Tustin Division of Property Attorneys

Division of Property

California is a “community property” state. For divorcing couples, that means that unless they signed a written prenuptial agreement detailing how property should be divided in a divorce, most of the financial assets they acquired during a marriage are considered part of the property that must be divided in a divorce. This doesn’t necessarily mean each individual asset will be divided in half; rather, the value of the property that each spouse receives in a divorce should be equal. Thus, one spouse may receive the couple’s house, while the other receives investments and other property whose value equals that of the house.

Community property doesn’t just include things you bought together. It could also include income earned during marriage, retirement savings you contributed to with jointly owned money; a business that grew during the marriage; and investments that appreciated in value during the marriage. If one spouse earned an advanced degree or professional license during the marriage with financial help from the community, the community is entitled to reimbursement at dissolution of the community contribution to the other party’s education and training that substantially enhanced their earning capacity. However, the community is not entitled to the enhanced earning capacity the spouse receives due to the advanced degree or professional license.

Assets that are not community property usually include:

• Anything an individual owned before marriage that did not appreciate in value.
• Inheritance and gifts given specifically to one spouse.
• Anything acquired by exchange of separate property. That is, if one spouse bought a car during the marriage using only money earned before the marriage, that car would not be community property.

As with the division of assets, community debts and liabilities must be divided equally unless agreed or otherwise provided in the Code.

Division of property in California can be extremely complex, with implications for your retirement savings, your taxes and ultimately, your financial future. It can also be one of the most contentious and difficult parts of dissolving a marriage. If you’re divorcing and you’re concerned about ensuring that your property is correctly divided, we can help you:

• Present the best, most complete and advantageous information about the value, source and ownership of your assets.
• Ensure that debt is correctly and fairly apportioned.
• Protect assets that are not community property.
• Ensure that your interest in retirement savings or other complex investments is protected.

At Wallin & Klarich, we’ve handled division of property and other family law matters for more than 30 years. We understand that our clients come to us during a difficult part of their lives, which is why we’re dedicated to providing personalized service. We promise to pursue the best possible outcome for our clients, as aggressively as necessary. And because we’re in 33 cities across Southern California, we’re able to meet with you wherever you happen to be. For a consultation with our experienced California family law attorneys, please call us now at 1-888-749-7428 or fill out the consultation form to the right.

At Wallin & Klarich, we approach every case with the belief that the person we’re representing could easily be one of our own family members. We’ve seen firsthand how stressful legal matters can be for our clients and their loved ones. We are committed to being available to our clients at all times — 24 hours a day, 7 days a week, 365 days a year. If you are involved in a family law matter in Southern California, you should call Wallin & Klarich today for a free evaluation of your case. Call 1-888-749-7428 or fill out our online consultation form to get in contact with a legal professional today. We will be there when you call.

Preemptive Federal Law

Federal Law may supersede state property law where congressional intent to preempt is clear. In federal preemption cases, property held in the name of one spouse alone is immune from community property claims.

The following are subject to federal law:

1. Federal Savings Bonds -
2. Military Insurance Policies – Military insurance policies under the NSLIA or SGLIA programs are the veteran insured’s separate property regardless of the source of funds for the premium payments. The veteran has the sole discretion to designate the beneficiary of the policy proceeds. That member’s beneficiary designation controls the disposition of the insurance policy proceeds. However, if the military group policy has been converted to a civilian individual property, federal preemption does not apply, state law applies.
3. Federal Employee Benefits – State community property law claims against federal employee deferred compensation benefits are preempted by federal law, only to the extent conflicting community property law would do major damage to clear and substantial federal interests. Thus, California Courts may apply community property principals to federally created benefits so long as the result does not frustrate the objectives of the federal legislation.

Military retirement pay and civil service pensions are subject to governing federal statutes. However, Effective February 1, 1983, the historical preemption of state law community property treatment of military retirement pay is nullified. Therefore, state courts are fully empowered to divide military retirement pay as community property; and state court domestic relations community property division orders are fully enforceable against the military.

4. Social Security Benefits – Social security benefits are prevented by the Social Security Act and must be treated as the employee’s separate property.
5. Veteran’s Disability Benefits – Veterans disability benefits are not divisible as community property in state court dissolution proceedings. However, once they are paid, the disability benefits are subject to state community property laws.
6. Copyrights – The Federal Copyright Act does not preempt state court jurisdiction to recognize, divide and enforce community property interests in a spouse’s copyright.
7. ERISA Pensions – The Employee Retirement Income Security Act of 1974 regulates and preempts the are of employee benefit plan law. However, ERISA does not preempt the application of state community property law to the extent that state law simply creates or recognizes the existence of community interests in ERISA governed benefits, it only bars enforcement.

Federal savings bonds must be treated as the separate property of the person whose name the bonds are registered even if they were purchased during marriage with community funds. However, if a spouse transfers community property into savings bonds registered in their name without their spouses consent, it is a breach of fiduciary duty owed between the spouses and they must account to the other spouse for the monies spent.

Division of Property – Overview

One of the most heavily litigated issues at divorce is the division of property. In other words, after the couple decides to split, how does the divorce court decide who gets what?

In California, the divorce court divides assets according to community property law. The general principle in community property is that all property acquired during marriage belongs to the couple equally. Thus, at divorce, this property is generally divided 50/50. Though there are certain exceptions, most property gained during the marriage will likely be considered community property.

Separate property is any property acquired before marriage, after separation, and certain types of property acquired during marriage. Separate property remains the property of the individual spouse at divorce.

Property purchased during marriage takes on the character of the funds used to purchase it, meaning property purchased using community funds is community property, and property purchased using separate funds is separate property. This is called the tracing rule.

Also, if separate and community funds are commingled so that they cannot be easily distinguished from each other, such as a joint bank account with both separate and community funds, then the entire amount is presumed community funds unless proven otherwise.

What does all this mean? That the rules for property division at divorce can be very complicated, and you will need a Southern California divorce lawyer to help you through this process. A divorce court makes the final decision regarding the distribution of property, but the court asks the parties to help it with this decision by asking them for facts and legal argument. This is why it’s imperative that you have a Southern California family law lawyer who is trained and experienced in presenting facts and legal arguments to the court. A family law attorney is even more necessary if the other party, your former spouse, is represented by a legal professional.

If you or someone you know is considering divorce, you will need a skilled Southern California divorce lawyer to advise you of your rights and to protect your property interests. At Wallin & Klarich, we have helped people with property division at divorce for over 30 years.  Call us today at (888) 749-7428. We will be there when you call.

Division of Community Property

Under California Family Code Section 2010, in a marriage dissolution, legal separation of nullity proceeding, the court has jurisdiction to inquire into and render any judgment and make orders that are appropriate concerning the settlement of the property rights of the parties.

To give the court the power to divide the property, all property must be listed in the petition, response, or subsequent pleadings.

The parties to a marriage dissolution or legal separation are required to complete two stage declaration disclosure requirements disclosing all martial assets and liabilities before there can be an agreement or court order regarding division. In the disclosures both parties must include all assets and debts, whether they are separate or community property. This must be completed to ensure an accurate division of the property and to give both parties full knowledge of everything that is to be divided. If an asset or debt is not included in the disclosure and thus not divided in the Judgment, the family law court has continuing jurisdiction to divide the assets or debts not previously included in the Judgment.

If the parties are not in agreement as to the division of the property, with stipulation by the parties, the court has the authority to value and divide the community estate in a marital proceeding.

With a few exceptions, trial courts are bound to divide the community estate equally between the parties. However, if the parties have a written agreement or oral stipulation in open court, the parties are free to divide the community estate in any way they desire. The agreement must be based on a complete and accurate understanding of the existence of and value of the community and separate assets. The court must accept the parties written agreements and oral stipulations in open court regarding the disposition of their property. In that case, the courts only role with regard to disposition of marital property is to incorporate the disposition into the Judgment.

When the parties cannot agree and the property division issues are before the court, the court must divide the assets and debts equally. The court may not look to fault in dissolving the marriage or dividing the property. The parties may agree to waive the equal division requirement by written agreement or oral stipulation in open court. The Family Code specifies narrow circumstances in which the community assets and debts need not be divided equally.

Division of Property – How Does the Court Divide the Property?

The divorce court has significant discretion to divide community property so that it produces a net equal division to the parties. The divorce court may divide property in one of four ways:

In-Kind Division

For property that is amenable to an equal division, such as bank accounts or insurance proceeds, the court will split the amount in half and award one half to each party.

Asset Distribution

For a community asset that cannot be equally divided in its present form, the court may request an appraisal of each community asset and distribute the property so that a net equal division is accomplished. Courts generally do not favor this approach because of how time-consuming it can be, but the parties may request this type of division if several community assets are unique or hold sentimental value to a party or the parties.

Sale and Division of Proceeds

For a community asset that cannot be equally divided in its present form, the court may order the asset sold and split the proceeds between the two parties. Courts generally favor this approach if an in-kind division is not possible, but the parties may object under certain circumstances, such as a community business that both parties are willing to co-operate even after divorce.

Deferred Partition by Conversion to Tenancy in Common

The court may convert a community asset into an asset held by both parties as tenants in common, then divide the proceeds between the parties once the asset is sold. This method of division occurs most often when the community asset is a house, which usually cannot be sold immediately.

If you or someone you know is considering divorce, you will need a skilled Southern California divorce lawyer to advise you of your rights and to protect your property interests. At Wallin & Klarich, we have helped people with property division at divorce for over 30 years.  Call us today at (888) 749-7428. We will be there when you call.

Methods of Division by the Court

Generally, the courts have broad discretion to determine the manner and division in order to accomplish a net equal division. The court normally adopts one of the following approaches:

1. In Kind Division – where the court divides fungible assets such as bank accounts, shares of stock, etc in kind, where each spouse is awarded one half.
2. Asset Distribution or Cash Out Division - the court can distribute one or more items to one spouse and items of equal value to the other spouse. This method can be time consuming since it requires the court to determine the value of the assets and debts in order to accomplish a net equal division.
3. Sale and Division of the Proceeds - the court can order that an asset be sold, with the proceeds divided in proportion necessary to effect a net overall community estate. This is often the most practical and lest expensive way of dividing the assets that are difficult to value. However, it would be an abuse of discretion by the court to order that the family business by sold where both parties are capable of operating it and each wants the business.
4. Deferred Partition by Conversion to Tenancy in Common - The court can award each spouse an undivided one half interest in certain items to hold as tenants in common deferring the division until it is feasible to sell and divide the proceeds. This is most applicable to the division of a home.

Division of community assets and debts is critical and complex. Therefore, it is very important that you seek the legal advice and expertise of an experienced family law attorney. At Wallin & Klarich, our attorneys have been in practice for over 30 years and will diligently represent your interests to the fullest extent possible. Call us today at 888-749-7428. We will be there for you when you call.

Division of Property – What Property Is Subject to Division?

All community property is subject to division at divorce. In addition to the more conventional properties, such as vehicles or real estate, community property may include investments, pensions, bonuses, severance pay, businesses, bank accounts, copyrights, salaries, stock options, disability payments, worker’s compensation, life insurance proceeds, court judgments, etc.

Certain property is not subject to community property division, but to division according to federal law. This includes federal saving bonds, military insurance policies, Social Security benefits, and veteran’s disability benefits.

If you consider the amount of property you acquired during marriage, you will probably realize that a significant amount of property belongs to the community, even if it was only purchased for an individual spouse. Also, not only does community property apply to tangible assets, but to intangible property interests, such as investments and pensions. The greater your community estate or the longer your marriage, the greater need to have a Southern California divorce attorney represent you and protect your legal interests.

If you or someone you know is considering divorce, you will need a skilled Southern California divorce lawyer to advise you of your rights and to protect your property interests. At Wallin & Klarich, we have helped people with property division at divorce for over 30 years.  Call us today at (888) 749-7428. We will be there when you call.

Division of Property – FAQ’s

1. If I get a settlement from getting injured in a car accident, is that my separate property?

It depends. The determining factor is when the accident happened. If the accident happened during marriage then it is a community asset. Even if you are paid the settlement after dissolution of marriage, it is still a community property asset. It is up to the court to decide what portion the other party should get if any. The court will take into consideration the severity of the injuries, the amount of the settlement, etc.

2. I have Stock Options at work, are they my separate property?

Employee benefits, including stock options may be subject to a community property division. The community interest in the stock options will be those received between the date of marriage and the date of separation and exercisable thereafter, or received before marriage and exercisable before the parties separation.

3. My spouse and I own land in another state, how does California address that in a dissolution of marriage?

Property acquired during marriage while living in California is community property and can be divided by the trial court even though it is in another state. However, a California court’s property division cannot directly affect title to out of state property.

4. Am I responsible for my spouse’s student loans?

It depends. Even if the student loan incurred for a spouse during marriage, the student loan is ordinarily not a liability to be divided as part of the community assets. It must be assigned for payment to the spouse who obtained the education unless the court determines (i) such a disposition would be unjust given the extent to which the community benefited from the education, or (ii) that a supported spouse obtained the education, resulting in lower spousal support.

5. Can a creditor come after me for debt that was assigned to my spouse in the division?

The rights of a creditor against the property of a debtor are not affected by assignment of the debt to the nonobligor spouse in the property division. A creditor, who is not paid, may seek collection out of the debtor’s property. However, the nonobligor spouse’s property, separate and former community property, can be reached by creditors after the property division only if the debt was assigned to the nonobligor spouse in the property division judgment.

6. If I inherit a home and my spouse and I live in that home prior to our separation, does my spouse have a claim to the home?

No. A home that is inherited is your sole and separate property.

7. How does the court divide community debt?

Generally, community debt is distributed equally between the parties, just like community property. It does not matter if one spouse has management control of the property, i.e., if the community sets up a business run by one of the spouses, if the business goes into debt the creditor may attach community assets.

8. Can parties agree during marriage to change the character of property from separate to community, or vice versa?

Yes. A party can agree to change the character of the property, but the agreement must be in writing and signed by the party whose interest is adversely affected. Agreements to change the character of property are called transmutation agreements.

9. Can parties agree prior to or during marriage not to divide their property according to community property law?

Yes, parties can agree not to divide their property according to community property law, but courts closely scrutinize these agreements to ensure their validity. The courts wish to protect parties from being coerced into signing a prenuptial or postnuptial agreement waiving valuable rights, so courts will scrupulously examine these agreements to make sure that they are fair and were entered into voluntarily. Consult an attorney for more information.

10. If I know I’m going to divorce my spouse, can I give away or sell community assets for a nominal price to a friend or family member then take back or repurchase these assets after the division of property is finalized so that my spouse doesn’t get it?

No, this is a fraud and courts do not tolerate this behavior. The parties have a fiduciary duty to each other to manage community property assets. This duty continues beyond separation and the commencement of a divorce action, and terminates only at the dissolution of marriage and division of property. By depriving your spouse of property to which she has a legal right, you are committing a fraud.

If you or someone you know is considering divorce, you will need a skilled Southern California divorce lawyer to advise you of your rights and to protect your property interests. At Wallin & Klarich, we have helped people with property division at divorce for over 30 years.  Call us today at (888) 749-7428. We will be there when you call.