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Is A Car An Asset In A California Divorce?

In California, cars are often such an integral part of our lives that we don’t consider them ordinary property. They provide a lifeline for getting to work and accomplishing everything from grocery shopping to going out to dinner. They’re essential, like food and shelter. But in a climate where cars often remain in a well-preserved state, our cars retain aesthetic value and we can become emotionally attached to them. Luxury models and rare collectible vehicles can hold significant financial value as well.

So how are these vehicles with so much meaning treated in a California divorce? Are they marital property? Can your spouse keep the car even if you bought it before you were married? There are several factors to be considered before these questions can be answered. If keeping your vehicle is a high priority for you, make sure you work with an attorney who knows how to protect assets in divorce and also make sure your attorney knows how important it is to you.

Your Car is an Asset But it May Not Be a Marital Asset

No matter how much your car means to you and what you’ve been through together, unlike children and pets, cars are treated as ordinary property in a California divorce. That means they are subject to the same rules about assets and debts as other property such as your house or your 401k account.

The question is not whether your car is an asset but whether it is a marital asset. When something is a marital asset, it is owned jointly and equally by both spouses. When something is a separate asset, it is owned solely by one spouse, and that spouse keeps it in divorce. Marital property—also known as community property in California—is divided equally in divorce.

It is possible for an asset or debt to a hybrid of both separate and marital property. That means part of the value of that assets would be shared in divorce and part of the value would belong completely to one spouse.

How Can You Tell if Your Car is Community Property?

The general rule for classifying property in California is that when something is acquired before marriage it is separate property and when it is acquired during the marriage it is marital property. It doesn’t matter whose name is on the title or who bought it—if you obtained the car while you were married, the assumption is that it is marital property belonging jointly to both spouses. However, there are exceptions to this rule.

  1. If you received the car as part of an inheritance, the law considers it to be your separate property.
  2. If you bought the car with money you inherited or money earned before you were married, then the car could be separate property (if you kept the money separate)
  3. If you owned the car before you were married but you spent marital funds making payments or improvements, the car could be treated a marital property or hybrid property

The question of whether your car is marital property or separate property could be very complicated depending on the circumstances. If you believe your car should be separate property, if you can point to records tracing it to your separate funds, that will help establish the separate character of the property. For rare and valuable vehicles, it may be worth consulting a forensic accountant who can develop a strong record of the vehicle’s ownership history and upkeep.

What if You Owe Money on Your Car?

With the high price of even used vehicles, most of us are still making payments on our vehicles. Sometimes we owe more than the vehicle is worth because of damage, prior loans, depreciation, interest, and other factors. What happens then? Is the debt allocated equally or is one spouse responsible for it?

Just as with the value of the vehicle itself, the allocation of debt also comes down to primarily the issue of when the debt was incurred.

Written Agreements Can Change the Rules

The rules discussed so far regarding classification of marital property are the default rules under California law. Couples are free to create their own agreements that override these rules. A prenuptial or postnuptial agreement, for instance, might specify that a car is to remain separate property regardless of whether it is used and improved by both spouses. Or a couple can execute a transmutation agreement changing the vehicle from separate property to community property or vice versa.

Let Your Attorney Know if Keeping Your Car is a Priority

At Holstrom, Block & Parke, APLC, our experienced divorce attorneys work to ensure that our clients obtain the objectives that mean most to them in divorce. If your car is the one asset you can’t live without, make sure you let your attorney know, and explain what you might be willing to give up in exchange if the vehicle is marital property.

To discuss how to achieve your goals for property division and other issues in divorce, schedule a consultation with our attorneys today.

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