Division of Property in California

Divorce - Property Division in California

In the majority of divorces, the division of property and assets is a major problem, and the relevant regulations are frequently complex and unclear. Before beginning the process of separation, it is essential to determine if your property is designated "community" or "separate" property, and how each will be treated under the law.

Couples may try to pick how they wish to split up their marital property on their own because distributing assets and property based on community property rules may appear unfair. If they are unable to agree on how to divide their property, the court will make the final judgment, which will be based on community property rules.

Let’s begin by defining the table’s contents. In general, “property” refers to anything that can be bought or sold, including real estate (both residential and commercial), automobiles, furniture, clothing, and technology, among other things. Moreover, property can relate to anything of monetary value, such as bank accounts, investment assets, patents, and even security deposits on rental property.

All property owned by you and your spouse during a divorce will be designated as either communal or separate property (or in rare cases, a commingling of the two). When the divorce is finalized, this procedure of labeling will determine how the property is distributed.

Community Property California

California is a community property state, which means that a marriage or domestic partnership registration creates a legal “community” between two individuals. Any property or debt obtained by one spouse or partner during the marriage or partnership is considered to belong to the community, not the individual who acquired it. In accordance with section 760 of the California Family Code, community property is defined as “any real or personal property, wherever located, acquired by a married person during the marriage while domiciled in the state.” Upon divorce, the division of communal property is often 50/50.

The purpose of the state’s concept of communal property is to encompass a broad range of types of property and assets. The state relies on a plethora of extra statutes to determine whether real or personal property is community or not, based on a variety of intertwining variables and conditions.

Individual Property

The property that one spouse possessed before to the marriage does not belong to the “community,” and is therefore regarded as separate property and not community property. Separate property also includes gifts and inheritances given expressly to one person, as well as property acquired or acquired after the separation. This is the primary reason why the date of separation is so crucial in so many divorces, and why it should be documented and discussed with your attorney as soon as it occurs.

Even if purchased after the marriage, any property acquired with separate funds is also considered separate property. For instance, if you acquire a car after your marriage with money you earned prior to the union, that car can still be considered separate property. Rent or income received from separate property remains distinct, therefore money or rent made from businesses or real estate owned prior to the marriage will continue to exist as separate property, so long as it is not combined with common assets.

In California, community property law governs how property acquired during marriage is divided in the event of divorce. This means that any assets obtained during the marriage, such as income or real estate, are considered jointly owned by both spouses and subject to equal division.

However, there is also the concept of quasi-community property, which refers to assets that were acquired by either spouse outside of California but would have been considered community property if they had been acquired within the state.

To avoid the default rules of community property division, couples can enter into a prenuptial or postnuptial agreement that outlines how their property will be divided in the event of divorce. This can be especially important for couples who have significant assets or businesses that they want to protect.

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The different types of property in California

Community property– Absent a written agreement, the law requires an equal division of the community estate. For the most part, in California, property acquired from the date of marriage until the date of separation is community property. Community property is an asset earned during the marriage through time, effort or skill during marriage. It is divided equally during a divorce unless there is a written agreement to some other arrangement.

Gifts and Inheritance

Unless a gift or inheritance was given jointly to both parties, it will be awarded as the sole and separate asset of the person who received it. This is because gifts and inheritance are not earned through time, effort or skill, and are, therefore, not community property.

Per Capita Income

Money received from an Indian Reservation for being the member of a particular tribe is the sole and separate asset of the person who received it. Anything purchased with that money is the sole and separate asset of that person. This is because the money is not earned using time, effort or skill. It is earned as a result of one’s heritage.

Community Debt

Like assets, almost all debts acquired during the marriage are community and are divided equally.

Retirement Benefits

When a married person accumulates an interest in a pension, retirement, profit sharing, or other employee benefit plan during the marriage, the part accumulated during the marriage is community property. In California, the retirement or pension plan is then divided using a court order called a Qualified Domestic Relations Order (QDRO). A QDRO is a set of instructions that helps determine how much money is to be paid to each party.

Military Retirement

There are separate rules for military retirement. Federal law does not recognize a spouse’s right to receive military retirement unless the parties were married for ten years or more.

Family Residence

Where minor children are involved, the primary parent may be allowed to remain in the marital home. This can be done by delaying the sale of the home or structuring a property settlement to award the house to the primary parent. 

One common settlement term is to allow both spouses to remain on title until the youngest child graduates from high school. Later, the house can be sold and the profits split equally.

Separate Property

Separate property is anything acquired by a spouse before the marriage, during the marriage by gift, devise, or bequest, and after the parties separate. It is awarded to the spouse who owns it.

Separate Debts

Debts incurred during the marriage are usually equally divided. They are divided to the person who incurred them. Debts accumulated after the date of separation are awarded to the party who incurred them. 

Similarly, after separation of the parties, the earnings and accumulations of each party are the separate property of the party who earned the asset.

Student Loans

While most debts accumulated during the marriage are the joint obligation of both spouses, student loans are the exception. They are the separate obligation of the person who incurred them. 

Unless the spouses co-signed for the debt, a student loan will be the obligation of only one party.

Disclaimer: The above rules are merely generalities and should not be construed as legal advice and should not be acted upon or relied upon in any way. If you have specific questions about any of the above, please call our office for more information.

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Property Division - Who Stays in the Home?

Property division is rarely as simple as the preceding definition suggests, and much of the work in the divorce process entails determining where separate and communal property have "combined" throughout the course of the marriage. When one partner owned a property prior to marriage and sold it to put a down payment on a new home with their spouse, this is a regular occurrence.

The down payment would be deemed separate property, but if the mortgage payments were made with money earned during the marriage, the equity in the house would be considered a mix of separate and communal property. If one spouse owns money in a bank or investment account prior to marriage, and subsequently puts the partner's name on the account, deposits community earnings, or uses the account to pay community debt, complications can arise.

Using a forensic accountant to trace the money and evaluate the history of transactions during the marriage, then dividing the leftover money into separate or communal property, is a common solution in these circumstances.
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Oftentimes, your attorney will be able to help negotiate a fair settlement that includes remaining in the home. 

This could be by coming up with a creative solution in the divorce settlement, negotiating a delay in the sale date of the home, or helping the client find money in the divorce to buy the other party out. 

If you are going through a divorce and are interested in saving the family home, we will work together with you to help you achieve this goal. For more information, please call our office or email us. We are here to help.

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