset is determined to be of substantial value, it is community property and must be divided between the parties – unless of course, either party can present a written transmutation agreement changing the character of this asset from community to separate.

3. Inherited Wealth in Divorce in Hong Kong: Over the years, there has been much debate over how inherited funds should be treated in a divorce in Hong Kong and whether these funds should be excluded from division. In Hong Kong, inherited wealth are those assets that come from a source wholly external to a marriage. Like Great Britain, the courts in Hong Kong have regard to the “yardstick of equality” as a starting point, meaning the goal is to divide the asset pool fairly. Courts in Hong Kong may however, veer from this principle and make adjustments, thereby dividing assets “unequally” if after reviewing certain statutory factors, taking into account the whole of the asset pool, reasonable needs, compensation and applying the “sharing principle” if assets exceeds the needs, in addition to the specific circumstances surrounding the divorce, and finds that an individual’s inheritance could be a resource to fulfill and satisfy an individual’s reasonable needs and the needs of the children post-divorce (See the Hong Kong landmark case titled DD v LKW (2010) 13 HKCFAR 537.) As a result, the Court may heed to flexibility in order to find a suitable answer to the circumstances of each case whereby the objective is to reach a just result that is fair for both parties. Thus, unlike California, inheritance funds received by an individual in Hong Kong may be taken into account because it forms part of the asset pool that is a financial resource to one or both of the parties. Stephen J. Peaker, head of the Family Law Department at Oldham, Li & Nie (OLN) and a fellow of the International Academy of Family Lawyers (IAFL) says: “The issue of inherited wealth is becoming more and more prevalent in Hong Kong, both in contested and uncontested cases. The economic success of Hong Kong and the natural passage of time combined have created substantial inherited wealth. One of the key areas of dispute on succession is in relation to family businesses, often with enormous value where one party inherits a business interest. This business can be valued as part of an asset pool and unsurprisingly, this is viewed by the creators of the wealth as inherently unreasonable and has led to the proliferation of generational trusts and the increase in prenuptial agreements.”

It is interesting to note that in Hong Kong, the Court may consider an inheritance even if it has not yet been received, but provided an individual is set to receive an inheritance in the near future or has a perceived resource. Additionally, if you’re involved in a short-term marriage and there are inheritance funds in the asset pool, the courts may not consider the inheritance in the asset division yet if it is a long-term marriage, the courts may include inherited funds, unless these funds were kept entirely separate.

It is important to understand and become knowledgeable of the specific laws of your jurisdiction. Speak with a professional about how to protect your inheritance and what can be done to avoid any issues when dividing assets in your divorce. If you’re getting married, you may want to speak with a family law professional to discuss a prenuptial agreement and ways to avoid any issues in the event of a divorce. Being well prepared will help avoid any heartache in the future!

Divorce and Reconciliation

The decision to divorce is not an easy one. After careful thought, many couples come to the difficult decision to part ways. The divorce process can be excruciatingly painful as families become divided and individuals must navigate the law in obtaining an official divorce. In some cases, there are couples who realize halfway through the divorce process that a breakup of the family is not what they ultimately desire and the path towards reconciliation is forged.
What does reconciliation look like from a legal perspective in Hong Kong? Here are some things to consider when it comes to reconciliation:

1. Legal Ramifications of Reconciliation: If you and your spouse are considering reconciliation during the divorce process, it is important to speak with your solicitor. For example, if you and your spouse are working on your relationship and cohabitate after a separation, this will be important in your divorce as it will be taken into consideration with respect to the separation period. Note that if you and your spouse cohabitate for a period of less than 6 months, then the starting date for the period of separation will remain the same, although the time spent together to work on the marriage will not counted as part of the separation period. Also, when you file a Petition for divorce, you and your solicitor will discuss the issue of reconciliation and you will need to file a Certificate of Reconciliation. If there is a good chance that you and your spouse will reconcile, the Family Court may adjourn your case to allow for the possibility of reconciliation as the Family Court in Hong Kong wants to provide every opportunity for reconciliation. If you and your spouse wish to reconcile during divorce proceedings, you may wish to withdraw the Petition for Divorce. However, speak to your solicitor because if you wish to reconcile after you have obtained a Decree Nisi (tentative court order for divorce), then you must seek leave from the Family Court to rescind the Petition for Divorce which requires specific paperwork that your solicitor can prepare on your behalf and walk you through the process. Remember that if you and your spouse obtain a Decree Absolute, thus legally divorced in Hong Kong, you will now be free to re-marry, even if that means to re-marry one another once again.

2. To Reconcile or Not? Reconciliation is not for everyone. It is certainly a personal decision between you and your spouse. To be effective, both parties must genuinely want to reconcile. Reconciliation also requires effort by both parties to nurture this new relationship. On the flip side, reconciliation may be out of the question if emotional damage by the divorce is so severe and difficult to overcome. If there is a history of domestic violence or emotional abuse or manipulation, reconciliation should be carefully considered with the assistance of psychologists and others trained in the area of domestic violence and emotional abuse. This is particularly important when children are involved.

3. Keep The Lines Of Communication Open: If you hope to reconcile with your ex-spouse, maintain open lines of communication. Try to maintain a sense of civility, if not only for the sake of your children and their best interests. Consider counseling, and do not be afraid to ask your spouse if he/she is willing to attend counseling with you. A counselor can help guide you in the decision to reconcile and help you and your spouse avoid past mistakes in your marriage. You may also learn new skills on how to resolve the issues which led to the divorce in the first place.

Reconciliation should not be taken lightly. It takes significant effort and time. But if successful, it can be a wonderful thing for you and your family.

How To Prepare For Mediation

One of the most cost-effective ways to resolve your divorce is through mediation. In order for mediation to succeed, both parties need to be willing to come to the table willing to discuss all issues and with a compromising spirit.

In an earlier article published on www.hongkongdivorce.com, our special contributor Shanna Quinn, a professionally trained mediator, outlined family mediation and what it entails in Hong Kong.

In this article, we will discuss three (3) key ways to succeed in divorce mediation and how you can come out of mediation with a sense of gratitude and accomplishment.

1. Keep Your Emotions Out: It is not uncommon for spouses to use mediation as a vehicle to lay out emotions about all the wrongdoings that had occurred during the marriage. Whilst it is important to express your opinion and communicate your feelings during this complicated season of your life, the purpose of mediation is to resolve issues and move forward, not to rehash the past. By keeping your emotions out of the mediation, you are recognizing that a divorce is simply a business transaction, whereby you and your spouse are outlining the legal terms to dissolve your marriage. Thus, do your best to keep your emotions out of the transaction and the path towards resolving your divorce will be a lot more seamless.

2. Be Willing To Compromise: In order to move forward in resolving your divorce, each spouse has to be willing to compromise. In a divorce, there are no real “winners” or “losers” because at some point each of you will walk away without getting everything that you had wished for. There has to be a certain amount of compromise in order to resolve your divorce. To successfully compromise, you will need to be willing to hear the other side and the reasons behind their position. Be willing to listen and empathize with your spouse and you may soon realize that your spouse may also extend the same courtesy to you as well. A settlement meeting will provide you and your spouse with a platform to negotiate and figure out a plan that you both are willing to accept.

3. Ask Questions, Take A Break, Ask For Time: Mediation will provide you with an opportunity to hash out details of your divorce without the pressure of the Family Court issuing orders and making decisions for your family. If you are in mediation and you do not understand the legal jargon or terms being stated, be sure to speak up and ask questions. If you are represented by a solicitor or barrister, do not be afraid to stop the meeting and ask your solicitor or barrister to explain everything to you. No question is irrelevant as your understanding of what is being discussed will affect your future and your family’s future. If you need a break and need time to process what is being negotiated or offered, ask for this time and each person in the meeting should respect your request for a break. You are entitled to be involved throughout the entire process and you can only be involved if you understand what is being discussed and negotiated.

While in some cases one mediation is sufficient to resolve all of your issues, some divorces require multiple mediation meetings to finalize outstanding issues. If your matter requires several mediation meetings, it is important to note that any prior meetings are not without benefit since they are ALL stepping stones to resolution.

Financial Support During A Divorce

What Is Maintenance Pending Suit?  

Maintenance Pending Suit is a type of financial relief which can be ordered by the Court  during divorce proceedings, and will last until the grant of a Decree Absolute, the final Court Order dissolving a marriage. In awarding Maintenance Pending Suit, the Court will order one of the parties to a divorce to make periodical payments on an interim basis to the other for his or her maintenance for such duration as the Court deems appropriate, usually for the duration of the divorce proceedings.

How Does The Court Approach A Maintenance Pending Suit Application?

The Court will not delve too deeply into the financial positions of both individuals. The Court will look at the needs of the applicant to maintain the same living standard as during the marriage and how much the payor can realistically pay to the payee. The individuals will only need to disclose income and expenditure information and the Court then considers the parties’ situation broadly Before determining the appropriate amount, if any, that should be paid on a monthly basis.

Maintenance Pending Suit To Fund Divorce Proceedings

In addition to living expenses, an application for Maintenance Pending Suit can also cover the applicant’s legal costs for the divorce proceedings and/or litigation with third parties as long as the following conditions are met:-

  1. The applicant does not have any assets of their own or none that can reasonably be deployed to fund the cost of litigation;
  2. The applicant cannot provide any security for borrowing a loan or none can reasonably be offered;
  3. The applicant cannot reasonably obtain legal services by offering a charge on the outcome of the litigation; and
  4. The applicant cannot secure publicly funded legal help at the level of expertise required for the proceedings.

Variation of Maintenance Pending Suit

If the payor to a Maintenance Pending Suit Order considers that they can no longer make the periodical payments or if the payee requires additional financial support, they can apply to the Court to vary the Order. The Court will consider the change in circumstances of the individuals for example, if a payor has recently been made redundant, and the Court may then make an Order that is reasonable and appropriate in the circumstances reducing or suspending any periodical payments.

Depending on how the other party to a divorce approach the proceedings, it can be a long journey. Financial Relief has become an integral part of a divorce to support the parties and you should always keep financial relief in the forefront of your mind when considering your divorce.

Successful And Effective Co-Parenting Tips In Divorce

What Is Co-Parenting?

You might have just gone through a divorce, but you were blessed to have children together with your ex-spouse. You two might have gone separate ways on bad terms, but your children should not suffer and you and your ex-spouse should still play an active role in raising your children together as co-parents to ensure that your children’s needs are met. The quality of the relationship between co-parents will determine the welfare and emotional health of the children as they grow up.

Co-Parenting Tips

Here are some useful tips for successful and effective co-parenting through the difficult period post-divorce:-

  1. Clear Your Mind– The first step is to clear any negative feelings towards your ex-spouse and your marriage from your head. It will be difficult to set aside such feelings at first and it may take time. You should see co-parenting with your ex-spouse as a fresh start, which is all about your children rather than being about you and your ex spouse. You should both strive to be mature responsible co-parents and act in the best interests of your children.
  2. Regular Communication– Communication between co-parents is key to successful and effective co-parenting. Your ex-spouse may not be the first person you want to talk to in person but try to devise a workable arrangement. Perhaps you may communicate via phone messages or email instead. A possible advantage of communicating this way is that you are able you to keep a record of your communication with your ex-spouse in case there is any dispute as to “who said what”. Try to communicate directly with your ex-partner rather than using your lawyer to do the talking for you; not only does this tend to not facilitate an amicable open line of communication, but it will also result in unnecessary legal costs.
  3. Court Litigation is a Last Resort– There are certainly times when litigation is the only way to resolve problems, but you should avoid resorting to litigation before the Court unnecessarily. You should always try to resolve any issue with your ex-spouse by discussion and engage a family mediator to mediate between you and your ex-spouse if necessary. There is a likely chance that animosity between you and your ex-spouse may arise if either party resorts to Court. Ultimately, it is your children who will suffer as they will be the ones further affected by any negative tension between their parents.
  4. Seek Professional Help- Going through a divorce is extremely difficult, never mind the ongoing task of co-parenting with your former spouse. Family counselling can be very beneficial to help parties through the difficulties of divorce, and minimise any negative effect on children. You and your ex-spouse could also consider attending co-parenting classes in order to learn more about co-parenting and how to do it effectively.
  5. Be Consistent – Co-parents should aim to set a consistent set of rules for your children in both households such as curfews. This will ensure that your children feel less like they are living in two completely different households and ease them into their new living arrangements.

This article highlights the key tips to achieving successful and effective co-parenting. You and your ex-spouse should not dwell on the past and should act together for the best interests of your children. The emotional health and development of your children will ultimately depend on the quality of your co-parenting with your ex-spouse, so every reasonable effort should be made to learn how to do it effectively and cooperatively.