Community Property and the Marital Estate

During divorce, one job of the trial court is to divide the assets and debts of the parties. California, along with just nine other states, is what is called a "community property" state. So what is "community property" and how does that impact the way assets and debts are divided?

Community property refers to the idea that when two people are married, their "married estate" is one entity. Therefore, anything acquired during the marriage is community property, owned by both spouses. Property does not only refer to real estate. It also refers to tangible things like furniture, electronics, or vehicles. It also means anything of value, to include retirement plans, pensions, bank accounts, intellectual property rights, and the like. Community property also includes the income earned by a spouse during the marriage.

Separate property, however, is not part of the community property that will be distributed by the court. Separate property is property that is owned by one spouse before the marriage, after the marriage, or something that was gifted to just one spouse during the marriage. Note that separate property can become marital property, depending on how the parties treat it. For example, if a spouse receives a cash gift from a relative, but then deposits that cash in a joint account with their spouse, then that separate property may have turned into community property.

Note that property does not only mean assets. Debts incurred during the marriage also become part of the community property. Mortgages, vehicle loans, and credit card debt, for example, are all community property.

During divorce, this means that anything that is considered community property must be divided. California law requires that, unless there is an agreement between the spouses to do otherwise, the property must be divided equally. This is achieved by determining the value of all the assets and the debts, and attempting to make a distribution so both spouses receive half. This does not automatically mean that all of the marital assets will be sold, the debts settled, and the spouses split the remainder. What typically happens is that in a court proceeding, each party will present evidence about the net value of each asset (i.e. the gross value less any debt against it), as well as the evidence of the debts. The court will attempt to make the distribution of the net assets in such a way that the assets and debts are equally distributed between both parties.

We are highly experienced and skilled in the area of property division in divorces. Call us today at 619-800-0384 to discuss your separate and community property and what a judge may do in the event of a divorce.