When you get divorced in California, your “community property” is subject to division. You and your ex-spouse will need to decide who gets what, and if you cannot reach an agreement, a judge will decide for you.
In a California divorce, you get to keep all separate property – property that is exclusively owned and maintained by you. Your ex-spouse may claim that separate property is in fact community property and thus subject to division. You must be careful in how you handle separate property to shield these assets during divorce proceedings.
Understanding What Constitutes Separate Property
In the context of divorce proceedings, your assets will be considered either “community property” or “separate property.” Only community property will be divided in California.
Community property includes any and all assets that are obtained during the marriage. It does not matter who legally owns the property or whose name is on an asset’s title: If it was procured during the marriage, it is considered community property.
Common examples of community property include:
- Wages earned by both partners
- A house or piece of real estate purchased during the marriage, regardless of whether the property jointly owned
- A vehicle purchased during the marriage, even if only one partner’s name is on the title
- Furniture, glassware, keepsakes, jewelry, electronics, and other possessions purchased during the marriage
- Dividends of investments made during the marriage, even if they were only exclusively made and managed by one partner
- Interest or income obtained from one or both partners’ pensions and/or 401(k) plans
Separate property refers to assets obtained before the marriage and after the final legal date of separation. Gifts and inheritances given to a partner during a marriage will also be initially considered separate property. These assets must generally be insulated from community property and be exclusively maintained by a single partner.
Common examples of separate property include:
- Wages earned before the marriage that are kept in a separate, non-joint account
- Real estate and vehicles purchased before or after the marriage
- Inheritances and gifts directed exclusively to one partner
How Commingling Can Jeopardize Separate Property
In most cases, assets classified as “separate property” will remain separate property unless comingling occurs. Commingling refers to situations where separate property becomes mixed or entangled with community property. When commingling occurs, it can be successfully argued that separate property has become community property and is thus subject to division in California divorce proceedings.
To this outcome, you must be cautious in how you handle and manage your separate property. A common scenario involves one partner putting separate property funds into a joint, marital account. Once each partners’ funds mix, all of the funds in that account will likely be considered community property going forward – even if the partner tracks how much of the funds were originally separate property.
Separate property can also become community property if your partner invests work or capital into the asset. For example, say you own a car before you get married. That car is considered separate property when the marriage begins. However, when the car needs repairs, your partner takes it in for maintenance and pays for the work. Because your partner contributed capital to the asset, the car will now likely be considered community property.
To avoid transmutations of separate property, consider:
- Keeping your financial accounts separate. It is perfectly fine to have a joint marital account with your spouse, but remember that any funds you place in it will be considered community property and thus subject to division, no matter how much each partner contributes. By keeping a separate account from before your marriage began, you have a place to direct wages and maintain clear ownership of your wages and other forms of cash flow.
- Paying for all repairs and renovations with separate property funds. If you bring any vehicles or pieces of real estate into the marriage, you will want to handle all expenses with your own money. By using community property funds to maintain or improve the asset, it could be argued that your partner contributed to the asset and is thus entitled to an interest in it in a divorce.
- Insulating any gifts or inheritances. When you receive a gift or inheritance while married, its contents are still considered separate property. You must take care to preserve its classification by directing funds or assets to the appropriate accounts. If you place monetary funds from an inheritance into your joint marital account, for example, it will most likely become community funds.
If you are concerned about losing your separate property in a California divorce, our attorney at Cutter & Lax can help. Call (818) 839-2533 or contact us online to discuss your case with us.