In the process of considering divorce, many people get concerned about whether California is a community property state, and what that will mean for them. While California is indeed one of only nine community property states in the U.S., the difference between the rules in our state and those of other states is not nearly as drastic as many people suppose.
To understand why, we need to explore California’s community property rules, how they are applied, and how this compares to property division schemes in other jurisdictions.
What is Community Property?
Community property is the term used to describe assets that belong to both spouses in a marriage. It is sometimes referred to as marital property.
The opposite of community property is separate property. When property is classified as separate, it belongs entirely to one spouse.
Community property is divided between spouses in divorce while separate property is kept by the spouse to whom it belongs and it is not subject to division. Therefore, the process of determining whether property should be legally classified as marital or separate is vitally important.
Just to make matters confusing, some property can be classified as a hybrid mix of separate property and community property, so that part of the value of that property would be divided in divorce and some of the value would be retained by only one spouse.
Marital Agreements Override California Laws
Since community property is split in divorce and separate property is not, fierce disagreements often arise about how assets should be classified. If the couple executed a prenuptial agreement before they got married or created a postnuptial agreement during the marriage, that agreement probably addresses the issue, at least with regard to some assets.
For instance, if one spouse owned a business before the marriage, they might establish an agreement specifying that the business would remain the separate property of that spouse even if the other spouse assisted in operating the business. Or if one spouse expected to inherit the family beach house, the agreement might state that the house would belong to that spouse only as their separate property even if the couple invested marital funds in making upgrades to property.
If the marital agreement was executed in compliance with the requirements of California law, then the terms of that agreement override the provisions in California community property laws. Couples can control their own future through the use of marital agreements, which is why these agreements are becoming increasingly popular.
When is Property Considered Separate?
As a general rule, assets are considered to be separate property if:
- One spouse owned the property before the start of the marriage
- One spouse received the property as an inheritance
- One spouse received the property as a gift (from someone other than their spouse)
Everything else is community property. That includes salary earned by a spouse during the marriage, as well as retirement benefits they accrued. It does not matter whether one spouse purchased an asset on their own or only put their name on the title. If it was acquired during the marriage (other than by gift or inheritance) the property is community property.
Moreover, property that starts out as one spouse’s separate property can transform into community property either fully or partially unless that spouse takes careful steps to preserve the separate status. In the example above, for instance, if a spouse inherited a vacation home, that inheritance would initially be considered separate property, but if marital funds were invested to improve it, at least part of the value of the home would likely be considered community property. The spouse who inherited it might preserve the separate characterization by executing a postnuptial agreement or scrupulously avoiding the use of marital funds on the upkeep of the house.
How is Community Property Divided in a California Divorce?
Property that has been classified as marital community property is divided equally in divorce in California. In many other states, marital property may be divided according to equitable principles instead of a 50/50 split. However, they usually start with the assumption of an equal split and then adjust the division to account for other factors in the marriage. Some community property jurisdictions follow this practice as well.
Most states follow the same general rules for classifying property as marital or separate. The end result is that property division in a community property state may not be much different than in other states. Regardless of where you are, it is important to work with a divorce attorney who is prepared to produce persuasive arguments regarding how property should be classified.
If a couple has not been married long or if they executed a marital agreement keeping certain property separate, then they may not need to divide up much marital property. Couples married for a longer time may have considerable community property and face very complex asset division situations.
Holstrom, Block & Parke, APLC Protects Your Property Interests in Divorce
The experienced team at Holstrom, Block & Parke, APLC understands how to demonstrate that particular assets should be classified in the way that best supports your interests in divorce. Our team of Certified Family Law Specialists is ready to help you secure your rightful share of property in divorce. Schedule a free, confidential consultation to learn more about the ways we can protect your interests.