Dividing Property During a Divorce
In California, there are two different “types” of property which will be involved in a divorce:
- Marital or community property
- Separate property
Marital or Community Property
Generally speaking, marital or communal property is everything which either spouse earned or acquired during the marriage (unless you agree otherwise). For example, any money you earned at work and used to pay towards household bills is marital property. A familial home is also often considered to be marital property.
It is important for both spouses to realize that not all property acquired during the marriage may not be considered to be marital property. There are some unique situations where what one may presume to be “marital property” is actually “separate property”.
Separate property generally refers to property or assets which were owned alone prior to the marriage, or which were acquired as a gift or inheritance during a marriage. It typically includes items which were purchased with or exchanged for other separate property, any earnings made on separate property, and increases in the value of separate property, given that the property owner can prove their claim with financial documentation.
Property and assets acquired after a couples’ date of separation but before a divorce is also considered to be separate property. A couple does not need to move out of the marital home for a “date of separation” to be established. In California, it is the date which one spouse decides to end the marriage and then performs some acts of physical separation which clearly demonstrates that the couple no longer desires to be in the relationship (i.e. moving out of the marital bedroom).
How California Divides Community Property
California law does not require what is known as an “in kind” division of your community property, meaning that objects do not need to be physically divided. The law only requires that the net value of the assets received by both parties are equal.
Because of this, it is common for one spouse to be awarded the family home while the other spouse will be able to keep the family business or a real estate investment property, as long as the assets are equivalent in value.
Spouses have the option of dividing assets by assigning specific items to one another. For example, a spouse can “buy out” the other spouse’s share of an asset or sell assets and then divide the proceeds. Spouses can also agree to hold property together after the divorce if they choose (i.e. maintaining the family home until the children have left the home).
A couple must also assign every debt accrued during the marriage to one another. This may include:
- Car loans
- Credit card debts
It is important for couples to realize that any separation or divorce agreement is not binding when it comes to their creditors. Creditors may continue to attempt to collect a jointly owed debt from either spouse as long as the debt exists.
If a debt is “owed” by one spouse, the other can then request that the court place a lien on the separate property owned by the other spouse to secure the repayment of the debt.
With that said, in most situations it will be recommended that you try to pay all marital debts once the divorce is finalized.
During the division of property, the character of that property may change by what is known as “transmutation”. The transmutation of property may change it from separate to marital property, or it may change it from marital to separate property.
Transmutation can be accomplished in one of four ways:
- An agreement is reached between both parties
- The property is jointly titled in the names of both spouses
- The property is given as a gift
- Commingling separate and marital property
Understanding Quasi-Community Property
In California, we have something which is referred to as “quasi-community property”. This is property which was acquired by a couple or a married person in a non-community property state (such as California) and which would have been considered as community property if it was acquired in a community property state.
This may be important for some couples to consider, as if the married couple relocates to a community property state and divorces (or if a spouse dies), a court in that state may then treat that property like community property when determining who will gain rights over that asset.
Understanding Quasi-Marital Property
California also recognizes a “quasi-marital property” law where normal community property rights will be granted to a party who has “putative spouse” status.
A putative spouse is someone who has cohabited with another person whom he or she is not legally married to but who they believed they were married to. This is commonly due to a legal flaw (i.e. a former marriage was still valid unbeknownst to a spouse).
How Property Value Is Determined
Spouses will be asked to assign a monetary value to each asset and piece of property. It may be necessary to receive appraisals on items such as antiques and artwork, and retirement assets may require the assistance of a CPA, an actuary or another financial professional.
Lavinsky Law Is Here to Help
Brighter Days Are Ahead, Lavinsky Law is committed to protecting the rights and financial welfare of our clients in the Los Angeles area.
If you are facing a divorce and would like to discuss the division of your separate and marital property, our family law attorneys are here to help. To arrange for your complimentary consultation today, please call (310) 274-2717.