Property division is one of the most contested issues that you will face in your divorce. Even if you think you will have an amicable divorce, differences of opinion in how the property will be divided can lead to drawn-out legal battles. It is important to have an attorney by your side to make the process run smoothly and ensure that you are receiving what you are entitled to under California law.
Community Property State
California is a community property state. Being a community property state means that most property acquired during the marriage is divided 50/50 in the event of a divorce.
Marital Property & Separate Property
There are two categories of property in a divorce: Marital and separate. It is important to determine what property falls into which category, because only marital property is divided in the divorce. Separate property does not need to be divided — it belongs to one party or the other.
Marital property is most property that the parties acquired during the marriage. Debts and assets are considered marital property and will be divided in the divorce. It is irrelevant which spouse actually acquired the property or the debt if it is marital property. Any marital property that was acquired during the marriage but is located outside of California is also considered marital property during the divorce.
Separate property is any property that was either: 1) acquired before the marriage, 2) inherited, or 3) gifted to you individually. If property that was originally separate is later commingled with marital property, it may be considered marital property.
For example, if you receive an inheritance but then use the inherited money to renovate your family home, the inheritance may no longer be categorized as separate property. Additionally, separate property includes any property acquired after a legal separation is in place.
You can take legal action during or before your marriage to change property from marital to separate or from separate to marital. Separate property can be transformed into marital property through the recording of a title change. Additionally, parties can also make property designations in a prenuptial or postnuptial agreement. The agreement should be written and signed to be valid.
It can be difficult to uncover what property is under your spouse's control. Your spouse may try to hide or spend assets during a divorce to avoid the division of the asset. It may be in your interest to talk to your attorney about hiring a forensic accountant who can track the marital assets.
Valuation of the Property
Determining the valuation of complex assets can be tricky and may require the help of professionals such as real estate experts, investigators, business valuators, and forensic accountants. Examples of complex property include stocks, retirement accounts, pensions, 401(k)s, bonds, businesses, and real estate. One joint expert may be hired or each spouse may hire their own expert.
Even for assets that appear simple on the surface, issues can arise. For example, if one spouse is buying the marital home from the other spouse and you agree upon the equity in the house, you still may have to consider whether the selling costs will be deducted and who is responsible for the taxes.
Dividing Assets Equally
In California, you can divide an asset equally one of three ways: 1) in-kind division, 2) value division, and 3) sale and division.
To divide assets in-kind means that the property is divided physically in half without a sale. For example, if the property is publicly held stocks, each spouse could get half of the stock.
In a value division, you determine the value of the properties, divide the values, and then equalize. For instance, if the parties owned two houses, they would first determine the value of each home. Each spouse would keep one house, and then equalize the difference in value, meaning the spouse with the higher-valued house would owe the difference in value to the other spouse.
Sale and division mean that the parties sell the assets and then divide the proceeds equally.
California is a no-fault state. No-fault means that any bad conduct by either of the spouses is not a factor in the rule that all marital property is to be divided equally.
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