One of the biggest challenges of a California divorce that doesn’t involve children is the division of property (any asset that can be bought or sold). There is a significant amount of confusion surrounding the differences between community and separate property. This stems from the fact that California is a community property state where any property or debt made by either spouse during the marriage belongs to both people. After learning that, some people may mistakenly believe that California does not recognize any property as separate, but that is untrue.
What is Separate Property?
This is fundamental because separate property will not be divided during divorce. (Mixing separate assets with community ones is commingling, and we will go over its impact later in this blog.) Even in California, if you acquired an asset before you were married, then it is separate property.
However, what happens if you purchased a rental property or another business before marriage? Although you did this before marriage, you likely generated income from either when you were with your former spouse. The income you gained from the rental property continues to be separate even if you receive it during your marriage—but you cannot commingle the funds with community property. For example, putting the rent money into a bank account that you share with your spouse.
Any gifts you receive are also not considered community property. Inheritances are an extension of this as well. Large inheritances may be exempt from being shared, but they could factor into how much money you owe in spousal support. Lastly, any assets you acquired after you were separated or were identified in a valid prenuptial or postnuptial agreement are separate too.
When Separate Becomes Community
Commingling assets occur when separate property gets mixed in with a marital asset. This can develop an incredibly complex issue, and it may even warrant the need to hire a forensic accountant. Imagine that you and your spouse owned homes before being married. You kept yours and rented it out. As mentioned earlier, this is separate property. Your spouse, however, sells their house and uses the proceeds as a down payment on the new home that the two of you will share. (Their down payment is also considered to be separate property.)
You and your spouse then make mortgage payments together, and you use some of the money from your rental property to make the payments. Is your rental money still separate? If your spouse made the down payment with separate funds, how will the equity in the house get divided? This is just one example of how complicated commingled funds can be, but your attorney will navigate these challenges for you.
Contact Your Family Law Attorney
The family law attorneys at The Grey Legal Group, APC, will guide you through the issues you will face during your divorce. This applies to child custody, move-away requests, and property and debt division. Contact us today to speak to skilled lawyers who understand how to help you through the divorce process.
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