Division of Property in Divorce
California community property law is an extremely complex set of rules and regulations, statutes and case law that takes years of experience to learn and understand. Our attorneys have decades of experience in divorce law including how the division of property is handled in the Riverside courts. While the presumptions are easy to grasp, how those presumptions are applied to cases and the hundreds of nuances that serve as exceptions and differentiations to the presumptions are confusing as can be.
What is the Community Property Division Presumption?
The main presumption as to how community property is divided is found within the definition of community property and separate property. Community property is defined as all property acquired during marriage that is not separate property. Separate property includes property that is acquired before marriage, after the parties’ date of separation, and all property acquired by gift, bequest, inheritance or devise, and of course all appreciations of separate property. The presumption then, upon divorce is all community property is divided between the parties equally. Sounds easy enough. However, there are many reasons why this presumption is not easy to actually apply in a divorce or legal separation case, including:
- Community property may come in many different forms, including real property, cash, bank and investment accounts, stock, stock options and restricted stock units, deferred compensation, personal property including electronics and furniture, intellectual property, and so on. The court is required to completely equalize community property when dividing it between parties, which can be difficult when you have many, or just a few, assets with different values or hard to value items. For example, imagine that a wife wrote a book during marriage that she has not attempted to market yet. Is there a value? What if she starts marketing the book after separation and lands a big contract – is the contract community property because it is related to the book?
- Many assets are not strictly community property and are mixed in character. This makes the task of valuing the community property portion extremely difficult in almost all cases. For example, a common example occurs when a spouse acquires a family residence before marriage and therefore it is their separate asset, and the parties live in that home during marriage and use community property to pay down the mortgage, make improvements, and so forth. As a result, the home gains a community property interest that must be divided upon divorce. This situation is known as the “Moore Marsden” situation. Another common yet extremely difficult division issue occurs when a party starts a business before marriage and continues to work to increase the value of the business during marriage and earns an income from the business. This situation is known as the “Pereira Van Camp” situation.
- In divorce situations where each spouse wants (or doesn’t want) a certain community property asset or debt can be a difficult situation for a family law judge, because they will have to determine which spouse will retain the asset or debt. In many circumstances, the court may be forced to order the sale of an asset, such as a family residence, even though financially it is the worst possibility for the parties.
How do I Determine What Community Property Exists in Our Marriage?
There are several key ways to determine the extent of community property that parties own between them, if one party does not already have that information. It is important to note the concept of fiduciary duties between spouses during marriage requires spouses to communicate to the other the extent of their assets, liabilities, income and expenses in a reasonable manner. It is a breach of fiduciary duty to hide assets or financial information from a spouse. If there is such a breach of fiduciary duty and one spouse really is in the dark about the assets or debts owned by the parties jointly as community property, and a divorce case is initiated, there are options. Some options are “easy” while some are far more difficult.
Within every divorce case, each party is required to fully, accurately and without fail disclose all assets and debt, income and expenses in the form of a “preliminary declaration of disclosure.” This financial disclosure includes a Schedule of Assets and Debts and must be done within 60 days of the filing of the petition (for the petitioner) or 60 days of the filing of the response (for the respondent.) This is the easiest way to understand the extent of community property because it takes no action by the party that doesn’t have the information to begin with. The other party provides it, as they should, as part of the disclosure process.
If financial information is not properly disclosed, there are a number of options including:
- Demanding that the other party supplement their preliminary declaration of disclosure
- Filing a motion to exclude evidence that the other party intends to “surprise” the other side with at trial by not disclosing it in the preliminary declaration of disclosure
- Sending subpoenas to financial institutions or other third parties to obtain account statements and other evidence
- Taking the deposition of the non-disclosing party and others
- Sending a specific demand for documents to the non-disclosing party
- Sending a demand for the non-disclosing party to provide every computer hard drive they have for inspection and copying. This is called a demand for Electronically Stored Information, or ESI
- Sending specially drafted interrogatories (questions) to the opposing party demanding they answer information about financial issues under oath.
What is Separate Property?
Separate property is not subject to division by the California Family Court in Riverside County. Separate property is those assets (and debts) that were acquired before marriage, after separation, or during marriage through gift, bequest, devise, inheritance, etc. Increases in value and accumulations of property that is derived from separate property will remain separate (for example: if a person owns an apartment building before marriage and receives rent from that apartment building during marriage, the income received is likely separate property in character).
Can the Character of Property Change?
Yes. Property can be “transmuted,” which means to change character over the course of marriage. Separate property can change to community property, separate property can be transmuted to the other party’s separate property, and community property can change to separate property. There are specific requirements for this to occur, which include at a minimum a writing that is accompanied by an “express declaration” that the person giving up their rights in the property specifically understands that they are giving up those rights and the title to the asset is changing.
If Property Changes Character, How Does the Court Divide the Property?
The court in a divorce or legal separation case only has the power to divide community property. It does not have authority to award one party’s separate property to the other party. California is different than other states that allow for an “equitable division” of property, even if that property is owned separately. As a result, the judges in California Family Court and including those judges in Hemet and Riverside, will only divide community property upon divorce and they are charged with doing so exactly equally between the parties.
How Can Wilkinson & Finkbeiner Help Obtain a Division of Property in My Divorce?
Our attorneys are skilled litigators and divorce “strategic planners” that have dealt with hundreds of cases where complex community property division was an issue. We have also been involved in countless cases where we had to conduct extensive discovery to learn the truth about the various assets and debts owned by the parties because the opposing party was not forthright. We have received excellent results for our clients, including obtaining giant sanctions awards against the opposing party for failing to divulge relevant financial information. We provide a centrally-located office in Temecula, free parking, and a completely free, private consultation to discuss your case and your options with you. Call or email us today.