Marital property in a California divorce refers to all property that was bought after the marriage. This makes it a shared or community property under the law. What distinguishes the community property laws in California from most other states is the fact that all marital property must be equally divided between the two spouses during a divorce.
In most other states, the concept of “equitable distribution” applies, which gives weight to various other factors in order to determine a “fair” division. But in California, factors such as the individual income of each spouse or the length of marriage will not impact the division, and the property will get equally divided.
What is Included as Community Property
Under the state’s community property laws, all assets and liabilities acquired after marriage are split 50/50 in the event of divorce. These will include:
- Whatever income either spouse has earned during marriage, such as salary, business income, interest income, capital gains, stock dividends, and retirement income.
- All personal property and real estate acquired during marriage while using the marital income sources.
- All debts that either spouse incurred during the marriage.
It does not matter in California which spouse earned more or acquired more property in a marriage. Equal division applies irrespective of these issues. But if the divorce is uncontested, the spouses may agree to a different asset distribution plan. Separate property in California including everything an individual owned before marriage, or received as a gift or inheritance (subject to the condition that it remains separate after marriage).
Other Issues Related to Community Property
Although marital debts are split equally just like marital assets in a California divorce, this does not mean that all the debts incurred by a spouse after marriage become the shared liability of the other spouse. The liability for those debts lies with the “community property.” Therefore, when the community ends at the time of divorce, each party will be liable only for their own share of the debts.
Another important issue to understand in California property division is the concept of quasi community property. This refers to the assets or debts that you acquired during marriage while you were a resident of another state prior to moving to California. Under the state law, all quasi community property will also be divided equally just like community property, even though it comes under a different classification.
Can You Avoid Community Property in California?
If you wish to opt out of community property in California, you may have to enter into a prenuptial agreement with your would-be spouse prior to marriage. Make sure you have the legal representation from a competent Orange County prenup lawyer while drawing up this settlement. If you want to enter into such an arrangement with your spouse after marriage, you have the option to sign a post-nuptial agreement.
Both parties must fully consent to the agreement, which must be laid out in accordance with the state law. The agreement will define which property belongs to which party. If either party uses coercive or pressure tactics to force the other party to become a signatory to this agreement, it will be invalidated by the court.
Determining the Valuation of Marital Property
Unless you and your spouse agree to sell the marital property (so that the proceeds can be equally divided) or enter into an in-kind property division that is approved by the court, each item of your community property will be valued before it can be divided. The family law courts in Orange County will look at proper property valuation as a pre-requisite before an equal division is ordered.
Property valuation essentially becomes a question of fact, and the court will review the evidence put forward by both sides before making a final decision on the division of property. You and your former spouse have a legal obligation to make full disclosure of all material information and facts pertaining to the valuation of the marital assets as well as debts.
Upon request from the other party or from the court, you have a duty to provide full access to all books and records related to the nature and valuation of such marital property. The courts in Orange County will encourage you and your ex-spouse to agree on the community property valuation so that the division can be resolved quickly and amicably.
Unless you and the other party have agreed in advance to use the book value or actual purchase cost of the property to be used for division, community property division in a California divorce must be based on Fair Market Value (FMV).
For the purpose of marital property division, FMV of an asset is the highest price at which a buyer is willing to purchase and a seller is willing to sell the asset. Community assets and debts in a California divorce are usually valued as close as practically possible to the date of the divorce trial.
Your Orange County divorce attorney can help ensure that a competent valuation of all marital property is conducted so that your rightful share is fully protected. Your attorney may make use of expert testimony of a professional appraiser, CPA, real estate agent, actuary, or forensic accountant as needed.
The property’s owner is also allowed to testify regarding valuation of his or her own property, though not as an expert. Comparable market sales data as well as original buy-sell agreement may also be sometimes used as the inputs or basis for the marital property valuation.
Consult with a Skilled and Resourceful Divorce Lawyer
Community property division in an Orange County divorce is one of the most important issues that will impact your life for years to come. Therefore, it is vital to work with a trusted and experienced legal counsel when it comes to dividing property with your ex-spouse in a divorce proceeding.
Your attorney will not only make sure that the assets and debts are accurately valued and divided, but also pursue the possibility of any potential hidden assets that must be uncovered so that you do not lose out on your rightful share of the marital property.