When couples divorce in California, one of the biggest questions that arises is who gets what? Like child custody and visitation, property division is one of the most emotionally challenging aspects of divorce because cars, homes, and other personal property can represent years of hard work and/or sentimental value.
California is a community property state. This means that in general, property acquired by either spouse during a marriage is presumed to be equally owned by both spouses. Section 2550 of the Family Code requires the community estate to be evenly divided upon separation, so without any agreement to the contrary, the court will review the marital estate and order a 50/50 division.
How Does California’s Community Property Law Work in Practice?
If you and your spouse file for divorce in California, you have the option of negotiating your own property division and keeping the court out of it. Should that prove impossible, the court will take the perspective that any income and property (both real and personal) acquired by either of you during the marriage belong to both of you equally. Here are some real-world examples of what this division might look like.
- You and your spouse bought a beachfront property in La Jolla together for $3 million not long after the marriage. The mortgage is currently valued at $1 million and an appraiser concludes that the house is now worth $4 million. After the mortgage is subtracted, the net community interest in the property is $3 million. If you want to keep the property, you will have to ‘buy out’ your spouse’s $1.5 million share (half of $3 million), either in cash or property of equal value.
- Your spouse has a 401(k) that they began contributing to 10 years before you married. They continued to make contributions during your marriage. According to the most recent quarterly statement, their 401(k) is worth $600,000. Since they started contributing to it 10 years before your five-year marriage, two-thirds of that value, or $400,000, is his separate property and not generally subject to division. The community interest in the account is therefore $200,000.
- You started a software consulting business during the marriage. To get it off the ground, you and your spouse applied for the business loan together, and the loan is now paid off. An expert values the business at $100,000, so each spouse’s community interest is $50,000.
- Your spouse has a credit card with a $5,000 balance. Since the balance was accumulated during the marriage, you are each responsible for $2,500. There may be exceptions: for example, if your spouse recklessly ran up that balance to spite you or buy gifts for a new love interest, the court may hold them responsible for paying it.
- A year after your five-year marriage, you took out a $30,000 student loan for your dental assistant associate degree. The loan balance is now $25,000. Under California Family Code section 2641, a spouse who acquires a student loan is usually the one responsible for paying it unless it was taken out over 10 years before you filed for divorce and both spouses benefited substantially from the education. Since the loan is only four years old and you have yet to find employment as a dental assistant, you are responsible for the balance.
What is Quasi-Community Property?
The term quasi-community property refers to any property acquired by one or both spouses when they lived out of state which, if acquired while living in California, would be considered community property.
In other words, if you or your spouse lived outside of California during your marriage, and you earned any income, bought any real estate, or acquired any other assets that would be considered community property in this state, it is quasi-community property and subject to a 50/50 division upon divorce or legal separation.
For example, if you both lived and worked in Illinois during the marriage and bought $10,000 worth of antique furniture to decorate your home, the earnings from your respective jobs and the furniture are quasi-community property because they would have been community property if earned and acquired in California.
What Property is Considered Separate in a California Divorce?
Separate property is anything you own or owned under the following circumstances:
- Before you were married
- Received as a gift or inheritance during the marriage
- Acquired after the date of separation from your spouse
Anything you purchase with separate property (e.g. you buy a cottage with the money your mother left you) remains your own, as does any money you earn from separate property (e.g. you rent out the beach house that your grandmother willed you).
There are times, however, when separate property and community property become mixed. This outcome, known as ‘commingling,’ can make property division more complicated during a divorce. Below are a couple of examples:
- You owned a home before getting married, sold it, and used the money to make a down payment on a marital home. While the down payment would be considered separate property, any mortgage payments made using marital funds are community property.
- Your spouse has a pension from a job they held before and during the marriage. The contributions they made are separate property but those made after are community property. Once you separate, future contributions are separate property once more. In cases like these, dividing a pension can be complicated and requires expert assistance.
Although the concept of a 50-50 split sounds straightforward, in a lot of cases it can be anything but. Valuing some types of assets can take time, commingling can make it more challenging to determine who is entitled to what, and if one spouse tries to conceal community property to avoid division, forensic accountants may have to get involved. Working with a high-asset divorce attorney can help you leave the marriage with the property you are legally and rightfully entitled to.
Do You Have Questions About California Community Property Law?
In a divorce, property division can easily become a source of contention. If you’re facing a divorce that includes real property and valuable assets like pensions and family businesses, you need an experienced California divorce lawyer who knows how to get the results. At Renkin & Associates, we are committed to helping you get the outcome you need to move on after divorce. To request an appointment with divorce attorney Richard M. Renkin, contact us online or call 866-228-7116 today.