California Property Division
If a couple is unable to decide how to divide marital assets during a divorce in California, the Court will eventually intervene and decide for them.
During a divorce, many couples believe all their assets are community property. This is not so. In California, all property owned by the parties will be characterized as separate property, community property, or quasi-community property (property that would otherwise be community property but was acquired while the parties lived in a state with equitable division laws).
Is California a Community Property State?
Yes, California is a community property state. Pursuant to Family Code §760, unless otherwise provided by statute, all real or personal property, wherever situated, acquired by a married person during marriage is community property. Further, Family Code §2601 states that the Court may award community property to the parties as it deems proper to “effect a substantially equal division of the community estate.” These laws apply to both assets and debts.
What About Separate Property in California Property Division?
Separate property is handled differently. Separate property is real or personal property owned prior to the marriage, acquired during marriage with separate funds, or received by gift or inheritance. If property isn’t considered separate by law, it may be deemed separate according to a couple’s prenuptial or postnuptial agreement.
Parties cannot finalize their divorce unless and until all property is awarded by agreement or court order.
The basic timeline for property division is as follows:
- Characterize all property as separate or community;
- Determine the value of all community property; and
- Divide community property as equally as possible.
Date of Separation in California
The parties’ “date of separation” is crucial to determine the character of property at divorce. Property acquired after the date of separation is presumed to be separate property of the receiving party.
There does not need to be a physical separation between the parties for a true separation to occur. The California Family Code defines the “date of separation” as the date there is a complete and final break in the marital relationship, shown by one spouse expressing the intent to end the marriage followed by conduct consistent with that intent. The parties do not need to live in separate homes or bedrooms to be “separated” under California law. Some parties will continue to live together throughout the dissolution process.
The date of separation may become a trial issue in California divorce cases. Parties often disagree on the date of separation, especially if a major financial event takes place around the time of separation. For instance, one party may receive a large sum of money such as a commission check, performance bonus, or even a lottery payout. If Spouse 1 receives a large bonus on May 1st, Spouse 2 is more likely to claim that the “date of separation” was on May 2nd or later to protect his or her right to one-half of those funds. Spouse 1, on the other hand, will want the date of separation to fall before May 1st, so that the entire bonus payment is his or her separate property. If the parties cannot agree, the Court will need to review evidence and determine what the actual date of separation is, then determine what property is community and what property is separate.
In some cases, separate property can be forfeited and treated as community property at divorce. One of the most common ways a spouse will forfeit their separate property is by commingling it with community property. One example is when a spouse uses their premarital bank account to receive deposits from the other spouse. Another example is when a spouse makes mortgage payments or improvements to a property or home that was owned separately by the other spouse. Many other types of assets may be partially separate and partially community property such as retirement accounts that were held prior to a marriage but they contributed to it after they were married. A business owned by one spouse before marriage, but operated during the course of the marriage and the other spouse contributed labor or money into it, may be partly community property or the community may be entitled to a reimbursement. To ensure separate property is treated separate at divorce, one party may need to hire a forensic accountant and produce records to “trace” the property back to a separate property source.
An experienced Orange County property division lawyer can help a client work through characterization issues and determine what work will be needed to protect separate interests at divorce.
Determining the Value of Community Property
If the couple seeking a divorce is unable to mutually agree on the value of their community property, the Court may decide for them. To help facilitate negotiations between spouses, expert appraisers can evaluate the market value of all types of property from automobiles and antiques to businesses and real estate. It may be necessary to hire an actuary or other forensic financial expert to determine the value of retirement assets due to the complicated nature of these funds.
California Property Division Laws
Under California law, there are several ways to divide community property between spouses including “buying out” the other person’s share of an asset, dividing proceeds of assets that are sold, or maintaining property jointly until an agreed-upon event. For example, the parties may agree to a deferred sale of the family home so that the parties’ children may continue to live there until they graduate from high school. Sometimes it’s also wise to hold real estate or businesses until it’s a more favorable time to sell the properties.
California family law requires that all community property debts including credit cards, loans, and mortgages accrued during the marriage be equitably divided. It’s important to understand that creditors may not abide by your divorce decree and may try to collect a debt from either one of the spouses. It is important to discuss this issue with an attorney to avoid future issues.
Call the Orange County Property Division Lawyers at Johnson Attorneys Group Today
The skilled family law attorneys at Johnson Attorneys Group have experience negotiating and litigating complex property division issues. To discuss your case with a divorce attorney, contact our family law firm at (949) 942-8784 to request a private consultation. We are located in Newport Beach and help clients all around Orange County resolve issues related to California property division, child support, child custody, high-net-worth divorce, and more.