Ask Debra – In this series, Family Law Specialist Debra Schoenberg answers your most pressing divorce-related questions.
The first in a 2-part series on asset division: 10 FAQ about Property Division in a California Divorce
Before we get into our most-asked questions about how assets are divided in a California divorce, it’s important to understand one basic principle: community property.
Under community property law, all assets and debts acquired by a couple during their marriage are considered jointly owned and will be divided 50/50 in the event of divorce. (There are certain exceptions for things designated explicitly as “separate property. “)
California is one of just nine states that operate under the community property principle. And while it is simple in theory, in practice, asset division can still be quite complex, especially in high-net-worth situations.
1. How do you determine community vs. separate property?
In general, anything accumulated while married, as well as any debt taken on while married, falls under community property.
Separate property includes:
- Assets and debts that belonged to each partner before the marriage
- Earnings that come exclusively from separate property
- Anything acquired by one partner through gift or inheritance
- Assets acquired after the date of separation
However — and this is one area that can get complicated — you may also have commingled property. This refers to assets that were brought to the marriage separately but were subsequently mixed with community property. (For example, one spouse owned a vacation home at the time of the marriage, but during the marriage, renovated or upgraded it using marital funds.)
If the spouses disagree over classification, the burden of proof is on the person claiming an asset is separate property.
Identification and valuation of the various types of property can get particularly knotty and contentious in a high-asset divorce. Some couples, especially those with substantial assets or complex financial portfolios, opt for a prenuptial agreement, which can streamline property division in the event of a divorce by designating certain assets as separate property.
2. How are assets split 50/50 — in practical terms?
Simply put, the court will take the total value of the couple’s shared assets and subtract their shared debt to determine net worth, which will then be divided equally between spouses. Not all property can be divided “in kind” (splitting the actual asset in half); while it’s easy enough to give each partner half the cash, you can’t just cut a sailboat, for example, down the middle. But there are several ways to make sure you each receive equal value. A property might be converted to cash (sold) and the proceeds divided. You might each get a comparable asset (one person the boat, the other the car). Or, in some cases, one spouse might buy out the other’s share of a certain asset. In the end, you each wind up with half of the community estate, but again, getting there can be a complex and emotional process, and may require creative solutions.
3. Do I have to pay my ex-spouse’s debt?
The process of classifying and dividing debts can be even thornier than splitting assets, and every case is unique. But the short answer is, yes: in general, under community property law, responsibility for shared financial obligations is divided equally in a divorce.
Often, the best course is first to reduce debt as much as possible. This may involve selling off jointly owned assets.
If your shared debts are greater than the total value of your community property, the court can order an unequal division. In such cases, the spouse in a better financial position may have to pay down the debt; however, that can be offset by awarding them more community property or a reduced spousal support obligation.
In the case of joint debts, like a joint credit card, it’s important to know that creditors do not have to honor agreements made between spouses about who will pay off the debt. If your ex falls behind, the company can still pursue you for past-due payments. If your divorce settlement assigns specific debt payment obligations, you may have to file a motion to have it enforced.
4. Does a spouse’s behavior affect property division?
California is a no-fault divorce state, which means that, to file for divorce, neither partner needs to prove wrongdoing by the other. If one or both of you want to end the marriage, you can be granted a divorce based on “irreconcilable differences”. Likewise, when it comes to dividing assets, California courts do not consider fault. It may feel unfair, but no matter why the marriage ended, even in the case of infidelity or abuse, community property law still applies.
5. Who keeps the family home in a California Divorce?
This is one of the most emotionally loaded property division questions. The home where you have lived together and raised – or are still growing – a family feels like much more than a financial asset, and carries many significant logistical implications. Nevertheless, legally speaking, unless your home meets very specific criteria qualifying it as separate property, it typically falls under community property (even if there is only one titleholder, which can happen for a variety of reasons). This means that in a divorce, the judge will likely award each of you an equal share of the family home.
However, there are still options for how this plays out:
- In some cases, one spouse buys out the other’s share and becomes the sole owner.
- Some couples sell the house and split the proceeds (Note that this can have serious tax implications; consult a financial adviser.)
- Others defer the sale of the house and remain co-owners for a determined amount of time.
You’ll need to consider numerous factors, such as: Does it make sense for one of you to go on living in the home? Can you afford it? What will ease the transition for the children (especially if they are young, in school, tied to community)? What option will help you co-parent peacefully and effectively?
Even in a community property state, every divorce and marriage settlement agreement is unique and often requires strategic approaches.
Property division can be a complex and hotly disputed aspect of the dissolution process. However, divorcing couples who can work together can opt to create a property division agreement on their own and have it approved by the court. This is often in everyone’s best interests as it can save time, money, and a lot of stress compared to a lengthy court battle. It’s crucial to work with a knowledgeable and experienced family law attorney during this process.
The skilled family law attorneys at SFLG can help you navigate the division of assets to reach an outcome you can feel good about, even in high-asset or high-conflict cases. Our goal is to keep the proceedings straightforward and amicable, avoiding court if possible, but we are formidable trial lawyers if litigation becomes necessary.
(click here for Part 2, Questions 6-10)
by Debra Schoenberg
