Property Characterization & Division
Separate vs. Community Property
The Court will divide spouses’ property as part of a divorce. In California, the general rule is that anything acquired during the marriage with funds earned during the marriage is “community property.” It gets split in half during the divorce. Unless there is a written premarital or post-marital agreement, this equal split will apply even if the property is only in one spouse’s name and even if one spouse did not contribute to the acquisition.
Assets and debts that are acquired with money earned before a marriage, with money earned after a marriage, with inheritance, or with a gift to one spouse will generally be “separate property” belonging to one spouse.
Challenges in Property Division
There are two major factors that complicate property division – (1) determining when a marriage ends and (2) tracing the source of funds used to purchase property.
Property acquired after a marriage ends with funds earned after a marriage end is Separate Property. When a marriage ends depends on when a couple physically stops living together, when one spouse announces to the other the marriage is over, and when the couple objectively stops acting married. A court will consider all of these factors and all the circumstances of the relationship to decide when the marriage ended.
Money earned during a marriage is called ‘community funds.’ Money outside the marriage, by inheritance, or by gift to one spouse is called ‘separate funds.’ The type of funds used to purchase property will determine whether the property is Separate Property or Community Property. Identifying whether property came from community funds or separate funds is called “tracing.” Tracing requires meticulous records (bank statements, receipts, copies of checks, wills, loan documents, etc.). Certified family law accountants can often be helpful in reviewing and deciphering these records. Here are some examples of situations where tracing may be required:
- When one spouse received a gift or inheritance, that spouse needs documents to prove the money was not intended for both spouses.
- When separate property money is used to buy something during the marriage, one spouse has to prove the money used to make the purchase was actually separate property.
- When separate property money is mixed with community property money (perhaps in purchasing a house or in a joint bank account), the Court will split the money in half unless one spouse can prove exactly how much was separate property and where it went.
Dividing Businesses
Whether a business is community property, separate property, or both will depend on when the business was started, the source of the funds used to support it, and whether both spouses contributed to the business. The contributions that can make a business community property can be community property funds, both spouse’s work at or for the business, or one spouse’s moral or logistical support in the marriage that allowed the business’s value to increase.
Certified family law accountants are often helpful in identifying whether and how much of a business is community property.
Personal Injury Settlements
Where one spouse is physically injured during the marriage and receives money as a result of that injury, the injured spouse will usually receive the monetary award so long as the award is not hopelessly mixed with other community property.
Duty of Loyalty, Honesty, and Disclosure to Your Spouse
Most people don’t realize the law sees their spouse and as their business partner in life. Spouses have the same financial responsibilities as business partners. These responsibilities are called ‘fiduciary duties.’ Spouses have fiduciary duties to each other during marriage and during a divorce case.
Spouses are legally obligated to act in the financial best interests of their marriage before they act in their personal financial interests. Spouses have a legal obligation to inform each other of their finances and financial health. Spouses are legally required to consult each other before making huge financial decisions about marital property and finances.
If one spouse breached his or her fiduciary duties, the Court could impose fines or refuse to award that spouse portions of the community property.
Contact Core Family Law About Your Property Division
In Court, ‘it doesn’t matter what you believe, it matters what you can prove!’ Core Family Law will work with you to identify and collect the evidence necessary to protect your money and property. Please keep in mind that this page is not legal advice for you or your case. Contact Core Family Law to speak with an attorney and schedule an in-person consultation.
Come See Us!
Schedule an in-person consultation and see our individualized approach first hand. Meet with us, discuss your situation, your needs, and your priorities.
OR CALL US AT