Community Property and Separate Property in a Dissolution
What property interests are considered community property?
California is a community property state. This means that, generally, all assets acquired during a marriage are automatically the property of both people in the marriage. When the marriage is dissolved, community property assets need to be split 50/50. Of course, the asset itself need not be physically split, for instance a house will not be divided. But, in the total calculation at settlement or trial, the total value of community property assets must be shared equally.
Consequently, it is important to know when property or a debt is separate or community. Community property rights begin at the date of marriage and end at separation. Family Code section 760 explains that “Except as otherwise provided by statute, all property, real or personal, wherever situated, acquired by a married person during the marriage while domiciled in this state is community property.” (Emphasis added.) The definition of separate property is found in Family Code section 770:
(a) Separate property of a married person includes all of the following:
(1) All property owned by the person before marriage.
(2) All property acquired by the person after marriage by gift, bequest, devise, or descent.
(3) The rents, issues, and profits of the property described in this section.
(b) A married person may, without the consent of the person's spouse, convey the person's separate property.
Notably, workers compensation awards and personal injury awards might be separate property, depending on the circumstances. Social Security SSDI, social security benefits, and student loans are usually considered separate property.
How can separate property become community property?
Separate property, such as an inherited house, can become community property if the person who inherited the home gifts it to the community. This is usually shown by a change of title or how the property is treated. The “transmutation” law is codified in Family Code section 850:
Subject to Sections 851 to 853, inclusive, married persons may by agreement or transfer, with or without consideration, do any of the following
(a) Transmute community property to separate property of either spouse.
(b) Transmute separate property of either spouse to community property.
(c) Transmute separate property of one spouse to separate property of the other spouse.”
How can separate property and community property be determined during a dissolution proceeding?
In complex cases, a family law attorney will need to review all the property at issue and determine if it is community property or separate property. As explained above, when and from whom the property was acquired (most important), the form of title, and how the property is treated may indicate whether it is separate or community. Where the numbers are difficult to follow, like if separate money gifts are comingled with community funds, it will be necessary to hire a forensic accountant to assist in the analysis. Ideally, both parties can jointly agree to the same expert accountant to keep expenses low. Of course, the former spouses might not agree on whether property is community or separate. If the parties can’t reach a settlement, the court will hold a trial and make the determination. Because it is often hard to predict the result of a trial and the attorney fees can be high, most dissolutions end with a settlement.
For questions about dividing property in California divorce cases, contact the Law Office of David Reagan for a free consultation. Mr. Reagan handles family law cases in Alameda County, Contra Costa County, and throughout the San Francisco Bay Area for a reasonable fee and works hard to obtain a just result.
