How Will Our Assets Be Divided in a California Divorce?
One of the primary financial consequences of divorce in California is that a couple’s assets will be divided between the two of them. California follows a property distribution system called “community property” which divides all of a spouse’s assets into community property and separate property. This can be relatively straightforward in some cases and deeply complex in other cases, especially where real estate, family businesses, and retirement funds and other long-held financial instruments are involved. Below is an overview of the process of dividing property in California.
Determine What Is Separate Property
Separate property is the property each spouse had before the marriage or was given as a gift solely to that spouse (and not later converted to community property).
Determine What Is Community Property
Community property is all assets that were earned by either spouse during the marriage or acquired with such earnings. This is true even if only one spouse worked.
Ensure That All Property Is Properly Accounted For
Spouses often have a motive to hide or conceal property through transfers to family members or simply hiding it. An attorney will use methods to make sure all property is accounted for.
Value the Community Property
Community property will be divided 50/50 between the spouses in a divorce, so it is important to have an accurate valuation of the property, not one intended to improperly favor one spouse.
Address Matters of Mixed Assets (Commingled Property)
Property distribution gets quite complex when property becomes mixed assets, containing separate property and community property (e.g. a business started before marriage which has risen in value due to at least one spouse’s efforts).
Attempt to Reach an Agreement on Dividing Community Property and Mixed Assets
As the total inventory and valuation of community property and mixed assets becomes clear, the spouses should attempt to reach a settlement agreement on dividing it in a 50/50 manner.
Litigate on the Division of Community Property and Mixed Assets, If Necessary
If the spouses are unable to reach a settlement agreement, it will be necessary to litigate the property distribution issues before a California family court judge.
Obtain a Final Divorce Order Dividing the Property
A judge will approve a settlement agreement (if fair) in a final divorce order, or will reach a determination if the matters are litigated, and hand down a binding order on both spouses.