Property Division

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Property Division

Property Division

California is a community property state, which means that any assets or properties acquired during marriage are considered jointly owned by both spouses. The legal implication is that in the event of a divorce, the family court in San Diego will divide the property equally between the two parties. (This is different from several other states, where the marital assets are divided “equitably” and not “equally.”)

It's vital to clearly understand the rules governing the distribution of debts and assets in a San Diego divorce. This knowledge will prepare you for what to anticipate if you choose to dissolve your marriage. Property division arrangements made during divorce proceedings can profoundly impact your financial future, making it a high-stakes priority.

At Moshtael Family Law, our proven and capable property division lawyers in San Diego can help you navigate the divorce process. We will provide you the strongest legal representation to protect your rights to your fair share of the community assets you and your ex-spouse accumulated during marriage.

Community vs. Separate Property in San Diego

In a San Diego divorce, all property belonging to both you and your spouse will be categorized as either community or separate property (or, in an exceptional situation, a combination of the two). The classification of a particular piece of property will determine how it gets divided upon the finalization of the divorce.

What is Community Property?

California is a community property state, which implies that a marriage or domestic partnership registration in the states makes two people one legal "community." Any property or debt acquired by one person during the course of marriage or partnership is seen as belonging to the community and not the individual who purchased or accumulated it.

The California Family Code section 760 states that community property is "all property, regardless of location, acquired by a married person while domiciled in the state during the marriage." In general, community property is divided equally (50/50) during a San Diego divorce. The state’s definition of community property is designed to encompass a wide range of property and belongings that a couple acquires during marriage.

What is Separate Property?

In San Diego, any property that either party owned before entering the marriage is classified as separate property. Subject to conditions, it also includes gifts and inheritances intended for one party (that may be received during marriage) and any property obtained or earned after their separation. Determining the date of separation is critical in many San Diego divorce cases in order to identify separate property.

Purchasing any property using separate funds renders it separate property, even if it may be acquired during the marriage. For instance, if a car is bought after marriage using funds earned before marriage, it still qualifies as separate property. Income or rent derived from separate property remains independent as long as it is not mingled with community assets. Therefore, any income or rent earned from real estate or businesses owned before the marriage will remain separate property.

What is Commingled Property?

A couple's assets in San Diego may sometimes include a mix of community and separate property. In many cases, a party may bring a piece of property into marriage (separate property), but over a period of time, the community may gain an interest in the property.

For example, consider a situation where one spouse brings a house (owned prior to marriage) into the marriage. But during the course of marriage, community earnings are used to make the mortgage payments. In this case, the property will be treated as a mix of community and separate property.

In some cases, the property can lose its classification by blending with a property of another nature. For instance, if a spouse has a bank balance prior to marriage and post-marriage the couple continues to use the same bank account by making deposits and withdrawals involving community earnings. In this situation, the asset will probably lose its "separate" identity. This "commingling" of the asset could transform it into community property in San Diego.

Accurate Marital Asset Valuation and Distribution in a San Diego Divorce

In high-net-worth divorces in San Diego, obtaining professional financial appraisals and valuation of assets from qualified experts is usually necessary to determine their actual value. At Moshtael Family Law, we collaborate with reputable professionals in various fields of finance, including business valuation professionals, real estate appraisers, and forensic accountants.

Our San Diego property division lawyers are also well-versed in debt allocation as an essential aspect of any divorce settlement. We will guide you through every aspect of debt division to ensure your financial rights are safeguarded to the fullest extent.

Who Gets the Family Home in a San Diego Divorce?

In San Diego, if the couple's home is determined to be separate property, the spouse who owns it will retain ownership after the divorce. Taking this into account, if it’s deemed to be community property, there are several methods by which it can be divided, either through mutual agreement or by court order.

Sell the Marital House and Divide the Proceeds

A popular way to divide the family home in San Diego divorces is to sell the community asset and split the proceeds equally between the two parties. This may be the only viable solution if neither spouse can afford to keep the home individually post-divorce. If the property has negative equity, which means the outstanding mortgage exceeds the property's current value, both spouses will share the loss equally.

Spousal Buyout

Another alternative for family house property division in San Diego is for one of the spouses to assume complete ownership of the property and financially compensate the other for their portion (known as a "buyout"). Various costs need to be considered when determining whether the buying spouse can afford to take full ownership of the home, including:

  • Mortgage payments
  • Property taxes
  • Homeowners insurance
  • Maintenance and repair costs
  • Utilities
  • HOA fees (if applicable)

Deferred Sale (Spouses Stay on Title)

If the divorcing parents in San Diego have minor children, the judge may issue a "deferred sale of home" order, temporarily delaying the property’s sale. During this period, both co-parents continue to own the home jointly, with the custodial parent getting the exclusive right to use and possess the property. This order is intended to reduce the impact of the divorce on the children. It is best to consult with our San Diego property division lawyers at Moshtael Family Law to determine if a deferred sale order is appropriate in your situation.

Business Division in a San Diego Divorce

In San Diego, businesses started during a marriage are generally considered community property. This means both spouses have an equal interest in the business assets and debts, regardless of who started the enterprise or who managed it during the course of marriage. This can be a significant concern for business owners who have invested a lot of time, effort, and money into building a successful business.

Even if the venture was started before the couple married, any growth, expansion, or profits earned during the marriage could be considered community property and be subject to division. This could result in the business owner having to sell or give up as much as 50% of their business to their spouse, significantly impacting their future plans for the business.

In these cases, our San Diego business division attorneys at Moshtael Family Law can help you explore the best possible options, such as:

  • One spouse buys the other’s share in business- When one spouse wants to retain 100% ownership of the business, it may be prudent to buy out the share of the other spouse. To retain the business, the owner may offer to give up their right to other assets during the property division or provide the other spouse with monetary compensation equal to half the business's value.
  • One party offers the other a partial ownership- Another option is for one spouse to offer the other partial ownership of the business. They can do this by giving the other party some business assets such as stocks or granting them control over specific business operations. This arrangement enables the company to continue operating as a single entity, but the owner may need to surrender some control to the other spouse or at least share the business profits.
  • The spouses divide the business into two distinct entities- The spouses may consider splitting the business into two legally separate entities. This approach could result in two smaller competing companies, but they could enter into a “non-compete” agreement or “non-poaching” agreement to run their separate enterprises after a division.
  • The spouses sell off the business- If the business owner cannot afford to buy out the share of the other spouse and is unwilling to offer them partial ownership, selling the business may be a judicious idea. This option is most effective when the business owner does not see much future financial value in running the business independently post-divorce.
  • The spouses dissolve their business- A business dissolution is usually considered the last option for business owners. With that said, it may become necessary if the parties disagree on the division terms and there are no third party takers for the business. A bankruptcy may have to be considered if the business has accumulated debts that cannot be paid back.

When deciding which option is best for a particular situation, it's essential to consider the long-term financial implications for both parties and the potential impact on the business itself. We encourage you to seek the advice our legal and financial professionals at Moshtael Family Law in San Diego to ensure the best possible outcome.

Division of Retirement Assets in a San Diego Divorce

In San Diego, any retirement or pension benefits that you and your spouse have accrued during the marriage until the separation date are deemed as community property and must be divided. Any pension or retirement benefits accrued before marriage or after separation are considered separate property and are not subject to division.

The division of pension or retirement benefits accumulated during the marriage can vary depending on several factors, but it is typically split equally based on the date of separation. In cases where each party has an equal community property interest in a pension or retirement plan, they can each keep their own plan. Pertaining to this, if the plans have different values, they must be evaluated and divided equitably.

A Qualified Domestic Relations Order (QDRO) is used to divide pension assets between the two ex-spouses in a San Diego divorce. A QDRO is a specialized court order that transfers a certain portion of retirement assets/pension benefits from one spouse to the other. It’s entered separately from the divorce judgment and must be negotiated and signed by both parties and their respective lawyers before a judge's approval.

Professional Licenses and Educational Degrees in a Property Division in San Diego

Under the state law, if one spouse obtains a college degree or professional license during the marriage, the other spouse has community property rights and can claim reimbursement for the costs incurred in obtaining the degree or license, including interest.

This typically includes expenses related to fees, books, and tuition. The law does not entitle the other spouse to a share in the increased earning potential resulting from the degree or license of one spouse. Nonetheless, the enhanced earning ability can be considered in determining spousal support (alimony).

During your divorce in San Diego, any loans obtained for education or professional licenses will be assigned to the spouse who took out those loans.

Reimbursements Under Family Code 2640 in San Diego

In San Diego divorce cases, it is sometimes necessary to address whether one spouse is entitled to reimbursement for using their separate property to acquire community property.

When a spouse contributes their separate property to obtain a joint or community asset, they are entitled to reimbursement for the amount they contributed without interest or appreciation. This dollar-for-dollar financial reimbursement ensures that each spouse receives fair compensation for their contributions to acquiring community assets.

To illustrate: John has a separate bank account in San Diego with $250,000. He either acquired it via inheritance or brought this amount into the marriage. A year into their marriage, the spouses purchase their family home using this separate property money, and they co-own the property

Assuming that John can prove that he channeled his separate property money towards the down payment on their family home, he has a right to receive a financial reimbursement (without interest or appreciation), even if they sold the first home and bought a new one later during their marriage.

This rule also applies when the couple uses separate property assets for community property renovation, upgrades or improvement projects.

What Happens to Family Pets in a San Diego Divorce?

During a divorce, who gets to keep the pets can become a contentious issue. In San Diego, either party can request the judge to determine custody of their beloved pet. The family court has the authority to grant sole or joint ownership of the pet. When making the decision, the judge will consider the pet's well-being including protecting them from abuse or harm and ensuring that the pet will have access to adequate food, water, shelter, and medical attention.

Dividing Community Debts in a San Diego Divorce

Unless both spouses have a prenuptial or postnuptial agreement outlining the division of their assets and debts, a San Diego family court will order them to divide their community assets or debts equally.

If the value of the community debts exceeds the value of the community assets, then an exception to the 50-50 property division rule will apply. In such cases, the state law permits courts to order an unequal division of debts by assigning the excess debt to the spouse that is in a better financial position.

While marital property is typically divided equally in a divorce, debt division doesn't always happen similarly. Each party is responsible for paying off the debts assigned to them as part of their divorce settlement terms. If one spouse fails to make payments on a given debt, creditors may pursue them for the overdue payments. It means that both spouses should be aware of the debts assigned to them and take responsibility for their portion of the debt to avoid legal consequences.

You can file a motion with the court to enforce the debt settlement if you receive communication from creditors regarding payment for a debt allocated to your former spouse under the terms of your divorce settlement. This step can help protect you from being held liable for debt payments designated to your ex-spouse in the divorce decree.

Date of Separation in Debt Division

When a San Diego couple separates, debts incurred by either party after the separation are generally considered "separate.” The responsibility for payment of those debts is assigned to the spouse who incurred them post-separation. The judge usually considers this when dividing the couple's assets and debts during the divorce settlement process.

California law employs a two-part test to establish an official separation date, making it challenging to determine the exact date because:

  • There must be physical separation between the two spouses to establish an official separation date under California law
  • Physical separation is considered to have occurred when one spouse moves out of their shared home
  • The judge may also determine that physical separation has occurred when the spouses have begun to sleep in separate areas within the same home
  • One of the requirements to establish an official separation date under San Diego law is the intent of at least one spouse to end the marriage, in addition to physical separation

When the Marital Property is Owned in Another State

Quasi-community property is a term used to describe property acquired during the marriage but located in another state. In San Diego, this property is treated just like community property and is subject to division during divorce proceedings.

San Diego family courts do not have jurisdiction over the actual property located in another state, but they can still enforce the division of the property by ordering one party to transfer their interest to the other party.

It means that even if a property is located in another state, it can be divided as part of the divorce settlement in San Diego. The court can enforce this rule, ensuring both parties receive a fair and equitable property division.

Get the Top-Rated San Diego Property Division Attorneys on Your Side to Protect Your Rights

Property division can be a significant source of disagreement and conflict between spouses in a divorce. It can be challenging to determine how to fairly divide assets, debts, and property acquired during the marriage, especially if both parties have different opinions on what is fair.

This process can become emotional, complex, and time-consuming. Our experienced San Diego divorce lawyers can help protect your interests in property division matters.

If you're going through a divorce involving high-value assets like real estate, family business, marital home, overseas investments, stocks and bonds, jewelry, and cash, we have the skills, knowledge, and resources to get you the best possible property division outcome. To request a free, no-obligations consultation, call us at 619-639-9898 or reach us online.

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