Only nine states in the U.S. are “community property” states and California is one of them. Many people think they know what that means, but they fail to consider that there are exceptions to community property rules. Moreover, each state interprets community property principles in a slightly different way.
So if you are divorcing in California, it is important to understand not only how community property rules apply but also when they apply and when an exception takes precedence.
Community Property vs. Separate Property
All property that you own when you are married is classified as either marital property or individual property. Marital property is community property—it belongs equally to both spouses. It is also divided equally during a divorce unless you have a prenuptial agreement that provides for other arrangements. Individual property is separate property, and the spouse who owns it does not need to share or divide it during a divorce. Because community property is generally divided 50/50 while separate property is not divided at all, it makes a huge difference whether an asset is classified as community or separate.
The distinction sometimes applies to the way property is distributed after a spouse’s death as well.
How Property Becomes Community Property
An asset is considered marital community property in California if it is acquired during the marriage. It doesn’t matter if one spouse bought it and put only one name on the title. Earnings and retirement benefits of one spouse are also considered community property belonging equally to both spouses when they are accrued during the time a couple was married.
Once a couple separates, the property they acquire is no longer treated as community property. That makes it critical to establish the date of separation.
Generally, property that one spouse owned before the marriage began is that spouse’s separate property and therefore not divided during divorce. However, if a spouse does not keep the property separate but commingles it with marital property, the separate property can become hybrid. That means at least part of the value will be split in divorce.
Exceptions to Community Property Classification
California law specifies that some types of property acquired during marriage are treated as separate rather than community property. This includes:
- Property one spouse receives as an individual gift
- Property one spouse receives as an individual inheritance
- Money earned from separate property such as rent from separately owned real estate
Remember, however, that if separate property is commingled, then the income from that property could be treated as community property.
Domestic Violence Can Impact Community Property
Another exception to the general rules about community marital property involves domestic violence. If a spouse commits serious acts of family violence, the other spouse may be entitled to keep some property that would otherwise be divided as community property. For instance, if one spouse commits an act of domestic violence that constitutes a felony violation, the abused spouse is not required to share their retirement benefits. The court may also make that exception for community property in cases of misdemeanor domestic violence as well.
Prenuptial and Postnuptial Agreements Can Override t Community Property Rules
The community property rules of California may have no impact whatsoever if you and your spouse execute a prenuptial or postnuptial agreement. Assuming that the agreement was created in compliance with all legal requirements, then you can specify any terms you want with regard to property owned during the marriage.
If you want to avoid or minimize the potential impact of community property laws on your marital situation, the best way to do that is with a prenuptial agreement prepared before the start of the marriage so that both partners understand what to expect. This can protect blended families in which family members could be inadvertently left out of property distribution when one spouse passes away.
After the start of the marriage, it is too late to prepare a prenuptial agreement, but partners can still establish an agreement that overrides community property rules by executing a postnuptial agreement. Because this type of agreement is entered into between people in a confidential relationship with existing rights and obligations, courts scrutinize these agreements very carefully. It is important to follow the legal requirements precisely to ensure that a postnuptial agreement will be enforceable.
Let Holstrom, Block & Parke Protect Your Property Interests in Divorce
Whether you are preparing to get married and wondering about how to protect your interests or you are contemplating divorce, the experienced attorneys at Holstrom, Block & Parke, APLC can help you take the right steps to protect your separate property and ensure that you receive the right allocation of community property. For a confidential consultation to learn more about that protection we can provide, contact our team today. We are ready to put 300+ years of collective experience to work for you.
