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Is California a Community Property State?property division in San Bernardino

As one of only nine community property states, California is unique when it comes to the division of property during divorce. In California, each spouse has ownership of 50% of any and all property acquired during the marriage—or community property. This property can include physical property, such as homes, vehicles, and valuables. However, money and income is also property in California and is also subjected to the community property standard. While this may seem like a simple principle, the concepts surrounding community property and the division of assets during a divorce can become overwhelming.

In order to ensure that your rights are being fairly represented in property division, it is essential that you consult a property division attorney in San Bernardino. At the Law Office of Michael R. Young, our firm has over 50 years of combined experience and can handle whatever circumstances you face. Since our founding, we have helped numerous clients achieve favorable results in complex cases. As a result of our dedication and commitment to excellence, we have received an AV® rating from Martindale-Hubbell®!

For a consultation with a San Bernardino property division lawyer, call (909) 315-4588 today!

How Do We Handle the Division of Property?

Because of the community property laws of California, it is important to discuss with your spouse and agree upon an equitable division of the property. When the couple cannot agree upon division of property, the court will differ to the community property law and make its own determination as to how to distribute the 50-50 split. At this point, the judge will determine what he or she believes to be the “just and right” manner in which each spouse receives a distribution of the property.

In handling property division, it is important to determine when the property was obtained. Was the property before or during the marriage? Property acquired prior to the marriage is considered the separate property of the acquiring spouse and is not subject to community property laws. However, there may be circumstances in which separately acquired property, or money, was transformed into community property at some point during the marriage.

For example, suppose each spouse had separate checking accounts prior to being married, with each account holding $5,000 and $3,000. When the couple married, they kept their separate accounts. However, the couple later decided to consolidate their checking accounts, creating one joint account and combining the balances. In doing so, the couple agreed to give up their separate ownership of their $5,000 and “transformed” the money into $8,000 of community property, now subject to a 50-50 split.

It is also crucial to agree on a value for the marital property and deciding how to divide the property. Doing so will aid ensuring that each spouse is receiving an equal share of what they are entitled. Furthermore, reaching an agreement as to property division prevents the courts from making its own determination of the division of property. An attorney can assist in negotiating these aspects of the property and helping you and your spouse reach an amicable division of the property with minimal court intervention. Or conversely, it may be necessary to hire an attorney to protect your property interest.

What are hidden assets in a divorce?

When people divorce, total disclosure is expected when they file. However, that is not always the case. Sometimes spouses will hide assets; either tangible or intangible, from the other spouse hoping they will not be discovered. There are penalties for hiding assets in a divorce and there are legal ways to uncover these assets.

Tangible and Intangible

Tangible assets are things that have physical value, or that can be sold. Examples are cash, jewelry, artwork, collectibles, and firearms. Intangible assets do not have a physical existence. Examples of these would be patents, trademarks, and copyrights. Both tangible and intangible assets are subject to distribution in a divorce and both should be disclosed and not hidden.

First Steps

The first step in the discovery process is to request a full disclosure of all assets. These can be assets acquired before and during the marriage and separately or together as a couple. Once the asset total is presented, attorneys can then start the process of creating asset division plans that may be accepted by a judge.

Discovery Tools

If a spouse suspects that the other spouse is hiding assets, there are legal resources available to help. These resources include oral depositions where the spouse-in-question has to talk about their assets under oath. Additionally, a spouse can demand financial documents and property and safety deposit box inspections from their spouse. These requests and demands should be handled by an experienced attorney on behalf of an inquiring spouse.

Requests That Should be Made

Any document that relates to assets, liabilities, income, and debt should be requested during this discovery process. This can include income tax forms, loan documents, financial statements, bank account information, stock options, patents; basically, anything that has value should be acquired. An asset division attorney can help you pursue the documents you need to find potential hidden assets.

Uncovering hidden assets is necessary for each spouse to receive an equitable distribution of marital property. Hiring an attorney is the best way to protect yourself and your assets, to request the appropriate materials from your spouse, and to ensure you receive full disclosure.

What Is Community Property?

Community property is defined as property acquired during the course of a marriage. One of the biggest misconceptions is that community property applies at the time of marriage. Technically, community property laws take effect only during dissolution of marriage. Community property laws are applied during dissolution of marriage in order to determine the equitable distribution of property to each spouse. This means that each spouse has a presumption of a 50% ownership of each piece of property acquired during marriage. The objective of these laws was to simplify the distribution of assets, while ensuring an equitable distribution to each spouse. The reality, however, is that there is nothing simple about navigating California’s community property laws. There are many variables at work that can change the nature of separate or community property during the course of a marriage.

Community property applies to multiple layers of property acquired during the marriage, including the following:

  • Any and all income acquired by either spouse during the course of the marriage
  • Any real and personal property acquired during the marriage (ex: your home)
  • Debts that are acquired during the marriage

The presumption of community property ends at the time of separation, not at divorce. While this may seem to be simple, calculating the actual date of separation can be difficult. Separation does not always begin on the date where one spouse moves out of the family home. Rather, separation is calculated from the time where at least one spouse has made the decision to terminate the marriage in addition to a physical act of separation. The court will require the clear demonstration of one spouse’s intentions to terminate the marriage in order to determine when the community property standard ceases to apply.

What Is Separate Property?

Separate property is any property solely owned by one spouse. The other spouse does not share any ownership in that property. The most common way of establishing separate property is identifying any property that was acquired by one spouse before the marriage or after legal separation or divorce.

For example, if a wife owns $10,000 in a savings account prior to the marriage and keeps it until the time of divorce, that $10,000 would be her separate property. She has complete ownership, and her spouse is not entitled to a 50% ownership share.

That example seems to be fairly straightforward and fair. However, consider the following example:

  • What if the wife decided to take $5,000 from that account during the marriage and moved it into the couple’s joint checking account? Further, what if, at the end of the marriage, there was $5,000 in the joint account and $5,000 in the original savings account? Does she own the whole $10,000 or does her spouse have any ownership?

This gets into the area of transmutation, which is discussed further below.

What Is Transmutation?

As discussed earlier, property that is acquired prior to marriage remains the separate property of that spouse. However, there are certain instances where separate property may be transformed, or “transmuted,” into community property during the marriage.

Transmutation occurs when the separate property of one spouse is no longer used solely for the benefit of that spouse and benefits the community. Transmutation can occur where the holding spouse grants joint title to his/her spouse during the course of a marriage. For example, one spouse owned a home prior to the marriage and, during the course of the marriage, he adds his wife to the title of the home. In doing so, the property is transmuted from separate property into community property.

Remember the bank account example above?

Imagine that the wife used her $10,000 of separate property as a down-payment of the marital home. Because she used that property to care for and advance the benefit of the community, the $10,000 has been transmuted into community property.

One might argue the money has been spent, however, that $10,000 is equity in the home. If the home is sold during the dissolution, the wife may demand that she receive her $10,000 in addition to her community property share of the sale. However, because she used the money as a down payment for a home that benefited the community, she is only entitled to one-half of that original $10,000.

How Does Community Property Apply to Debt?

Debt is subjected to the community property presumption in California. This means debts acquired during the marriage are “owed by the property.” Even where only one spouse signed for the debt—if it was acquired during the marriage, its repayment is the responsibility of both spouses upon divorce.

Basic principles for debt and community property in California:

  • Debt incurred by one spouse before or after legal separation remains the separate debt of that spouse.
  • Debt incurred solely for the benefit of one spouse generally remains with the debtor spouse and not the other.

It can be common for one spouse to solely sign for a debt on a purchase and solely use that property for their own purpose. While the other spouse, during dissolution, may argue that the property and debt were acquired only by one spouse and not commingled with the community, the argument does not escape the reality that the debt belongs to both spouses. The spouse holding the debt will argue that, while the vehicle was used exclusively by one spouse, it benefited the community by providing the community with multiple vehicles, which alleviated the constraints of being a single-car household.

What About Educational or Professional Licenses?

In most states, following common contract law, a spouse who supported the other spouse as they obtained a professional degree or license during the marriage may be entitled to a share of the enhanced earning ability of the educated spouse. California, however, has adopted the approach of reimbursing the supporting spouse for the costs associated with the other spouse achieving her education and/or license.

This may include any payments made toward the following:

  • Tuition
  • Textbooks
  • Fees to the College

For example, during the first three years of marriage, a husband worked to provide a living for the community while his wife attended law school. Upon graduation and passing the bar, the wife takes a high paying job at a law firm and the couple divorces shortly after. Generally, the husband would be entitled to the new earning capacity of his wife that he supported during her time in law school.

What If My Spouse Has a Pension / Retirement Benefits?

Pension benefits are only one aspect of retirement benefits that must be considered during dissolution proceedings. Today, pensions are becoming less common and are being replaced by even more intricate retirement plans. Pensions are known as defined benefit plans, where an employer contributes to a retirement plan for the benefit of an employee based upon their time of service to the company.

Suppose a wife works for a company that provides her with a pension. She worked for the company for 2 years prior to her marriage, worked for the company for 10 years during the marriage, and retired 2 years after the dissolution of marriage.

In California, the court will apply the “time rule,” determining the fraction of benefits that belongs to the community and the fraction belonging to separate property. The percentage of benefits earned during the marriage belong to the community and will be divided equitably among the community while the benefits earned outside of marriage are separate property. Using the above example, we have 14 years of service by the wife to her employer, during which time she earned pension benefits. Upon divorce, the wife is set to receive $5,000 per month in pension benefits. However, due to divorce, 10 years of pension benefits is owned by the community and the remaining 4 years is separately owned by the wife.

What If My Spouse Has a Business?

A business is an asset, and if operated during a marriage, is considered to be an asset to the community. As long as that business has developed and grown during the course of a marriage, then that growth is attributed as a contribution to the benefit of the community.

However, there are instances where determining a business’s value is difficult. Commonly, a business is valued on its assets and projected profits. But what if it is a service-based business? For example, a real estate office, accounting firm, or any non-good-selling firm. There, a valuation of the business must be performed in determining the value of “goodwill.” Goodwill is the intangible value of a business that cannot be accounted for by actual inventory or company assets, but rather the overall value of the firm.

What Happens to the Marital Home?

The issue of the marital home may first depend on whether minor children are involved. When minor children are involved, the general approach is to allow the primary custodial parent to continue residing in that home for a period of time, even after divorce is finalized.

These costs will usually fall on the occupying spouse:

  • Paying taxes
  • Mortgage payments
  • Insurance payments

It is not uncommon for the non-occupying spouse to make such payments when there is a disparity of income. When minor children are not involved, the marital home must be sold and any proceeds from the sale will be subjected to California’s community property laws.

Simplify Property Division with Our Help

While California has adopted community property laws as a means of “simplifying” the division of assets during divorce, there are many intricacies at work that require careful navigation. The Law Office of Michael R. Young is highly experienced in negotiating and working with the system to ensure that each client’s rights and property interests are secured during a dissolution of marriage. Our San Bernardino property division attorneys can walk you through every step of property divisi.

Don’t hesitate to contact our firm for a case evaluation! Call (909) 315-4588 to begin.

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