Dividing assets and debts can be one of the most challenging aspects of a divorce. If you need help, Sachdev Legal Group, APC is here to help. Give our San Diego property division lawyers a call today to schedule a free consultation. Our team would be happy to sit down to review your case, determine what’s most important for you, and formulate a plan to get the results that are best for you and your family.
As you might imagine, allocating assets and debt between spouses can be a major source of contention during a divorce. If a couple can agree, the process functions much more smoothly and they have more control over how to craft the agreement.
That said, part of the reason that disagreement arises is due to the many different types of assets a couple can own. There are also difficulties involved in splitting certain property. These marital assets may include:
Now, in the event that a couple cannot decide how to divide these assets, the court will do so in accordance with state law. Bear in mind that California is what is known as a “community property” state. This means that, generally speaking, all property and debt incurred during the marriage is owned equally by both spouses.
For that reason, it is important to distinguish California from “equitable distribution” states. In those states, a court will consider matters of fairness. Here in California divorce cases, however, the judge will order the community property and debts to be split evenly. This is true even if one spouse contributed more to the marriage or put more work into acquiring the property.
But, note that the court does have some flexibility in dividing the assets. For example, one spouse may be awarded the marital home in exchange for the other spouse receiving a greater portion of money in savings. This is due to the fact that it is not always possible to easily divide properties without resorting to the sale of the asset and then splitting the proceeds.
The division of property might seem like a fairly straightforward process. However, there are few things that can complicate these matters in California.
One of the first issues that a couple may encounter during property division is confusion over what assets qualify as community property. This is important because non-community property, referred to as separate property, stays with the spouse that acquired it (unless you reach an agreement that states otherwise).
That said, generally speaking, community property covers everything that you and your spouse own together. This includes all assets earned or bought during the marriage, regardless of where the purchasing income came from. In other words, this rule will apply even if only one spouse was working or otherwise generating the income used to acquire the assets.
Further, community assets include items that may have been property acquired while you were living out of state. This classification also covers any debt that was taken on during the marriage, regardless of which spouse incurred it.
Now, with that in mind, you may be wondering what is not considered community property. Unless there is an agreement to the contrary, property that a spouse owned before the marriage is separate property. In addition, assets acquired after the date of separation are separate property. It also includes inheritance and gifts made specifically to one spouse.
Once all property has been classified as either community or separate, there are a few other issues that can arise. Because these can make a divorce more complicated, it is typically best to consult with an attorney for legal advice:
In some instances, separate property and marital property get mixed together. For example, a home may be purchased from both a shared bank account and an account that one spouse owned before marriage. In order for the judge to properly divide this asset, the couple must be able to trace the source of the assets that purchased it.
This isn’t always easy and can get even more complicated if the value of the asset increased during the marriage. Further, an additional challenge would be if repairs to a community property asset were funded from separate property. For that reason, it’s best to have an attorney involved that knows how to investigate these matters. Our San Diego family law attorneys will help you determine an accurate community property valuation.
Retirement plans, such as pensions, can also complicate the division of assets. This is particularly true if one spouse was working or otherwise contributing to the plan before the marriage. These matters become even more challenging when it comes to determining the present value of the asset. Further, the fact that many cannot be cashed out without incurring a penalty may make division or transfer more difficult.
For that reason, these assets often require some long-term planning. Further, the benefits provider may also have certain steps that must be followed. An example would be requiring a qualified domestic relations order (QDRO) to transfer or divide the policy. These must be approved by both the court and the benefits provider and can be very technical in nature.
If one spouse owns a business, this will need to be dealt with in the divorce as well. Generally, the other spouse is entitled to half of the earnings from the company. However, if the business was started before the marriage, this can make valuation difficult. There is also the question of whether both spouses should continue to have an ownership interest after the divorce.
That said, value calculations are based on a number of factors. These include the nature of the business itself and whether or not any community property was used to fund its operations.
Being awarded a judgment or settlement from a lawsuit can also be difficult to allocate in a divorce. Typically, this will depend on whether or not the injury occurred during the marriage. Further, if the settlement was meant as reimbursement for funds paid out of the separate property, the spouse that made these payments is entitled to receive those amounts first.
For example, let’s say you were hurt in a car accident during the marriage that led to a settlement with the insurance company for $60,000. Now, suppose you used a bank account that you funded before the marriage to cover $25,000 in medical bills before the settlement came through. In this case, you would be entitled to receive $25,000 before the remaining $35,000 would be subject to division as community property.
Now, although community property is usually divided on a 50/50 basis between the couple, there may be instances where one spouse is penalized by getting less than an equal share. Specifically, this would be appropriate if one spouse intentionally and without authorization used community assets for his or her own purpose.
This behavior is referred to as misappropriation of assets and might include activities such as illegal gambling or drug use. It might also include negligent mishandling of community assets. Examples would be failing to pay taxes for several years or giving large sums of money to other people without the other spouse’s consent.
However, it’s important to note that things like making extravagant purchases, legal gambling, or running an unsuccessful business would not be considered misappropriation. If you are unsure whether your spouse’s behavior constitutes unauthorized use, reach out for legal representation for assistance.
Our San Diego family law firm has extensive experience with these complicated property division matters. As part of our representation, we will fully investigate your situation and, through the use of appraisers and other experts, perform an accurate valuation of your property and debt.
Next, our San Diego divorce attorneys will undergo a thorough review of the applicable law and standards for divorces in California. We will then determine the best course of action for your unique situation.
As mentioned, because marital asset divisions are not always straightforward, it’s important to have an attorney on your side that can advocate for your interests and get you the best outcome. If necessary, we are prepared to bring your case to court.
As you can see, it is critical to have a family law attorney on your side that has extensive experience with California divorce law and procedure. You can reach out to us at any point during the separation process. We will keep you informed as to your rights and advise you on what steps you can take, as well as actions to avoid. Call today for a free, no-obligation consultation.