Private Investigator Can't Transfer His Business to His New Spouse to Avoid Paying Spousal Support to His First One
In a recent case, a California Appeals Court affirmed the ruling of the trial court that an ex-spouse cannot transfer his business to his present spouse in order to avoid paying spousal support to his first spouse. Kevin Berman married his first wife, Cathy, in 1974. The marriage lasted until a trial court issued their status only disso judgment in December 2006. On March 6, 2009, the trial court ordered Kevin to pay $9,500 a month to Cathy for spousal support. They stipulated to a reduction of that amount to $4,000 a month in May 2013. In September 2015, Kevin filed a request for an order terminating his spousal support obligation. In a series of declarations, he stated that on June 29, 2015, he had signed a transmutation agreement, transferring his ownership of his investigation and security firm, Berman and Ely (B&E), to his current wife as her separate property for no consideration, in anticipation of his retirement at age 65. Kevin explained that his current wife had learned the business and was now running it full time.
The appeals court stated that “[t]he only evidence that the transfer was in good faith came from Kevin’s declarations and papers, in which he insisted that he did not transfer the business to avoid his support obligations." The trial court did not believe him, and the appeals court didn’t second guess the trial court on its credibility determination. Once the trial court determined that the transfer was “a sham” it could then treat the transfer as if it never happened and the appellate court affirmed the trial court's ruling. The trial judge and the appeals court declined to recognize the transfer and treated the business income as if it were still Kevin’s. The appellate court also said, “to hold otherwise would be an invitation for supporting parties to use section 4323, subdivision (b) to shield their assets through bad faith transfers to their new spouses.” The case is In re Marriage of Berman (2017) 15 Cal. App. 5th 914