One of the biggest reasons people get anxious and worried about divorce is that they expect to suffer financially. They know they will lose money and property, but they don’t know exactly what they will lose.
When two people separate their lives into distinct households, expenses increase for both, so there is no avoiding that challenge. In addition, couples will also need to cover court costs, legal fees, and other technical expenses that come along with the divorce process. However, with assistance from an experienced divorce attorney, you don’t need to worry about losing “everything,” particularly property owned before the marriage started. To understand why, it is helpful to look at California property laws concerning separate property and community property.
Prenuptial or Postnuptial Agreements Take Precedence
The rules about how property is classified and divided in divorce do not matter if you have executed a valid pre- or postnuptial agreement that covers these issues. The contractual terms you establish in this type of agreement override the default provisions in the law.
So, if you owned a business before you got married and you and your partner signed an agreement specifying that the business would remain your property, then you keep the business according to the terms of your agreement. However, it is important to ensure that the agreement was prepared in accordance with California legal requirements, particularly if it was executed after the start of the marriage.
Separate vs. Community Property
Many people are aware that California is a community property state, but they are not always clear about what that means. Our state’s community property laws specify that marital property will be divided evenly in divorce, but the laws do not divide up property that is classified as “separate.” Each spouse keeps their own separate property.
Property that one partner owns before they get married starts out as separate property. If it retains the characteristics of separate property, then if the partners divorce, the partner who brought the property into the marriage can walk out with it. For instance, if you owned a classic convertible at the time you got married, you should be able to keep the car when you get divorced without the need to split the value with your spouse—unless you used “community” property to maintain or improve the car. The rules about classifying property can get very complicated when dealing with property acquired before marriage because property can change from separate to community property, or something in-between. It is vitally important when approaching divorce to locate as many records as possible so that your attorney can trace the history of your separate property, show that it belonged to you before the marriage, and demonstrate that you used few if any marital funds to improve it.
Hybrid Property
Every asset acquired during marriage is considered community property even if it was earned or purchased solely by one spouse. The only exception is for a gift or inheritance that was made specifically to one spouse. That would be considered as separate property—at least initially.
When separate property gets mixed with community property, it changes. For example, a partner might buy a house before getting married, which would be separate property. However, if mortgage payments are made during the marriage with funds earned during the marriage, then the equity accumulated during the marriage is community property. The value of the house belongs partly to one spouse as separate property and partly to both spouses as community property. It is hybrid property. The same holds true for contributions to retirement plans established before the marriage, assets in bank accounts, and all other types of property. Unless a spouse takes specific steps to keep separate property distinct, it can easily become hybrid property subject to division in divorce.
In some cases, it may make sense to work with a forensic accountant who can dig deep to trace assets and spending to show how property should be classified.
Holstrom, Block & Parke, APLC Understands How to Protect Your Separate Property
It is not fair to lose property you owned before marriage when that property should rightfully be your separate property. At Holstrom, Block & Parke, APLC, our attorneys have over 300 years of collective experience protecting property rights in divorce. We understand how to establish the history of separate property and to show why it should retain separate status.
If you’d like to learn more about protecting your separate property during a marriage with a pre-or postnuptial agreement, or you need to protect your property during a divorce, we invite you to schedule a confidential consultation with our team by calling 855-426-9111 or contacting us online.
