Property Division Guide
In a divorce, a lot of time and money are generally spent deciding who
gets what. Assessing and evaluating marital assets can be complicated,
and California is a community property state, which means that property
should be divided evenly, which can become very complex. In a divorce
(also known as a marriage dissolution) in addition to
dividing assets, significant time may be spent assessing and dividing liabilities such
as loans and other debts. Before property is divided, it needs to be identified,
characterized and valued. In addition to physical, tangible property such
as houses, cars, stocks, and bonds, marital property can also intangibles
such as intellectual property. Assets and liabilities acquired by both
spouses during the marriage belong equally to both parties.
Marital assets are characterized as either community property – an
asset acquired during the marriage, separate property – property
acquired after the date of separation or prior to the date of marriage,
or hybrid property – property that one party may have invested money
acquired before the marriage in but that belongs to both spouses and has
Even though California law calls for the equitable division of property,
that does not mean that all assets need to be liquidated, it just means
that both parties should receive assets of the same value from the community
property. If a couple is able to agree on how to divide their property
and debts, they may only need a judge to sign off on their agreement and
issue a final order. If a divorcing couple is not able to agree on how
to divide their assets, they will need the court to assist.
4 Steps to Property Division
Typically, there are four steps involved in dividing property in a divorce:
- Identifying all property and the type of property it is
Characterizing property as either:
- Community property
- Separate Property
- Hybrid/mixed property
- Estimating the value of the property
- Dividing the property
How Property Value Is Assessed
Tangible property is usually assigned its actual fair market value. For
investments, intellectual property, and retirement accounts, an expert,
such as an actuary, is brought in to assist in determining the value.
Real estate value is typically assessed by a professional appraiser. Valuables
such as art, antiques, and jewelry are also typically appraised for resale
value by a professional.
Spouses have a fiduciary responsibility to one another to disclose all
assets, liabilities, income, and expenses as they go through the divorce
process. During the marriage, both spouses also are expected to openly
communicate with one another regarding assets and liabilities and dealing
fairly with one another.
hidden asset is something that one spouse has not disclosed to the other, or an asset
that seems to have gone missing during the divorce process. Spouses who
hide assets are penalized by the court by steep monetary sanctions or
An Orange County divorce attorney, through a process called discovery,
can work to trace and identify any hidden assets, and then work with a
forensic accountant to assign the value to the assets, identify which
assets are community property and which assets, if any, should be categorized
as separate property.
Hiding assets is considered to be a breach of fiduciary duties, and sometimes,
the court will impose monetary sanctions for the spouse who hid assets
for attorney fees for the spouse who had to initiate the discovery process.
As discussed previously, community property is divided equally in a divorce
in the state of California. Privately held businesses are considered to
be community property (unless there is a prenuptial agreement in place
to protect the business) and therefore, are subject to equal division
in a divorce.
When determining the value of a business, there are many factors that are
taken into consideration, including the business’s assets, debts
and liabilities, the value of the business’s accounts receivable
and other intangible assets (such as intellectual property), and the business’s goodwill.
The court also takes into consideration the earning capacity of the business,
its financial condition, the current economic outlook, prior sales of
ownership interests, and other intangible assets. Like with other community
property assets divided during a divorce, the
business valuation process aims to determine a fair market value for the business.
Prenuptial (Prenup) & Postnuptial (Postnup) Agreements
prenuptial agreement is a contract that allows couples to make a financial agreement in advance
of their wedding in the event that they get divorced in the future. Such
an agreement ensures that any assets one spouse takes into the marriage
remain with them in the event there is a dissolution of the marriage.
A savvy lawyer can draft an agreement that will protect a party’s
personal and business assets before the marriage takes place as a practical matter.
A postnuptial agreement is an arrangement between a couple following their
marriage that sets certain terms of the relationship. Postnups are most
often requested when one spouse comes into a significant amount of money
or has new financial assets, like a family business that was left to them.
Another reason for a postnup may be if one spouse is worried about a change
in behavior related to spending from the other spouse that could have
an impact on the couple’s financial stability, such as gambling
or overspending on luxury items. Other times, couples get a postnup if
the couple intended to create a prenuptial agreement before the marriage
but did not do so.
stock options are treated as property and are appropriately divided, though this can
be complex. Often times, lawyers work with forensic accountants to properly
evaluate and divide stock options.
Earnings during a marriage are considered to be community property, so
if one spouse is compensated at work during the marriage with stock options
that vest or partially vest during the marriage, the stock options will
most likely be treated as community property.
There are three formulas that are used to determine if stock options are
separate or community property, and the formulas take into consideration
when the parties got married and when they separated, what the vesting
dates were for the stocks, and whether the stock options were granted
for past service, or to attract or retain the employee.
Commonly Used Terms Related to Marital Assets
Community Property: Assets jointly owned by a married couple.
Discovery: The legal process for getting information about the other party for your
case, which can include interrogatories and depositions.
Marital Property: All property acquired by the couple during the marriage.
Prenuptial Agreement: A contract signed by spouses prior to marriage to determine how Property
will be divided if the couple divorces.
Postnuptial Agreement: A contract that is signed after a couple is already married that determines
how Property will be divided if the couple divorces.
Qualified Domestic Relations Order (QDRO): A court order giving one spouse a share of the other’s pension or
Separate Property: Assets that belong to only one spouse because they were acquired before
marriage or through a gif or inheritance.
Frequently Asked Questions Related to Marital Assets in California
Will I get to keep my house in the divorce, will it go to my spouse, or
will we have to continue to co-own it after the divorce?
If you bought a house together during your marriage, using community property
funds, the house is community property. If this is the case, there are
several options that will be considered including:
- Selling the house and dividing the profits, particularly if neither spouse
can financially take full ownership of the house
- A buy-out – one spouse takes full ownership of the house and pays
the other spouse’s portion. Insurance, utilities and repairs, property
taxes and monthly mortgage payments would all belong to the spouse who
is buying out the other’s interest in the property.
To minimize the impact of the divorce on young children, the court in some
cases will order a “deferred sale of a house” which is a scenario
where both spouses continue to own the home for a set period of time,
with the custodial parent having use and possession of the home during
Will the court determine who gets our household items, like furniture and
No. The value of your household goods is typically not included in a property
settlement. Generally, spouses should try to divide such assets together,
using the asking price for such items or fair market value.
How do spouses hide assets from one another and how can I tell if my spouse
is hiding money?
There are many deceptive ways for one spouse to hide assets from the other.
The most common ways that spouses hide assets are opening bank accounts
that the other spouse doesn’t know about, selling Property without
the other’s spouse’s knowledge, funneling money through a
third-party bank account, or transferring property to a third property.
Monitoring your joint bank accounts for changes in withdrawal patterns
and checking for any discrepancy from the financial activity that both
of you participated in to run your household prior to the divorce proceedings.
My spouse and I separated, moved into different homes and divided up our
stuff on our own. Do we need to go to court?
Technically, all property belongs to both spouses until it is awarded to
one by a judge, so you will still need to delineate what each spouse is
taking as part of your divorce proceedings.
Does my pension belong to me or my spouse if we get divorced?
Any contribution that was made to your pension before the marriage is considered
to be separate property, however, any contributions that were made to
your pension after the date of your marriage are community property and
your spouse is entitled to half of that.
I saved my own money, put it in a separate account, and made a significant
purchase (car, boat, etc.). Is this considered to be my property?
No. Even if you are the only one with the title to a car or boat that you
purchased with money you earned, your spouse is still entitled to half.
All money earned during the marriage, whether housed in separate accounts
or a joint account, is considered community property.
Is an engagement ring considered to be a marital asset?
An engagement ring is considered to be a “gift in contemplation of
marriage.” If the marriage doesn’t take place, the person
who purchased the ring may get it back. If the marriage does take place,
the engagement ring is considered separate property, as it was a gift
acquired before the marriage. However, there are a few exceptions, like
if the ring was a family heirloom, for example.
What Questions Should I Ask My Lawyer?
When dividing marital assets, it is critical to work with an attorney who
understand complex and sophisticated financial situations so that you
can ensure that you receive what you are entitled to in the divorce. In
selecting a lawyer, consider their background, and experience in this
area of law.
In addition, you may want to consider asking your lawyer the following
- Do you have experience in situations where the assets and liabilities are
similar to ours?
- What is your experience with high -conflict situations?
- Can you help me determine if my spouse is hiding assets?
- Do you have experience working with couples who both have retirement accounts
- What kind or experts will you work with to assess the value of our assets
- How can I protect myself and my finances during the divorce process?
- California Courts: Divorce or Separation - http://www.courts.ca.gov/selfhelp-divorce.htm
- Orange County Law Library - https://www.ocpll.org/
- Orange County Bar Association - https://www.ocbar.org/
This guide was produced by Moshtael Family Law. If you have any questions
or need some guidance or further information regarding marital assets, please
contact our Orange County divorce lawyers. We offer free consultations and look
forward to helping you.