Amidst all the emotional turmoil, once you’ve decided to end your marriage, there are several significant issues you need to resolve. The divorce process includes the following:
- Create a custody and visitation agreement if you have children
- Determine spousal/child support
- Divide your assets
While on the surface, things are just things, in a situation filled with tension, pain, anxiety, anger, and resentment, belongings can take on extra personal significance and emotional weight. The division of property can be very thorny and contentious. And the real stakes are high—your final settlement will have an enormous impact on your financial future and post-divorce life.
It’s crucial to understand your state’s specific laws concerning asset division so you can know what to expect, then initiate the property division process as smoothly as possible to achieve a satisfactory outcome.
The first thing to know is that California is a community property state meaning that in a divorce, by and large, ALL assets acquired during the marriage (and before separation or intent to divorce) are considered shared and will be divided 50/50 in a divorce. Even one partner’s business may be treated as community property if it was founded during the marriage, launched prior to the marriage but subsequently developed and supported with joint marital funds.
There are a few exceptions. An asset already owned by one party at the time of the marriage is considered separate property, as is an inheritance received by one partner even after the marriage. There may also be commingled property—assets brought to the marriage separately but became mixed; for example, a vacation home bought by one partner before marriage but renovated and furnished with marital funds.
The classification of various property types can be tough to untangle in a high-asset divorce, so some couples avert this situation with a prenuptial agreement that preserves certain assets as separate property in the event of a divorce.
It’s important to know that the community property rule applies to marital debts as well—in other words, responsibility for shared financial obligations will also be divided equally in the divorce.
Simply put, the court will look at the total value of all your shared assets and subtract the total community debt to arrive at a net worth, which will then be divided equally between partners. Note that this does not necessarily mean that all property will be split “in kind” (half of each actual asset, which is possible to do with money but difficult with objects) but that you will each receive equal value (for example, one of you gets the car and one gets the boat). In some instances, one spouse may buy out another’s share of an asset, or a property might be sold and the proceeds divided. But in the end, you each end up with half of the net worth.
Although property division can be the subject of hot dispute, couples can create a property division agreement and have it formally approved by the judge, saving you time and money compared to a drawn-out court battle.
Here are five essential steps to take if you want to work together to negotiate the division of assets:
Make a complete list of everything you own (and owe). The list would include home(s), land, vehicles, bank accounts, investments, pensions and retirement plans, valuable collectibles, and household items like furniture and appliances. Also, list debts. Be completely honest and forthcoming.
Determine the value of each item. Try to agree on the value of any item above a certain threshold that you set, perhaps 100, 300, or 500 dollars. The valuation of more considerable or complex assets, and things you disagree on, may require the help of a third party. For example, retirement accounts, pensions, and investments are very complex and best handled by a financial advisor.
Consider who should logically own each asset. Is there a compelling reason why one person should have a specific item post-divorce? Was there any separate property brought to the marriage that has stayed separate?
Seek professional guidance. The asset division process can be tense, emotional, and logistically complicated. An experienced family attorney can advise you on the law and your rights and also communicate with the other party to smooth the process. A financial advisor can help you avoid common pitfalls, like neglecting to account for tax implications, etc. Professionals can help keep the process calm and business-like and ensure you’re addressing tricky details.
Get the court’s approval. A judge is likely to honor your agreement as long as it is fair and balanced and neither party, especially without legal representation, has agreed to something unreasonable.
The skilled family attorneys at SFLG can help you navigate the division of assets—and your entire divorce—to reach a favorable outcome. We are formidable trial lawyers when litigation is necessary. We always aim to keep the proceedings straightforward and amicable, avoiding court if possible.
By Debra Schoenberg