When you get married in California, both spouses join their resources. However, some of their property is still considered separate property while other property is jointly-owned marital property, also known as community property.
Which is which? There are some general rules, and also some exceptions. As a basic rule, marital property refers to any asset or debt either spouse accumulates during the time they are married. Everything from homes and cars to salary, pensions, and bank accounts can be considered marital property if it's obtained during marriage. Because California is a community property state, marital property is typically divided equally in divorce.
But there are exceptions to the general rules regarding both the classification of property and the division of property, so it’s important to have your attorney consider all the details about how and when you acquired property and how it was used.
Distinction Between Marital and Separate Property
Understanding the difference between marital and separate property is crucial when considering a divorce in California. At the core, assets acquired by either spouse before the marriage are typically viewed as separate property. This could be an inheritance, a personal savings account, or even a piece of real estate. Separate property is kept by the spouse who owns it and is not subject to division during the divorce process.
However, things aren’t always black and white. The classification becomes complex when separate property gets mixed or "commingled" with marital assets. For instance, imagine you had a savings account before marriage. If during the marriage, you added funds earned while married into this account, that action blurs the distinction between separate and marital property. This separate property bank account might now be seen as community property, especially if both spouses accessed or used those funds. This is referred to as “commingling." It's a blending of separate and marital assets, often leading to complex legal considerations during a divorce.
The Intricacies of Business and Marital Property
Bringing a business into a marital equation can make property distinctions even trickier. If you began a venture before getting married, you might think it remains your separate property, particularly if your spouse did not work much or at all in the business. However, the nature of businesses makes them more susceptible to commingling. At least some of the value of the business may be treated as marital property unless you executed a prenuptial agreement specifying that the business would be kept as your separate property.
To understand why, it’s helpful to consider a common example. Say you had a small startup before marriage. After marriage, you injected funds from a joint marital account to expand your operations. Your spouse, seeing the potential, also invests time, effort, and maybe even funds into it. Over time, this business grows and flourishes.
Now, does this remain your separate property? Or has it transformed into a marital asset due to the combined efforts and investments? Even if your spouse didn’t directly help with the business at all, the support provided to the home and to your partnership can be considered as contributing to the value of the business because it allowed you to put time and effort into the enterprise.
The lines get blurred further if you use profits from the business (initially your separate property) to buy a family home or pay for joint vacations. The intricate combination of contributions, mixed finances, and shared efforts make businesses a particularly complex asset to allocate in divorces. Determining who gets what share or how to value each spouse’s contribution often requires nuanced legal insight.
California's Approach to Property Division
California’s sunny shores are also home to community property laws. This means that in a divorce, marital assets are usually divided right down the middle. It’s an equal distribution approach. And when a business is involved, this can require some finesse. Whether you're thinking of buying out your spouse's share or finding a mutually beneficial plan to continue operations together, you need an attorney who understands how to address all the challenges.
Although community property is typically divided 50/50, there are instances where one spouse may receive a greater share of marital property. Courts may award more to one spouse if the other has wasted marital assets, such as by spending money on an extramarital affair. Other instances of wrongdoing, such as domestic violence, can also prompt a court to award extra funds to one spouse. Spouses may also develop their own agreement providing a greater share of marital property to one or the other.
How Holstrom, Block & Parke, APLC Can Help
Divorce can be challenging, especially when assets like businesses are in the mix. But you don’t have to go it alone. We're here to help you make sense of it all, ensuring that you’re informed and prepared every step of the way.
We understand how to protect your assets and ensure you receive the full share of property you’re entitled to under California law. Reach out to Holstrom, Block & Parke, APLC today at (844) 237-5791 or contact us online for a consultation with a dedicated divorce lawyer in Southern California.