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Is California a Community Property State?

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.

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Inheritance and Divorce in CA

California is a community property state that considers any property acquired during a marriage to be marital property. Does this mean that if a family member leaves you an inheritance during your marriage that it becomes marital property? What happens to your inheritance if you and your spouse divorce? At Holstrom Divorce Authority, we can help you understand inheritance and divorce in California and how the law applies to your situation.

Is an Inheritance Separate Property or Marital Property?

California makes property division during a divorce fairly simple. Any property acquired before the marriage is separate property and belongs to the sole spouse. Property acquired during the marriage is community property belonging equally to both spouses.

There are two exceptions to this rule: inherited assets and transmuted assets. If a family member gives you a gift or inheritance, those assets are yours as separate property, whether your inheritance includes cash, stocks, bonds, real estate, or other assets.

An issue of ownership arises if you commingle or transmute your inheritance assets. Commingling could include putting inheritance assets into a joint account, using marital assets to purchase a family home, or investing in stocks, real estate, or a business that you share ownership of with your spouse.

Transmutation is a legal agreement to convert some or all of your inheritance into marital funds. Once you transmute any portion of your separate property, you can’t revoke the agreement and withdraw that property from the marital assets.

Protecting Your Inheritance with a Prenuptial Agreement

If a family member leaves you an inheritance before you are married, you and your spouse can determine in a prenuptial agreement whether any investments procured with your inheritance money will become marital property. You and your soon-to-be spouse can also determine if you agree to share profits from an investment if your spouse helps you manage the investment, and what portion of the investment belongs to your spouse.

If you and your spouse are already married when you inherit money, you can outline similar decisions in a postnuptial agreement. A postnuptial agreement is the same as a prenup, but you and your spouse agree to a postnup’s terms during the marriage. Managing inheritance and divorce in California often requires multiple steps to keep your inheritance separate from marital assets.

Other Ways to Protect an Inheritance in a California Divorce

You have several options to protect your inheritance from a divorce at different stages of your marriage. Before your marriage begins, you have the option to create a prenuptial agreement. You can also avoid commingling assets by creating a separate account or a trust to store your inheritance.

During the marriage, you cannot commingle or transmute funds from your inheritance. Don’t use your separate assets to pay communal debts or to invest in community property. You can set up a separate account or trust and draw up a postnuptial agreement.

Contact an Experienced Divorce Attorney in Southern California

Inheritance and divorce in California are simple concepts if managed correctly. If you’re considering a divorce and inherited property, contact an experienced divorce attorney in Southern California. Call Holstrom Divorce Authority at (844) 237-5791 today.

Divorce / Uncategorized

The Impact on Your Estate if You Die Before a Divorce is Final

The untimely death of chef and actor Anthony Bourdain has brought to national attention the potential ramifications of a person’s death during a divorce proceeding. In the same vein, it has highlighted the importance of understanding what would happen to your estate if you were to die during the pendency of your dissolution without having made any changes to your estate plan.

As occurred with Mr. Bourdain’s untimely death, he had been separated from his wife of 20 years for a year and a half. Though the pending “divorce” was made very public, it is unknown whether any divorce filing actually occurred,

What if does indeed happen if you have not taken steps in expectation of a permanent separation (indeed some are more permanent than others)? The broad answer to this complicated issue depends on whether your passing occurs before or after entry of judgment terminating your marital status. This discussion describes what occurs under California Probate and Family Law. The rules for these scenarios may be different in other states.

Death Before Entry of Judgment Terminating Marital Status

If you should die before entry of a status-only judgment, the Family Law Court would lose jurisdiction over all issues, except those already adjudicated. In California, this is called Abatement, and it happens automatically in this situation. Under these circumstances, your share of the community property and all of your separate property would pass as if the Divorce had never been filed! This is true, regardless of who originally filed, how long the divorce went on, how long the period of separation, or how hostile the parties were to each other during the process. It is also true regardless of cohabitation with a new significant other, regardless of the length of that cohabitation.

Therefore, your assets would pass to the beneficiaries of your current estate plan, which is usually your surviving spouse. If you do not have an estate plan, your estate, if over $150,000.00, would pass through probate, and your spouse would potentially receive all of the community property assets and a share of the separate property. Any non-probate assets, such as retirement assets and life insurance plans, would pass to your designated beneficiaries, again, normally your estranged spouse.

Death After Judgment Terminating Marital Status

If you should die after a status-only judgment (a provision of California law that allows the divorce to occur before, or separate from, the resolution of the other issues) that expressly reserves jurisdiction over the remaining issues in the case, the Family Law Court would retain jurisdiction and the property division would take place there. The personal representative of your estate would be substituted in your place in the divorce for this purpose, and the Family Law Court would be able to decide the outstanding issues in the case. It is worth noting, that the court’s jurisdiction over custody, child support, and spousal support would terminate automatically upon your death in the vast majority of cases.

Death after a status-only judgment also has a very different impact on how your estate would be distributed. A judgment of dissolution automatically terminates non-probate transfers between former spouses, including wills, trusts, and beneficiary rights under retirement plans. It also terminates the right of survivorship interest in joint tenancies and community property with right of survivorship. Unless the respective wills provide otherwise, the judgment also revokes all testamentary transfers between former spouses and any provision in a will nominating the former spouse as trustee, conservator or agent. However, a judgment of dissolution does not terminate the surviving spouse’s rights as a designated beneficiary under the life insurance policy. While the ability to change a beneficiary of a retirement plan or life insurance policy may remain during a divorce, California law prohibits such a change after the filing or service of Divorce papers.

One issue that everyone should consider with an impending divorce is that if you do not sign documents specifically stating otherwise, your estranged spouse will continue to hold the power, upon your incapacity, to make medical decisions on your behalf and, like in the case of Anthony Bourdain, will be the person to make all decisions regarding the disposition of your remains.

While no-one anticipates their death, the best course of action, always, is to prepare for that eventuality with an updated, current estate plan, which takes into consideration all aspects of your life, including an impending divorce. Sometimes doing nothing is indeed a conscious choice; by way of illustration a person with knowledge of a terminal illness also going through a divorce who chooses to maintain or change his/her estate plan. Sometimes it’s simply doing nothing.

Obviously we recommend that you always make that conscious choice knowing all of the consequences of that choice.

Divorce / Family Law / Money, Property & Support / Property Division / Uncategorized

The 9 Essential Steps to Estate Planning

While most people are aware that an estate plan is something they should have, many believe that simply creating a will or trust is all they need to secure their future. While these documents are indeed important, they are not catch-all solutions to all of the potential issues that can arise in the event of your incapacity or death. To ensure your future and family are protected, be sure to consider the following checklist when creating your estate plan.

  1. Draft a will: The backbone of your estate plan is your last will and testament. This document will allow you to provide instructions to your family on how you want your property to be distributed in the event of your death, as well as name beneficiaries and guardians to care for your minor children in your absence.
  2. Create a trust: Holding your assets in a living trust will allow you to ensure they are smoothly transferred to your chosen beneficiaries at the time of your passing rather than being collected and distributed through probate, a notoriously expensive and frustrating process. Living trusts can be used to transfer real estate, savings accounts, mutual funds, and certain other investments to your beneficiaries with ease.
  3. Create health care directives: Advanced health care directives such as a “living will” allow you to provide instructions to medical personnel regarding the treatment you would like to receive in the event of your incapacity, such as whether or not you want to be put on life support.
  4. Create a financial power of attorney: Similar to a power of attorney for health care, a durable power of attorney for finances allows you to grant someone the power to handle your financial and property matters if you should become incapacitated.
  5. Protect your children’s inheritance: If you have minor children, you should name a trusted adult who will manage any property or money you leave to them until they are of age. This person may be the same as the guardian you have designated in your will.
  6. File beneficiary documents: Bank accounts, retirement plans, stocks, bonds, and brokerage accounts can be made to immediately transfer to a designated beneficiary and skip the probate process in the event of your death by filing beneficiary forms with their respective managing institutions.
  7. Consider purchasing life insurance: There is a possibility that you may owe significant debts or estate taxes when you pass away. If you have young children or own a home, purchasing a life insurance policy may be wise to protect them against these expenses.
  8. Make funeral arrangement: Document your wishes regarding organ and body donation as well as whether you want your body to be buried or cremated. Likewise, create a payable on death bank account with funds to be used to cover your funeral and burial expenses.
  9. Establish a business succession plan: If you own a business, be sure to consider its future in your absence. Creating a thorough succession plan or buyout agreement can help ensure control of your business is transferred to the appropriate parties in the event of your passing.

While nobody ever wants to entertain the thought of their own passing, it is an inevitability which must be planned for ahead of time. At Holstrom, Block & Parke, APLC, our Southern California estate and probate lawyers can provide the steadfast guidance you need to create a comprehensive estate plan with ease. From creating wills and trusts to establishing guardianships and more, we have what it takes to help you achieve peace of mind.

Call (855) 747-6225 or fill out an online form today to schedule your free phone consultation.

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Wills And Trusts 101-Part 1 Of 2

WILLS AND TRUSTS 101—Part 1 Of 2

Written by Scott Feig, Esq.

Very often we hear these terms used together—Wills and Trusts. However, they are not the same thing and, in many instances, serve different functions. It’s likely that many of us have seen those infamous scenes on T.V. programs, or movies, where the lawyer reads the Last Will and Testament of the deceased uncle to the surviving members of the family—each member on the edge of his/her seat wondering whether they were left the uncle’s millions. And, as for a trust, it’s likely that many of us think of wealthy adult children receiving money from a trust—often called trust babies. But, both of these images limit really how important it is for the every-day person to have some type of will or trust in place.

It is likely that you may be reading this because you, like so many of us, know that having some type of document directing how our assets are to be given away at death, as well as who will take care of our children at our death, is crucial. And, knowing we have these documents in place helps us sleep better at night. To this end, this week, which is Part 1 of 2, we will start with understanding will basics.

What’s probably the most important issue for many of us is that a well-drafted will tells our survivors who will be the guardian of our children. For example, if a single person with children dies without a will, his/her survivors must file papers with the court to determine who will be the guardian of the surviving children. This can be a long and expensive process and may not necessarily carry out the deceased person’s unwritten wishes. A well-drafted will is analogous to the adage—an ounce of prevention is worth a pound of cure.

Please note that it cannot be stressed enough how important it is to seek guidance from an attorney regarding will formation. In fact, a well-drafted will distributes our property to the survivors we choose—like making sure your ‘69 Camaro goes to your brother, your coin collection goes to your son, and your ‘75 Thurman Munson baseball card goes to your best friend from childhood. However, without a will, it is unlikely that the ‘gifts’ will be made. In fact, in California, if you die without a will, then State law, not you, chooses how all of your property will be given away at your death. For example, if a married person, with no children, but surviving parents, dies without a will, then half of his/her property will go to his surviving wife, and the other half will go to his surviving parents. That’s it. So the car he wanted to give to his brother, and the baseball card collection he wanted to give to his best friend, may never happen.

So, why an attorney? And not a pre-printed form from a stationary store or an online form from a website that advertises wills? Like all areas of law, there are many concerns involving technicalities being carried out correctly so the will is valid when a person dies. An invalid will is the same as dying without a will. And, at times, portions of a will may be invalid without the proper legal guidance. For example, let’s look at a common scenario: A person has a valid will drafted where, among other things, leaves his expensive coin collection to his oldest brother. A few years later, he and his oldest brother have a falling out. So, this person takes a pen and crosses out his oldest brother’s name in his will and writes in his youngest brother’s name—believing that he cancelled the ‘gift’ to his oldest brother and made a ‘gift’ of this coin collection to his youngest brother. Are you ready for this? Neither the oldest brother nor the youngest brother gets the coin collection via the will. The law regarding crossing out on a will is complicated. And, often, when a person takes his/her own pen to a drafted will, problems arise. Thus, attorney guidance regarding will drafting, and even changes to the will, is highly recommended. In case you are curious, the coin collection would be distributed as if the person died without a will. So, if the man is survived by parents only, then the entire coin collection will go to his parents. This is quite a dilemma now for the parents if they have to choose to whom the coin collection should be given.

Please note that the above information was kept in simplest form to help give you a primer of a situation that is important to many people’s piece of mind. As many areas of law, the complexity is understood and handled well by an attorney. Thus, it’s helpful to know that an experienced attorney is a phone call, or email, away to help provide guidance.

About Dayn Holstrom

Dayn Holstrom is a hard working, compassionate problem solver who welcomes the opportunity to serve you in any way he can. His maximum availability to your questions and concerns begins with your free initial consultation. He is well-seasoned in all matters related to family law and a skilled negotiator and litigator.

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What to Do If My Father Dies Without a Will?

All too often people put off thinking about or starting to draft a will or a trust with an attorney because they cannot bear thinking about their own mortality.

Writing a will can be one of the greatest gifts you give to your family and/or friends. By doing so, you choose who gets your assets and you can direct the ownership of those assets to the place where it will do the most good. A well-prepared will also help to alleviate stress and family strife.

What happens if you have assets that you want specific people to inherit when you die, but you die without first writing a valid will?

The decision of who inherits your property can either be made by you, or can be decided by the State of California.

In California your property will be distributed according to California’s intestacy laws. If you die leaving a husband or wife, a certain portion of your property will go to them since most probably it is community property and your spouse is entitled to at least half if not all of the community property upon your death.

In addition, your spouse is also entitled to an additional share of your separate property depending on:

  • If you die without any living siblings or parents – receive all of your separate property
  • If you die with at least one sibling and/or parent – receive half of your separate property
  • If you die with more than one living child – receive one-third of your separate property

What about your children? The property that your children receive will depend on how much your spouse received. California law says that your children will receive everything that was not received by your spouse. However, if you die without a spouse, your children receive everything.

Dividing your assets and property after your death can be a complex process, but it doesn’t have to be. Planning for your family ahead of time can avoid these complicated rules and stressful times. You deserve the peace of mind and comfort that an enforceable estate plan can bring.

If you need legal assistance creating a valid will, we invite you to contact the family law offices of Holstrom, Block & Parke to discuss your legal options. The consultation is free, and confidential, speak to one of our attorneys today.

Located in San Bernardino, Riverside and Orange Counties, our law firm focuses on matters relating to estate planning and probate administration.

About Dayn Holstrom

Dayn Holstrom is a hard working, compassionate problem solver who welcomes the opportunity to serve you in any way he can. His maximum availability to your questions and concerns begins with your free initial consultation. He is well-seasoned in all matters related to family law and a skilled negotiator and litigator.

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