When two people decide to get divorced, the money and assets that the couple acquired during the marriage are divided. How does this property division process work? Who gets what – and how much? What about uncontested divorces? This page details CA’s family law concerning the division of assets and property in a divorce. Specifically, this page details:
- Basics of community property in Orange County
- Basics of separate property
- Bank accounts
- Assets acquired before marriage
- Retirement Accounts
- Hiring JS Family Law Attorney
CA’s Community Property Law
California is a community property state. Orange County is no different. In the United States, all jurisdictions are either a community property state or a common law state. The law regarding community property is what governs the division of assets when a marriage ends. So what is community property? According to CA Family Code § 760:
Except as otherwise provided by statute, all property, real or personal, wherever situated, acquired by a married person during the marriage while domiciled in this state is community property.
What does this mean? California’s court website does a decent job defining it:
This means that a marriage or the registration of a domestic partnership makes 2 people 1 legal “community.” So property that the couple acquires during marriage/partnership is “community property.” And debt that the couple acquires during the marriage/partnership also belongs to the “community debt.”
In layman’s terms, this generally means that any money or property that any spouse earns during the course of the marriage or domestic partnership is owned 50/50 with the other spouse. Upon dissolution or divorce, the assets are divided 50/50.
The above information is an oversimplification of community property, as there are many exceptions to the general community property law. Prenuptial agreements are a major exception. The division of assets is complicated. We highly recommend that you speak with a Orange County divorce attorney if you are planning on separating from your spouse.
What is Separate Property?
The opposite of community property is “separate property.” The division of assets is simpler when property is separate as opposed to community property. Legally speaking, what is separate property? CA Family Code § 770(a) provides a great answer:
Separate property of a married person includes all of the following:
(1) All property owned by the person before marriage.
(2) All property acquired by the person after marriage by gift, bequest, devise, or descent.
(3) The rents, issues, and profits of the property described in this section.
Again, in layman’s terms, this means that property acquired before and after the marriage are owned exclusively by you. Any property acquired before or after the marriage by your ex-spouse is owned exclusively by him or her. Furthermore, if that property produces income (lets say an apartment complex) the profits from that property are also separate property.
Just like the community property idea above, there are exceptions to this rule! The division of assets after a long marriage or domestic partnership is not easy (especially in Orange County). You should get legal advice on this immediately if you plan to separate from your spouse.
Division of Assets Settlement
California family courts and judges prefer if divorcing couples agree on how to divide the marital assets. Orange County is no exception. Judge’s love when couples settle their disagreements outside of court. However, if the parties cannot agree to the division of assets, or if one spouse is hiding assets, the Court will examine what is community property and what is separate and make a ruling.
How is the money in bank accounts divided during a divorce? As is any property, money in the bank is classified as either community property or separate property. If the married couple had one checking account with $50,000 at the time of the divorce, that amount would be split equally between the husband and wife.
But it gets more complicated than that. When couples co-mingle community property money with separate property money, the family court judge must decipher how much is separate property and how much is community property. There are sometimes complex computer algorithms that are used to figure this out. We highly recommend hiring a lawyer if you force a complicated division of assets.
Retirement accounts are an entirely different animal. IRA, pensions, 401k’s and other savings type investment accounts are often subject to a qualified domestic relations order. This is a complicated subject that you should discuss with your lawyer.
House – Real Property
Most married people in Orange County own a single home. In a divorce, who gets the house? If the home is 100% separate property, the spouse who owns it will get the house no matter what. If the house is community property, there are several ways it can be divided, either by marital settlement or court order.
First, the home may be sold, and the profits divided equally. Second, one spouse may “buy out” the other of his or her interest in the home. Third, when the spouses have small children, the court may order that the home be sold, but not right away. Under this situation, both spouses continue to own the home jointly, giving the parent with main custody of the children exclusive use and possession of the home during this time. This is also known as a “deferred sale of home” order.
There are other options, but many people also want to know what their stake in the house. What is the value that they will walk away with at the end of the day? This is more complicated than people realize. Below are two common examples that make this difficult.
One common example is when a couple purchases a home during the marriage. But the money used for the significant down payment was separate property earned by one spouse before the marriage. Usually the home is presumed to be community property (Family Code § 2581), but sometimes the separate vs. community property interests in the home must be apportioned on the basis of the status of the down payment and status of the loan proceeds. In re Marriage of Lucas.
Here is another common example. If you owned a home prior to your marriage, you would have a separate property interest in that house. However, after getting married, if the mortgage on that house is paid using community property money, the loan principle amount owed on the mortgage is reduced by those payments. In this scenario a community property interest may be acquired in the home. This is an extremely complicated situation and you should speak with an attorney when considering a division of assets.
As should be obvious, a division of assets in a divorce is not a simple thing under California law. Your home is important to you and that is why you should consult with a family lawyer.
Cars & Motorcycles
Who gets the family car or motorcycle in a divorce? As stated above, CA judges divide the value of community property equally. So, if a couple owns a vehicle that has a fair market value of $17,500, each person is entitled to half the value of the car, or $8,750. Obviously, the judge is not going to order the car sold and divided in every case. Often the Judge will order one spouse keep possession of the vehicle and buy out the other’s interest.
But if any money is owed on the car, that is likely community debt, and it will come into play when it’s time to finalize division of property and debts. It is best to speak with a divorce lawyer if you have questions on this sticky issue.
Just like assets, debts are community property too. They are divided accordingly. According to the Supreme Court of California,
Except as otherwise expressly provided by statute, the community estate is liable for a debt incurred by either spouse before or during marriage, regardless of which spouse has the management and control of the property and regardless of whether one or both spouses are parties to the debt or to a judgment for the debt.
There are many exceptions to this rule, and if you want to know how your debt will affect your marriage, consult with a lawyer as soon as you can.
Inherited money or assets are usually treated as the separate property of the spouse who received the inheritance. But, as in all things, it’s not always that simple. When an inherited money or property is commingled (mixed) with community property, it gets sticky. Or when the other spouse is placed on the title to an inherited piece of property or vehicle, it gets sticky.
Retirement accounts are exceedingly complicated. We plan on filling in this section with more detail in the near future. Right now, we have a detailed page on pensions, you can learn about the Time Rule and pensions here.
Hiring a Lawyer to Handle the Division of Assets
It might seem obvious, but we highly recommend that you consult with a family law attorney if you foresee a division of assets in your divorce. This is especially true if you own your own business and you’re worried about splitting it up. Not only will you need legal expertise, but hiring an OC lawyer will bring significant peace of mind and will provide you with a strategy. Our lawyer knows the family law judges and the best forensic accountants to hire. We recognize that separating from your spouse is stressful and it is our job to make sure that it is as fair as possible.
- If you’re looking for information relating to spousal support, visit our alimony page.
- If you need to learn about custody, our child custody page provides all of the basic information you’ll need to need to consult with a lawyer.
- If you need to figure out child support, click here.
- If you want to divide your assets without getting the court involved, you can go to divorce mediation and sign a marital settlement agreement.
- Please note that the division of assets is different in an annulment than in a divorce. Learn more on our annulment attorney page.
- How are assets divided in a domestic partnership dissolution?