What is Community Property in California and is it Always 50/50?

What is community property under California family law? The question is common, and the answer can range from straightforward to highly complex. This overview explains key principles to help you better understand California’s community property laws and how they apply in divorce.

California Community Property Law Under Family Code 760

California Family Code section 760 states:

Except as otherwise provided by statute, all property, real or personal, wherever situated, acquired by a married person during the marriage while domiciled in this state is community property.

Although the statute appears simple, it carries significant implications. Community property includes real property and personal property, regardless of where it is located, if it was acquired during the marriage while the spouses were domiciled in California.

However, characterization is rarely as simple as the statute suggests. The source of funds, timing of acquisition, title, and subsequent transactions all affect whether property is community, separate, or a combination of both.

What Is Community Real Property?

Real property refers to real estate of any kind, including:

• The family home
• Rental properties
• Land
• Commercial property

A property acquired during the marriage is often community property, but it may be partially or entirely community depending on:

• The date of acquisition
• The source of the down payment
• The source of funds used to reduce the principal balance
• Any improvements made during the marriage

What Is Community Personal Property?

Personal property is everything that is not real property. The term is broad and includes virtually all other types of assets.

Common Types of Community Property

The Family Residence and Other Real Estate

A home purchased during the marriage is frequently community property. However, if separate property funds were used for the down payment or mortgage reduction, the property may have both community and separate components. Tracing the source of funds is often essential.

Household Furniture, Furnishings, and Appliances

Furniture, appliances, and other household items purchased during the marriage with marital earnings are typically community property.

Jewelry, Art, and Other Personal Valuables

Jewelry and other tangible personal items acquired during the marriage with community funds are generally community property. However, Family Code section 852(c) creates an exception for certain gifts between spouses.

That statute provides that a written transmutation is not required for clothing, wearing apparel, jewelry, or other tangible personal articles that are used solely or principally by the recipient spouse and are not substantial in value considering the circumstances of the marriage.

The phrase “taking into account the circumstances of the marriage” gives courts discretion. Each case turns on its specific facts.

Motor Vehicles

Cars, motorcycles, boats, trailers, and other motorized vehicles may be community property. If a vehicle was acquired before marriage but paid down with community funds during the marriage, it may have both separate and community interests.

Bank Accounts and Financial Accounts

Checking accounts, savings accounts, brokerage accounts, and similar financial accounts may be community property.

The name on the account is not dispositive. The key issue is the source of the funds deposited into the account. When separate and community funds are commingled, tracing becomes necessary.

Cash

Cash is generally community property unless it was owned before marriage and kept separate. Disputes often arise when one spouse has exclusive access to cash or removes it without the other spouse’s knowledge.

Life Insurance

Life insurance may be term insurance or policies with cash surrender or loan value. Characterization depends on when the policy was purchased and the source of premium payments. Analysis can become complex when policies span both separate and community periods.

Stocks, Bonds, Notes, and Mutual Funds

Investment accounts may increase or decrease in value during marriage.

If market forces alone caused appreciation in a premarital account, the increase is usually separate property. However, if community funds were contributed or community effort enhanced the value, the community may acquire an interest. Forensic accounting is often necessary.

Retirement Accounts and Pensions

Retirement benefits and pensions are frequently divided through a Qualified Domestic Relations Order (QDRO).

The community portion is typically determined using a formula that accounts for length of service during marriage and contributions made before separation. Most retirement plans contain both community and separate components.

Profit-Sharing Plans, Annuities, IRAs, and Deferred Compensation

These assets are generally analyzed similarly to retirement accounts or financial institution accounts. If subject to a QDRO, the order will typically define the community share.

Accounts Receivable and Unsecured Notes

If money was loaned during the marriage using community funds, the resulting account receivable is generally community property.

Businesses and Business Interests

Corporations, partnerships, limited liability companies, and other business entities may be community property.

If a business was started during the marriage, it is generally community property. If it was owned before marriage, the analysis focuses on:

• When it was formed
• Whether community time or money contributed to growth
• Its value at marriage
• Its value at separation

Business valuation disputes are common and frequently require forensic accountants.

Intellectual Property

Patents, copyrights, trademarks, and similar rights may involve both federal law and California community property principles. Characterization often depends on when the intellectual property was created and whether community effort contributed to its development.

The Joint Title Community Property Presumption Under Family Code 2581

Family Code section 2581 creates a presumption that property acquired during marriage in joint form is community property for purposes of division upon dissolution.

The presumption applies to property held as joint tenancy, tenancy in common, tenancy by the entirety, or community property.

The presumption may be rebutted only by:

1. A clear statement in the deed or title document that the property is separate property, or
2. A written agreement between the parties stating that the property is separate property.

This presumption affects the burden of proof and is significant in litigation.

Title Alone Does Not Control Characterization

Title is important but not determinative. A home titled in only one spouse’s name is not automatically that spouse’s separate property. Likewise, property acquired during marriage is not automatically one hundred percent community property.

The Meaning of “Acquired” Can Be Disputed

If a spouse owned property before marriage but retitled it into joint form during marriage, disputes may arise regarding whether the joint title presumption applies and whether it can be rebutted.

Such situations may also implicate Family Code section 721.

Spouses Owe Each Other Fiduciary Duties

Spouses are fiduciaries to one another. In any interspousal transaction, neither spouse may take unfair advantage of the other.

When property changes character from separate to community or vice versa, courts evaluate whether there was full disclosure, voluntary action, and absence of undue influence.

Is Community Property Always Divided Equally?

In a California divorce, community property is generally divided equally unless the parties agree otherwise or a statutory exception applies.

However, determining what qualifies as community property is often the most complex and contested part of the case. Characterization depends on when the property was acquired, the source of funds, the form of title, written agreements, contributions of community effort, and applicable statutory presumptions.