Dividing assets and property is a significant part of most California divorces, and state law takes a unique approach to the distribution of marital property. California is a community property state, which means that property acquired during the marriage is likely to be considered the property of both spouses equally. There are exceptions, of course, but knowing how to navigate property distribution in a California divorce is crucial to the outcome of your case.

Sarieh Law Offices can help you identify what property qualifies as community property, determine how the division of this property may impact you, and negotiate terms for the best possible outcome. If you are looking for experienced legal support in your divorce, contact our office to schedule a free consultation.

Understanding Community Property in California

What does it mean that California is a community property state? California Family Code § 760 states that all property acquired by a married person during the marriage and while living in California is considered community property. In contrast, separate property includes:

  • Property owned by either spouse prior to marriage
  • Property acquired by either spouse during the marriage by gift, bequest, or descent
  • Profits of any property considered separate

Community property is divisible in divorces, while separate property is not. There are exceptions, including property included in a pre- or post-nuptial agreement.

Required Property Disclosures in a California Divorce

The distribution of assets and liabilities is often one of the final steps in a divorce, and it is also one of the most complex processes. Identifying every piece of property and calculating a value is only the beginning. As part of the early stages of the distribution process, each spouse will need to complete a Preliminary Declaration of Disclosure. This form includes a list of all assets and debts that the parties owned on the date of separation. A final declaration is also typically required in California.

These declarations are not filed with the court. Instead, the spouses are meant to serve the completed forms on each other and submit a separate form to the court that certifies service was made or waived.

If both spouses agree as to the value of their property, they may not need to have appraisals completed. However, disagreements often mean that a third party must determine the value. For example, if one spouse believes their marital home is worth $950,000, but the other spouse values the home at $1.2 million, a real estate appraiser will need to determine the actual value.

In this same scenario, assume the appraiser values the home at $1.1 million. If there is a mortgage on the property with a balance of $300,000, then the net community interest in the home is $800,000. This is the amount that would be divided between the spouses.

In addition to real estate, what should be included in property disclosures as part of a divorce?

Net Community Interest: The Cars

When there are vehicles to be divided, the value can be researched online, often using sites like Kelley Blue Book. Any vehicle loans should be subtracted from the value of the car to determine the net community interest. For example, a car valued at $75,000 with a loan balance of $15,000 would have a net community interest of $60,000. Rare or heavily modified vehicles may require hiring an expert rather than using an online valuation tool. Identifying the appropriate valuation tool or professional is something your divorce attorney can help you with.

Community Interest: The 401(k)

Some retirement funds, like 401(k) accounts, may be a mixture of community and separate property if contributions to the account were made prior to marriage. Rather than the spouses splitting the retirement account 50/50, the value of the community property portion must first be determined. Consider the following example:

Wife has a 401(k) account that she has been contributing to for 22 years. She and Husband were only married for 15 years. Husband’s portion of Wife’s 401(k) account would only be 50% of what was contributed during their marriage, and Wife would keep 100% of what she contributed prior to marriage.

You cannot just transfer the allotted funds in a 401(k) account to an ex-spouse after divorce. Spouses who are dividing certain retirement funds, including 401(k) accounts, must do so with a Qualified Domestic Relations Order.

Community Interest: The Bank Accounts

Bank accounts are also included in community property if either spouse deposited funds into the account during the marriage. Dividing bank accounts can become especially complicated in situations where the accounts had a positive balance at the time of marriage or if any separate funds were deposited into the account. For example, inheritance money deposited into a community property bank account would need to be separated from the division of the community estate portion of the account.

Community Interest: The Business

If you or your spouse own a business, an expert may need to be hired to determine the portion of the business’ value that is considered community property. There are many complex considerations in such scenarios, including:

  • Are there co-owners?
  • What is the spouse’s ownership interest?
  • Were any marital monies used to purchase or fund the business?
  • Did the other spouse contribute to the business in any way?
  • How long has the spouse owned the business?

Determining the value of the business and the community interest is often required as part of the division of property in California divorces.

Community Property Interest: The Dog

While your dog may feel like part of the family, pets are considered property in divorce. Psychological attachment may be part of the consideration process when deciding who keeps the pet. If one spouse gifted the pet to the other spouse, that may also be a factor. In many cases, a pet does not have a monetary value that must be settled in the divorce.

Community Property Debt: The Credit Card

Community property is not just property and assets; it also includes debts and liabilities. Credit cards often have purchases associated with both spouses and balances that were accrued during the marriage. For example, if one spouse has a credit card with a $4,000 balance from the parties’ vacation to Alaska, they will both be responsible for 50% of this debt.

Community Property Debt: The Student Loan

According to California Family Code § 2641, the spouse who takes out a student loan is typically liable for repaying it. However, there are exceptions, including:

  • If both spouses benefited from one spouse’s education or loan
  • If the education acquired reduces that spouse’s need for support

Your divorce attorney can help you determine if your or your spouse’s student loans fall into one of the exception categories or if the debt is considered separate property.

Dividing the Community Estate in a California Divorce

Once all of your property has been identified and valued, the community estate can be divided between you and your spouse. If you hope to reach an agreement with your spouse, you may be able to negotiate for an uneven split. For example, if you want to keep the marital home and not pay your spouse a lump sum for their portion of the value, you may be able to waive your right to their retirement account or forfeit your portion of the joint bank account. There is often room for some creative negotiation when both spouses are open to settling.

Otherwise, California is a community property state, and many divorces end in an equal 50/50 division of the spouses’ community estate.

Spousal Support Buyouts and Marital Agreements

Another possible option is a spousal support buyout, which allows one spouse to offset spousal support or alimony payments. If you or your spouse will be or have been ordered to pay spousal support, you may be able to agree on a transfer of assets or lump sum payment in lieu of support or in order to lessen the monthly obligation.

Contact Sarieh Law Offices for expert guidance from a Certified Family Law Specialist. We offer free case evaluations, so there is no risk in meeting with us to discuss the details of your divorce.