Splitting Assets in a California Divorce with Community and Separate Property.

Splitting assets in California Divorce

Splitting assets in a California divorce requires an understanding of community and separate property law.

Before we jump into how the Court splits assets in a California divorce case, let’s first make sure you understand what the terms community and separate property mean.

Community property is defined by California Family Code section 760 which states that: “…all property, real or personal, wherever situated, acquired by a married person during the marriage while domiciled in this state is community property.” Sound broad? It is intended to be. There are other statutes that both expand and limit whether real property (residential or commercial real estate or land) or personal property (anything that isn’t real property) is community or not, depending on the facts of the case. In general, community property is split 50/50.

Separate property of a married person includes all of the following: (1) All property owned by the person before marriage, (2) All property acquired by the person after marriage by gift, bequest, devise, or descent, (3) The rents, issues, and profits of that property and (4) the earnings and accumulations of a spouse and the minor children living with, or in the custody of, the spouse, while living separate and apart from the other spouse.

Similar to community property, the rules for what is and is not separate property are not always clear. Community property can have a separate property component to it and visa versa. Community property can become separate property and visa versa through a process called transmutation if both spouses agree to it and comply with the legal formalities. Like many rules in divorce and family law, there are exceptions to them and sometimes the exceptions can be complex enough to nearly swallow the rule. Generally, a separate property asset belongs 100% to the spouse that owns the property.What are the types of assets that are split in a California divorce? The list generally includes:

  1. Family home
  2. Commercial real estate
  3. Land
  4. Rental property
  5. Furniture, furnishings and appliances
  6. Jewelry, art, coins and collectibles
  7. Bank accounts
  8. Stock and investment accounts
  9. 401(k), pensions or other retirement accounts
  10. Businesses and partnership interests
  11. Life insurance policies
  12. Cash
  13. Cars
  14. Patents, copyrights and trademarks

In short, anything that is real or personal property, no matter where it is located, can become an assets subject to division in an Orange County divorce case.

Let’s talk about issues we commonly see when splitting assets in a California divorce.

1. Title to property in only one spouse’s name

If I had a nickel for every time I got a case where one spouse was on title to the property even though the property was acquired during the marriage, I would have a lot of nickels. This often happens when a piece of property is purchased during the marriage but is at some point refinanced and one spouse is removed from title because of some bank or loan requirement. This can also occur due to agreements between spouses during the marriage and a whole host of other reasons. Does the spouse who is removed from title or was never on title lose ownership interest in the house?

That is not an easy question and there is no simple answer. It all depends on numerous factors. Here are a couple of them:

1. Title to property can matter in family law cases. There is such a thing as a title presumption in California. Evidence Code 662 states, “The owner of the legal title to property is presumed to be the owner of the full beneficial title. This presumption may be rebutted only by clear and convincing proof.”

2. However, that title presumption can conflict with other family law statutes and California case law that has come down over the years. For example, in some situations, there may be a presumption by California law that if a spouse is removed from title during the marriage, there was undue influence (that means the transaction was not knowing, voluntary and consensual). This presumption would need to be overcome by the person who wants to claim the property should be divided according to its title.

I have painted here with a broad brush on purpose. There are general rules and there are exceptions. This is an area where the particular facts of a case can make all the difference in how the case is presented and decided. This is a very common area of litigation and hiring experienced Orange County family law attorneys like those within our firm is absolutely critical to your case.

2. Commingling community and separate property money

Another very common occurrence is the commingling of community money with separate property money during the marriage, which then causes a dispute between the spouses whether or not the money at the time of separation belongs to both or one of them. This often happens when one spouse has money in a bank or investment account prior to the marriage but, during the marriage, not only places the other spouse on title to the bank account but also starts to deposit community earnings into that same account and pays community debts from that account. Cases like these typically require the assistance of a forensic accountant to review the history of the transactions in each account during the marriage to decide if the community versus separate property portions can be traced backward in time and if we can determine how much of the money left over at the time of separation is community or separate property.

3. Splitting a business in a California divorce

How in the world does a court split a business in California divorce? It’s a question I sometimes get from a client who doesn’t understand how a business, especially one that is a small family business and doesn’t have much in assets but rather makes its money from the hard work of one spouse, can actually be divided between two spouses. The answer to the question is “valuation” of the business. When a business is operated by one spouse and that spouse has the knowledge, experience and the relationship with the customers, a court will generally award the business to that spouse but order the operating spouse to buyout the other. While we will talk about how a business is valued in different pages of the site, the most important thing you should know is that a forensic accountant is almost always necessary to determine what a business is worth. That means the business must open up its books (hopefully there is only one set of them) and provide truthful information about its revenue and debts. It is not uncommon for a business owner to be reluctant to turn over that information. While there are ways to make sure the information provided remains only within the divorce case, there is no exception to the rule of full disclosure and any business owner that tries to keep information from his or her spouse generally runs into trouble with the court especially when there is an experienced Orange County family law attorney that represents the other spouse.

Does all of this sound complicated? It can be. That is why you need an experienced Orange County family law attorney on your side.  Husband or wife, it doesn’t matter which side of the issues you are on – our family law attorneys know the law, have handled cases just like yours before and bring a wealth of experience and skill to cases that involve dividing real and personal, community and separate property. Contact us today for an affordable strategy session. Let’s get your case started on the right track.