Navigating Complex Asset Division in California Divorces

Is California a Community Property State?

California is one of only nine U.S. states that is a community property state. This can have an enormous impact on asset division during divorce, especially when the divorce involves a significant amount of assets and if the marriage is a lengthy one.

In a community property state, any assets acquired during the court are considered to belong jointly and equally to both spouses. When the marriage is being dissolved, those assets should be divided as equally as possible between the two.

It’s valuable to understand that debts acquired during the marriage are considered community property as well. And as with assets, there may be both community and separate debts.

One thing that may override community property laws is if there’s a valid prenuptial agreement in place.

What Is the Difference Between Community Property and Separate Property?

Not all assets may be considered community property. Some may be deemed separate property, which means they belong to one of the spouses, not both. Here’s an overview of how the court views community versus separate property. This can be complicated to untangle, especially for high-net-worth couples. If you’re unsure if some of your property will be considered separate or community, it’s vital to work with an experienced divorce and asset division attorney who can clarify things and help protect your assets.  

• Community property includes any assets acquired during the marriage and income earned by either spouse while married, including bonuses, stock options, and interest income. If one spouse owned a business before the marriage but funded it with community property during the marriage, it becomes community property, too.
• Separate property. This includes any property each spouse owned before marrying. It may also include gifts or inheritances received while married. 

However, there are situations in which separate property may become community property. This is where things can become complicated. It’s advisable to understand how this happens, as it can come as a shock when asset division begins. 

• Commingled assets. If one spouse had separate property but it was used for the couple’s benefit, it could be considered community property by the court. Some examples of this are one spouse owning a home before the marriage, which is then used by both spouses once married, and both spouses contributing to the mortgage or its upkeep. Another example would be one spouse receiving an inheritance and putting it into a joint account, using those funds for things that benefit both spouses, such as purchasing real estate or traveling.
• Transmuted assets. This happens when the couple consciously agrees to merge separate property into community property. In the example above, the spouse with the home may agree to share the home with the other spouse. When this happens, the property is usually considered community property and can no longer be considered separate. However, the court will look closely at these situations for signs of illegal activity or coercion on the part of one spouse over the other. When a couple wants to merge separate property voluntarily, it’s crucial they work with an experienced family law attorney who can advise them on how to manage it clearly and legally. 

What Types of Assets May Be Considered Community Property in California?

Any of the following could be considered community property in California as long as they either provided benefits to both spouses or were commingled or transmuted. When in doubt about whether a particular asset is considered community or separate property, it’s best to work with an attorney who can review the specifics with you.

• Bank accounts and cash
• Stocks and investments
• Retirement accounts, including pensions 
• Homes (which include vacation property)
• High-worth items such as jewels, art, and furniture
• Vehicles
• Businesses (along with items such as intellectual property, trademarks, and patents)

How Do the Courts Divide Things Equally? Will We Have to Sell Our Home or Business?

Not necessarily. The courts understand that it’s not simply a matter of dividing a line through properties such as real estate or businesses and giving half to each spouse. The good news is that the court will work to meet each spouse’s wishes, so if one spouse wants the home and the other is willing to relinquish it, the one without the home may receive the equivalent of the home’s value in other assets, such as bank accounts.

However, that’s one factor contributing to the complexity of asset division. If both parties want the home or business, considerable negotiation may be required to reach a satisfactory compromise.

If the couple cannot come to an agreement on how to divide the assets, the court may take over. If that happens, the court’s goal will be to abide by the 50/50 community property rule as closely as possible.

What Should I Do if I Have a Criminal Record and Want to Pursue Expungement?

Call the Law Offices of Paul J. Duron as soon as possible at 562-205-8527 to schedule a free consultation

. Asset division during divorce is always complex, but even more so when the asset list is extensive and multifaceted. We understand how important it is for you to protect your assets. We can review your holdings and provide guidance on what steps to take for the best possible outcomes. What’s more, we represent you only in this case, not your soon-to-be ex, and will work to advance your interests.