California is known as a “community property” state which means that the nature of and title in which each of you holds assets as individuals and as a couple will significantly impact the division of your assets during a divorce. The division of assets can get very complicated very quickly when there are many assets held jointly and separately in a marriage. The source of the asset may also play a role in how it is identified and divided. The Law Office of Janice Cho, with our experience, expertise, and dedication, is here to serve as your ally and your fierce advocate as you wind your way through this emotionally difficult process.
This article explores the intricacies of separate versus community property in California divorces, and what can happen when assets appear mixed in nature or have been mingled.
Community Property Defined
Community property in its simplest form translates to equal ownership. In California, all property acquired by either spouse during the marriage is presumed to be community property, meaning both spouses own it equally. This includes earnings, property bought with those earnings, and debts accrued during the marriage by either party.
However, there are exceptions that include personal gifts and inheritance received (even during the marriage) by one spouse, that are considered separate property as long as they are kept separate from community funds, i.e., the separate asset/property is not commingled (deposited) into a joint account or title is changed to include the other spouse. Separate property can be converted into community property under certain circumstances which we will discuss later in this article.
Separate Property Explained
Separate property is exactly what it sounds like, property owned or acquired by one spouse before the marriage including earnings, retirement and investment accounts, real property, etc. Separate property will also include any of the above property acquired after the date of separation. To keep separate property out of the communal marriage pot, safeguards must be put into place. Any separate property you’ve acquired before the marriage must not be commingled with community assets or its character changes (known as transmutation) into community property.
This maintenance of separation is crucial in preserving its nature as separate and keeping it protected from division through the divorce process. Typically, each spouse has control over their separate property, whereas either spouse has access and control over any joint assets and joint property during the marriage.
What Does Commingling Mean?
One of the most complex aspects of California divorce law is determining property status when separate property funds are commingled with community property. Understanding how these properties are treated when they become mingled can be quite complex and often requires legal intervention to untangle. For example, if one spouse uses money from a pre-marriage bank account (separate property) to buy a family home after marriage (community property), the separate funds become commingled with community property. In addition, a couple can jointly agree to change the nature of the property from separate to community by written agreement, this is considered a transmutation of property. This must be in writing and clearly state the intention to change the property’s nature.
Legal Implications of Commingled Properties
When separate and community properties are commingled, they can create significant complexities in a divorce. California law attempts to trace the assets back to their origins to determine their proper classification and division. The key legal concepts involved include tracing, reimbursement, and transmutation.
Tracing involves establishing the source of funds used to acquire an asset. If it can be shown that separate funds were used, then the asset may still be considered separate property. However, this can be challenging, especially when transactions are not well-documented.
If separate property funds are used to benefit the community, or if community funds are used to enhance separate property, one party may be entitled to reimbursement. For example, if community funds are used to pay off the mortgage on a separate property, the community may be reimbursed during the division of property.
Transmutation is a legal term that refers to the change in the nature of property, where separate property becomes community property or vice versa. Transmutation must be made in writing and should clearly state the intention to change the property’s character.
Division of Property
In divorce proceedings, community property is divided equally unless agreed otherwise by the parties. However, separate property is awarded only to the owning spouse. The spouse claiming that a property is separate must prove its status, often necessitating detailed financial records and documentation tracing the property’s origins and when it came into possession of the person claiming it and the source of the funds used to acquire it, if applicable. It is important to note that if community funds are used to make improvements on a property that one spouse owned before the marriage, the value of the property may be partially transformed into community property.
Property and Record Keeping Considerations
Throughout your marriage, maintaining clear and comprehensive financial records is essential. These records help trace the origin of assets and can significantly influence the court’s decision on whether property is designated as separate or community. Your home is often the most significant asset in divorce and determining whether a home is community or separate property can be particularly contentious. Factors such as how the home was purchased, whose name is on the title, and how mortgage payments were made play critical roles.
Another common asset is retirement and benefit accounts. These are treated as community property to the extent that they were earned during the marriage. Special rules may apply to the division of these assets.
How Oakland Divorce Lawyer Janice Cho Can Help
In California, the distinction between separate and community property plays a critical role in divorce proceedings. With divorce often being a very emotional process, dealing with intricate financial issues and considerations is more than you should have to face alone. Janice Cho is here to apply her expertise and her focus to help you resolve the financial aspects of your divorce in a fair and equitable manner that serves you well. The Law Offices of Janice Cho, APC is committed to providing you with unparalleled personalized service with expertise, integrity, and compassion.
Call (510) 925-2651 when you need the assistance of an experienced Oakland divorce lawyer.
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