In the United States, there are two methods for dividing marital property in a divorce: equitable division and community property. While the majority of states use the equitable distribution method, California is one of a handful of states that uses the community property model. What does community property mean? The Internal Revenue Service (IRS) explains it best:
“The theory underlying community property is analogous to that of a partnership. Each spouse contributes labor (and in some states, capital) for the benefit of the community, and shares equally in the profits and income earned by the community. Thus, each spouse owns an automatic 50% interest in all community property, regardless of which spouse acquired the community property. Spouses may also hold separate property, which they solely own and control, but the law in the community property states does not favor this.”
Community vs. Separate Property
In a California divorce, only “community property” is subject to division. Separate property is NOT divided. So, what differentiates community property from separate property?
Community property is all assets and cash acquired during the marriage regardless of who earned the money or whose name is on the title. In contrast, separate property includes:
- Property acquired by one spouse prior to the marriage.
- Gifts or inheritances received by one spouse during the marriage.
In some cases, if a spouse contributed (work or capital) to the increase value of separate property, then that spouse may have a 50% interest in the increased value of the asset.
Do We Have to Do a 50/50 Split?
No, not necessarily. In a California divorce, couples can enter into their own settlement that deviates from the 50/50 model as long as it’s reasonable and fair. However, if the couple cannot come to terms on a property settlement agreement, a judge will have to step in and he or she would divide the couple’s marital assets (shared property) according to California’s community property laws.
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Related: California’s Community Property Laws