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Guidelines for dividing assets and debt in a California divorce

On Behalf of | Jan 24, 2019 | Firm News, Property Division

California courts usually expect divorcing couples to prepare a mutually agreeable plan for splitting their assets and debts. However, some couples cannot reach such an agreement, and the court is required to step in. Couples also misunderstand the effect of the state’s community property laws. The following guidelines may help solve deadlocks about property division.

Couples who were married when neither of the parties possessed significant assets can assume that they must split their property fairly equally. This rule does not mean that every asset must be split in half; instead, the parties can achieve an equal distribution by allocation ownership of separate assets so that the end result is an equal division of their property. Assets should also be allocated on a “net” basis, that is, debts should be subtracted from the market value of the assets and the remaining amount divided equally. In allocating debt, parties should bear in mind that creditors are not obligated to accept the couple’s decision to divide and assume various obligations.

If one or both parties had substantial assets before the marriage, these assets may not be subject to community property rules. However, if these assets produced income during the marriage – say, rent generated by an apartment building – that income must be equally divided. The parties should be prepared to make full disclosure of their assets and liabilities before addressing the division of their property. If a comparison of the two disclosures reveals significant anomalies, the couple may wish to resort to financial mediation or resign themselves to a trial where the court will decide how the property should be divided.

Some couples use outside experts to assist them in valuing and dividing their property. Apart from attorneys, property appraisers and accountants are the most frequently hired experts. Attorneys can be very useful in suggesting methods of dividing property and in drafting agreements to achieve the parties’ agreement.