Navigating Complex Property Division in California Divorces

Divorce cases are notoriously challenging to navigate because of the strong emotions and high-stakes nature of issues like child custody and property division. Separated spouses with a high net worth or extensive assets can face particularly difficult divorce cases, as can partners with assets like businesses and pensions that are complicated to divide.

Having a divorce attorney with targeted experience with similar cases is an invaluable resource in complex divorces. If you expect to face challenges with property division during your divorce, contact Sarieh Family Law to schedule a free consultation.

Property Division in California Divorces

The first step is identifying and characterizing property. In California divorces, property can include:

  • Real estate
  • Personal property (vehicles, jewelry, furniture)
  • Retirement plans
  • Businesses
  • Insurance policies
  • Stock options

California follows a community property rule, meaning any property acquired during marriage is owned equally by both spouses. Unless a prenuptial or postnuptial agreement exists, community property is typically divided 50/50 in divorce.

Separate property includes assets acquired:

  • Before marriage
  • After separation
  • As gifts or inheritances

Courts consider multiple factors when distributing community property:

  • The property’s value
  • Income produced by the property
  • How the property is titled
  • Existing prenuptial/postnuptial agreements
  • Tax consequences
  • Associated debts and liabilities

When an equal division leaves one spouse at a financial disadvantage, courts may order equalization payments.

Understanding Equalization Payments in Divorce

An equalization payment compensates a spouse who receives less marital assets to achieve a fairer division. These payments can be agreed upon or court-ordered.

Key points about equalization payments:

  • Typically not taxable in California
  • May involve capital gains tax when property changes hands
  • Consultation with a tax professional is recommended

How Equalization Payments Are Calculated

The calculation process involves several complex steps:

1. Valuing Assets

All community property must be valued as of the separation date. While bank accounts are straightforward, pensions and private stocks require professional valuation.

2. Accounting for Debts

Shared debts are subtracted from total asset value. Separate debts are assigned to the responsible spouse.

3. Determining Marriage Date Values

The total property value at marriage is subtracted from the separation date value.

4. Excluding Separate Property

Inheritances, gifts, and other qualifying separate property are deducted.

5. Comparing Final Values

The payment equals half the difference between spouses’ final property values. For example:

  • Spouse A: $120,000
  • Spouse B: $180,000
  • Difference: $60,000
  • Payment: $30,000 (half the difference)

This simplified overview demonstrates why professional legal guidance is essential for accurate calculations. For personalized advice about your property division, contact Sarieh Family Law to schedule a consultation.