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California Property Division
Property Distribution Laws in California

In California, the courts generally accept a fair and reasonable property division the parties agree to, but if the parties cannot agree, the property is divided by the Superior Court within the Judgment of Divorce.

California is a community property state. All community property and debt acquired from the date of marriage until the marital cut-off date is divided and distributed equally. When spouses fail to reach an agreement on their own, the Superior Court splits it for them equally.

The courts presume that property acquired by the spouses during marriage in any joint form (tenancy in common, joint tenancy, or tenancy by the entirety, or as community property) is community property. This presumption affects the burden of proof and may be rebutted by either of the following:

  • ”a clear statement in the deed or other documentary evidence of title by which the property is acquired that the property is separate property and not community property”;
  • ”proof that the parties have made a written agreement that the property is separate property.”

The court has the latitude to give one spouse an asset of the community estate in order to effect an equal division of the marital estate. The court does not consider marital fault, but in the event of economic misconduct, the court may also award, from one spouse’s share, an amount the court determines he or she deliberately misappropriated to the detriment of the other spouse.

Debts accumulated after the date of separation are treated as follows:

  • “debts incurred by either spouse for necessaries of life of either spouse or the children of the marriage for whom support may be ordered, in the absence of a court order or written agreement for support or for the payment of these debts, shall be confirmed to either spouse according to the parties’ respective needs and abilities to pay at the time the debt was incurred”;
  • > “debts incurred by either spouse for non-necessaries of that spouse or children of the marriage for whom support may be ordered should be confirmed without offset to the spouse who incurred the debt.”

Property division in divorce is described in the California Code - Sections: 2501, 2581, 2601, 2602, 2621, 2623, 2625, 2641.

Factors in Community Property Distribution

According to the California Family Code - Sections 760, 770, 772, 2550, all real or personal property acquired by a married person during his or her marriage while domiciled in this state is community property.

A prenuptial agreement can be used to overwrite equal division of property. Absent a written agreement of the spouses, the court divides the community estate of the parties equally.

Separate property of a married person, which is not included in the division of the community estate, includes:

  • all property owned by the person before marriage;
  • all property acquired by the person after marriage by gift, bequest, devise, or descent;
  • and certain rents, issues, and profits of the property.

A married person may, without the consent of the person's spouse, convey his or her separate property. After entry of a judgment of legal separation of the parties, the earnings or accumulations of each party are the separate property of the party acquiring the earnings or accumulations.

Marital Property vs. Separate Property

Marital property includes all earnings during marriage and everything acquired with those earnings. Unless the creditor was specifically looking to the separate property of one spouse for payment, all debts incurred during marriage are marital.

Separate property means gifts and inheritances to one spouse, personal injury awards received by that spouse, and the proceeds of a pension that vested (that is, the pensioner became legally entitled to receive it) before marriage. Property purchased with the separate funds of a spouse remains that spouse's separate property. Property purchased with a combination of separate and marital funds is part community and part non-marital property, so long as a spouse is able to show that some separate funds were used. Non-marital property mixed together with marital property generally becomes marital property.

Property Defined

California law defines community property as any asset acquired or income earned by a married person while living with a spouse. Separate property is defined as anything acquired by a spouse before the marriage, during the marriage by gift, devise, or bequest, and after the parties separate.

Absent a written agreement requiring a particular division of property, the law requires an equal division of the community estate. This means that from the total fair market value of the community assets, the joint obligations are subtracted, yielding the net community estate, which is divided in two. Unless agreed otherwise, each spouse must receive half of the net community estate.

The law does not require an "in kind" division of the community property, which means the physical division of each asset. The law requires that the net value of the assets received by each spouse must be equal. Thus, it is not uncommon for one spouse to be awarded the family residence, with the other spouse receives the family business and investment real estate. Each spouse receives an asset of equal value. Since the total net value of the assets being received by each spouse is equal, such a division is proper.

Ordinarily, it is not difficult to determine whether a particular asset is community or separate property. However, certain types of assets can pose unique problems in this regard, including a business that one spouse owned before marriage and both spouses worked on during the marriage, or property that belonged to one spouse before marriage but was shared during the relationship.

Valuing Property

From the total fair market value of the community assets, the joint obligations of the parties are subtracted, yielding the net community estate. Unless agreed otherwise, each spouse must receive half of the net community estate.

The Marital Home

Where minor children are involved, the primary custodial parent may be allowed to remain in the marital home. During this time, the spouse who lives there usually pays the mortgage, property taxes, and homeowner's insurance, although the other spouse may be required to make those payments if there's a significant disparity in the spouses' income and resources. Later, the house must be sold when there are no children living there or when the youngest child attains the age of majority, or as otherwise agreed by the parties or specified by the court.

Pensions and Retirement Accounts

When a married person accumulates an interest in a pension, retirement, profit sharing, or other employee benefit plan during the marriage, the part that was accumulated during the marriage is community property.

Retirement benefits vary greatly but can generally be divided into two groups:

  • Defined Contribution Plans: A defined amount of money belonging to the employee. The employee and/or the employer make defined contributions. The balance of the plan is constantly changing, but its value is definable at any given point. 401(k)’s, 403(b)’s and profit sharing plans fall into this category.
  • Defined Benefit Plans: A retirement benefit where an employer promises to pay a benefit to an employee sometime in the future, based upon some type of formula. Normally, this formula is based on the employee’s salary near the end of his or her career and the number of years he or she worked for the employer before retirement. Defined benefit plans are much more complicated to value and often require the professional evaluation of an actuary to determine exact values.

Pension Plans are divided in one of two ways: 1) a reservation of jurisdiction or 2) a cash-out. The spouse who owns the retirement plan can pay the other spouse for the non-owner spouse's share of the community interest, or the court can reserve jurisdiction to have each spouse receive a proportionate share of the benefits when they are paid.

In California and other jurisdictions, if spouses share in each other’s retirement or pension plan, a Qualified Domestic Relations Order must be completed. A QDRO is a written set of instructions that explains to a plan administrator that two parties are dividing pension benefits. The instructions set forth the terms and conditions of the distribution - how much of the benefits are to be paid to each party, when such benefits can be paid, and how such benefits should be paid.

The other method of dealing with a pension involves obtaining "actuarial evaluation." An actuary is an expert who deals with statistical and financial evaluations of insurance policies, annuities, and pensions. By reviewing the plan description as well as the accumulations on the account of the employed spouse, the actuary can determine the "present value" of the community share of the pension plan. With a cash-out, the employed spouse receives the pension plan in its entirety, and the other spouse receives other community property assets of equivalent value.

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