When dividing property in a divorce, it matters what state you live in. Americans live either in a “community” or “common law” property state; in the latter (which includes California), the courts decide what belongs to whom in divorce and death proceedings. In “community property” states, each spouse is an equal owner of any property acquired during the marriage. Property acquired before or after marriage would be considered “separate property” and, therefore, not subject to joint distribution after divorce.
In both community and common law property jurisdictions, the impetus is to impart fair and equitable, not necessarily “equal,” rulings. Many people still think that a 50/50 distribution is always the goal, but even in community property states, that is often not feasible.
The central tenet of community property seems straightforward. But there are several situations where couples who are divorcing may find themselves in a gray area that requires further clarification.
Tax penalties. Tax penalties can later make otherwise 50/50 or “equal” divorce court decisions anything but — in other words, one person may end up facing financial burdens that can greatly reduce any awarded benefits.
When separate becomes community. So-called “separate property” can easily partially or wholly become “community property” if, for example, you buy a house before the marriage which you later renovate using jointly-owned funds.
Length of the marriage. The duration of a marriage can affect asset distribution and spousal support. In a short marriage, for example, courts will try to leave people approximately where they were, financially, before marriage.
Unequal contributions. In community property states, a spouse is considered an equal owner of community property, even if he or she never brought a single penny into the marriage, never worked outside the house, and may have even unnecessarily drained much of the couple’s saved assets. Then again, courts may take such “waste” (called “dissipation”) into account when deciding who gets what; in some cases, offending parties may suffer some penalty–i.e., lower alimony payments.
Debt. Acquired debt is equally shared when couples divorce, something people sometimes forget about as they aggressively fight over assets.
Hiding assets. Persons who try to hide assets (e.g., delayed compensation plans, such as stock options) may subsequently face criminal prosecution, especially if a forensic accountant gets involved.
Alimony and child support. Many things complicate property distribution in divorce proceedings. Two of those things are alimony and child support – complications such as these often require a judge to exercise discretion when dividing property.
Waiting period. Most of these rights for spouses don’t kick in until the divorce initiates; in other words, in general, you can’t sue your spouse to give you a fair allowance while still married.
Prenups. While a prenuptial agreement can, in theory, protect a much-richer spouse from the potential burden of having to share a substantial asset base, such agreements can be successfully challenged/overturned, especially if fraud or a hidden asset scheme is uncovered.
If you’re going through a divorce, don’t try to sort out the property division aspect by yourself. It’s important to work with an experienced family law attorney who knows the rules in California and can make sure to safeguard your rights as you move into the next phase of life.