Does California Require Equal Property Distribution
Marital Property & Equal Distribution Laws in California
California is what is known as a “community property” state. In a divorce case, the community property—also known as marital property—will be divided equally between the spouses. Community property is defined as property that 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, however.
How Marital Property Is Divided in California
In California, if you and your spouse decide to get a divorce, then your property will be split down the middle—or 50/50. Your California marital property laws state that all assets, as well as debts acquired during marriage, are included in your shared property.
The following assets may be considered to be community property during divorce property division in California.
- Professional practice or business
- Pension or retirement plan
- Stock option or stock
- Insurance policy’s cash value
- Investment or bank account
- Income earned in the course of your marriage
- Car, antique, art, jewelry, or furnishings
- Real estate (including a rental property, house, or land)
As far as community debts are concerned, the community debts that must be split 50/50 include any liabilities that you incurred between your marriage date and your separation date. Your community debt may include credit card debt, even if your credit cards are in only one spouse’s name.
However, note that although the law requires that you divide these assets “equally,” the law does not necessarily require that each individual asset be divided in half. Obviously, many assets cannot be divided in half, such as houses. If a married couple owns multiple properties, the divorce court can award different properties to different spouses so long as the value of the division is equal.
Another option for dividing marital property in California is for you to “buy out” your future ex’s share in a particular asset, such as the family home. In addition, you and your future ex-spouse have the option of selling your home and splitting the profits of the sale. Typical divorce proceedings involve the combination of all of these methods depending on the unique circumstances and facts of the cases.
When It Comes to Divorce Property Division in California, What Is Separate Property?
Separate property is handled differently from marital property, or community property, in California. 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 that is acquired during the marriage can be characterized as separate property if it was acquired as a result of a 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, the argument can be made that the money is community property. This is known as “commingling.” Because the cash in a bank account is indistinguishable from all of the other cash in it, there is no way, outside of a written note or the titling of the account (the name(s) on the account), to identify which cash belongs to whom.
Additional Separate Property Considerations During Divorce
If 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 law concerning marital property specifically allows for the spouse who puts separate property toward the purchase of the marital residence to recoup that money in the division of property at the conclusion of a divorce case.
Also, if a married couple owns a house already and one of them receives a cash inheritance, it is common for the money to be 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 because 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.
What is Transmuted Property During Divorce Property Division in California?
California marital property laws say that assets 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 written document that 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 rents it out instead of living in it, 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 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.”
A Family Law Attorney Can Help Your Marital Property in California
The above is an overview of divorce property division in California. There are numerous other types of assets to which different rules may apply (i.e., 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 marital assets in a divorce should be fair, but it should not compromise the rights of the individual.
Thus, if you are considering a divorce in San Diego and needing help understanding California marital property laws, consider working with a divorce attorney to navigate these issues.
I will go over California’s law regarding the division of marital property with you and explain to you how it applies in your unique situation. Then, I will help you to pursue your fair share of marital property at the negotiation table or at divorce trial, if necessary. Either way, I will make sure that your financial best interests and legal rights are protected during every stage of your divorce proceeding.