Does California Require Equal Property Distribution
San Diego Divorce Lawyer – Does California require equal property distribution?
California is what is known as a “community property” state. In a divorce case, the community property will be divided equally between the spouses. Community property is defined as property which is acquired “by the community” during marriage—commonly the wages you and your spouse earn during marriage. This divorce law definition, as in most areas of the law, has its exceptions.
In Divorce what is separate property?
California recognizes “separate property” as the assets owned prior to marriage. This definition is not exclusive, however. It has additional definitions and, of course, exceptions. Property which is acquired during the marriage can be characterized as separate property if it was acquired as a result of gift or inheritance. Unlike community property, in a divorce the owner of separate property has exclusive rights to it and it may not be divided by the divorce judge. The divorce court also does not have the authority to “offset” one party’s separate property assets by awarding greater than 50% of the community property to the party who has less separate property.
If one spouse receives a cash inheritance, that is not the end of the question of whether it will be determined by the divorce court to be separate property. If, for example, that money is deposited into a jointly titled account without a writing expressly evidencing an intention by the party who received the inheritance that the deposit was not a gift, there is a strong argument to be made that the money is community property. This is known as “commingling.” Since the cash in a bank account is indistinguishable from all the other cash, there is no way, outside of a writing or the titling of the account (the name(s) on the account), to identify which cash belongs to whom.
If, however, a spouse receives a cash inheritance and uses it for a down payment on a residence in which the married couple lives, the separate property money used for that purchase can be “traced” using bank records and real property purchase documents. But more importantly, the Family Code specifically allows for the spouse who puts separate property toward the purchase of the marital residence to recoup that money in the division of assets at the conclusion of a divorce case. That spouse is not, however, entitled to the same proportion of the separate property contribution to the original purchase price as the house is worth (or sells for) at the time of divorce—that spouse is only entitled to a maximum of the actual dollar amount contributed to the initial purchase. Of course, it is also possible that the value of the marital residence goes down, and the separate property contributing spouse loses a portion of the separate property down payment.
If a married couple owns a house already and one of them receives a cash inheritance, it is common that that money is used to renovate or upgrade the otherwise community property house. In this situation, the inheriting spouse may be entitled to recoup some or all of that money depending upon the particular circumstances of the renovation or upgrade.
A different yet similar situation occurs when one spouse inherits a house or other real property and the married couple uses community property to improve the separate property. The “community” may be entitled to reimbursement for that money, and since community property is divided equally, the spouse who owns the house will not receive the entirety of the money used to improve the separate property home.
If a spouse inherits a house, but instead of living in it, rents it out, the rental income will also be separate property. Unless that rental income is commingled in a jointly titled account or otherwise transmuted, that income will
What is Transmuted property – San Diego Divorce Lawyer
Property may be “transmuted,” that is, changed from community property to separate property or vice versa. Often, when spouses make gifts to each other, they do so without contemplating that they will get divorced in the future. If property is of a nature that requires a “title,” such as a house or a bank account or a vehicle, the manner of holding title will generally control whether property is separate or community property. Notwithstanding the title, however, if a transfer is accompanied by a writing which explicitly states that the property in question is being transmuted from separate property to community property (or vice versa) the divorce court will treat that property according to the wishes of the parties.
If a spouse inherits a house, but instead of living in it, rents it out, the rental income will also be separate property. Unless that rental income is commingled in a jointly titled account or otherwise transmuted, that income will remain separate property. However, that is not the end of the story. Another aspect of divorce cases is that one spouse may be ordered to pay support to the other spouse, either for child or spousal support. The income collected from separate property assets (which can include rental properties, stocks, or any other investments) will be counted as income “available for support.”
Although the law requires that community property be “divided equally,” the law does not require that each individual asset be divided in half. Obviously, many assets cannot be divided in half, such as houses. In some circumstances, rather than order the sale of the marital residence, the divorce judge can give the opportunity to one spouse to use separate property to pay the other spouse an amount representing half of the community property share of the value of the house. If a married couple owns multiple pieces of real property, the divorce court can award different properties to different spouses so long as the value of the division is equal.
The foregoing is an oversimplification of property division in divorce cases. There are numerous other types of assets to which different rules may apply (ie., retirement accounts, stock options, etc.). The failure to accurately characterize (determine whether property is community or separate) or identify whether a portion of an asset belongs to one spouse can be a costly mistake. The division of assets in a divorce should be fair, but it should not compromise the rights of the individual.
If you are considering a divorce in San Diego and needing help with understanding community property, you should seek the advice of a divorce attorney. The San Diego Divorce Attorney at the Law Office of Michael C. MacNeil have many years of divorce law experience and will competently represent you. Please call for a no-cost divorce attorney consultation at (858) 922-7098. We look forward to helping you with any of your questions about divorce in San Diego.
This blog post is not intended as legal advice and should be considered general information only.