Understanding California’s Community Property Law
Different states have different laws regarding spouses’ ownership rights in property acquired before and during their marriage. As Californians, our marital assets are treated as “community property.” At its most basic level, this means that assets acquired during the marriage are considered to be equally owned by both spouses. However, there are several special rules and exceptions that often make it difficult to cleanly divide marital property during a divorce.
Community Property – The Basics
California’s community property law states:
Except as otherwise provided by statute, all property, real or personal, wherever situated, acquired by a married person during the marriage while domiciled in this state is community property.
Thus, the general rule is that assets purchased by either spouse become the property of both spouses. However, even looking the basic statutory language above, you can see that there are several limitations. Most notably:
- The spouse must live in California at the time of the purchase.
- The spouses must be married at the time of the purchase.
- Other statutes can (and do) provide specific exceptions to the general rule of community property.
Assets that may be treated as community property include cars, boats, homes, jewelry, furniture, savings accounts, pensions, retirement plans, and all other forms of personal property. Ownership interests in businesses and professional practices may be deemed community property as well.
Determining Who Gets What
If both spouses own everything together, how do they divide their property in a divorce? With some assets – like bank accounts – the parties can actually agree to each take a portion of the property. However, for things like the family home (Link to Who Gets the House blog article). and vehicles, what usually happens is that the spouses each take certain assets in exchange for giving up their rights to others. If the parties do not have sufficient assets to arrange an equitable split, they may agree to sell their assets and divide the proceeds.
Things get more complicated when non-community property is involved. While assets owned by one spouse prior to the marriage are not typically considered community property, there are important caveats to this general rule.
For example, if one spouse already owned the family home but the couple makes substantial upgrades during the marriage, this can create community property rights in the remodeled home. Likewise, income generated from a business or professional practice owned prior to the marriage can become community property as well. If both spouses work in the business or the business appreciates substantially in value during the marriage, this can also add to the list of issues to be resolved during the divorce.
With regard to investments and pensions, accumulation and appreciation from the period the spouses were married would be subject to division as community property. However, previously owned interests would be treated separately.
For More Information, Contact Sarieh Law
Property division is often one of the most complicated aspects of a California divorce. Attorney Wail Sarieh has over a decade of experience helping his clients get what they deserve. To learn more, contact Sarieh Law today.