Community Property in California
Dividing assets in a divorce depends on the state where your divorce was filed. California
uses community property principles of dividing assets upon divorce. Property
that qualifies as community will be equally divided between the parties
in divorce proceedings. Conversely, property that is considered to be
a party’s separate property is not subject to property division.
All property the couple acquires during marriage qualifies as community
property. In contrast, property that a party acquired before marriage
or after the date of separation is considered to be their separate property
upon divorce. Furthermore, property a spouse acquires during marriage
through gift or inheritance is also considered to be their separate property
and won’t be divided upon divorce.
The kind of assets that may be considered to be community or separate property
is broad. This includes real estate, personal property, financial accounts,
intellectual property, and business interests.
Characterizing a Business
Business interests follow the same characterization rules as other forms
of property. Thus, a business that was first acquired during the marriage
will be considered a community business that is subject to division upon
divorce. Therefore, any business interest that one of the parties received
before marriage or after the date of separation will be deemed their sole
and separate property and is not subject to division at divorce.
However, business interests are not static. Businesses often grow over
the course of time. As a result, a separate property business that was
acquired before marriage but experienced substantial growth during marriage
may be attributed to community property. If, for example, community property
funds were used to fuel the business’ growth, or the efforts of
the non-owning spouse were to thank for the growth in question, such growth
may be characterized a community growth subjet to division upon divorce.
Dividing Business Interests
Dividing business interest isn’t like dividing property between a
storage space, money in a bank account, or financial investments. The
value of a business is more than just the sum of its assets and liabilities.
The spouse who was primarily involved in the operations of their business
in question has a significant interest in continuing business operations
after divorce. A court is unlikely to split business interests in a way
that gives one spouse equal voting rights for business decisions to competing
spouses, especially whrere one spouse had virtually nothing to do with
running the business in question.
In such cases, a California court could allow the owner-spouse to buy out
whatever community interest the other spouse might have in the business.
This lets the nonowner spouse cash out their community interest while
leaving the res[ponsibility for running the business with the more experienced
spouse. Alternatively, a court can order the sale of the business and
make the parties divide the sale proceeds equally between each other.
Get in Touch with Hanson, Gorian, Bradford & Hanich for Legal Advice
If you are going through a
divorce that involves substantial assets, such as publically traded stocks, retirement accounts, and small business
interests, you should seek the experienced legal advice of a divorce attorney
from Hanson, Gorian, Bradford & Hanich. We offer practical and effective
legal solutions for residents and families in Southern California with
offices conveniently located in both Riverside and Temecula. You can count
on us to zealously advocate for you and your family’s best interests.
To schedule a free consultation about your divorce, call us at (951) 506-6654 or
contact our office online today.