Basic Community Property Principles
California uses the community property system of
dividing marital assets and liabilities upon divorce. When a couple gets divorced, they have an equal interest
in all assets and liabilities that are considered part of the community
estate. All assets and liabilities acquired during the marriage qualify
as community assets and liabilities unless evidence clearly indicates
that they are a party’s separate assets or liabilities. Property
and debts acquired before marriage or after the parties date of separation
constitute separate property.
Importantly, all assets and liabilities are presumed to be community assets
and liabilities. As a result, the party claiming a separate interest in
assets or liabilities has the burden of proving the separate character
of those assets or liabilities.
Separate Proceeds and The Lender Intent Rule
The community property presumption also applies to proceeds acquired under
a loan. To overcome the community property presumption regarding loan
proceeds, a party may present evidence that the lender intended to rely
on the party’s separate property regarding repayment.
So, how does one prove the lender’s intent in making a loan? Testimony
from the lender or their qualified agent speaking directly to the issue
of intent is an effective way to demonstrate intent. However, the vast
majority of commercial lenders are banking entities. As a result, direct
testimony of the lender’s intent might be easier said than done.
Identifying someone who was authorized to make the loan can be difficult,
especially if they made the loan several years before the parties’
When finding direct evidence of lender intent is otherwise impractical,
a bank expert could deduce the lender’s intent, based on their knowledge
of industry-specific standards for authorizing loans at the time or specific
lending policies of the financial institution that originated the loan.
Given the difficulty of demonstrating lender intent, people trying to claim
loan proceeds as their separate property should supplement evidence of
lender intent with other evidence, including:
- The size of the party’s separate estate relative to the community estate
- Loan documents containing the party’s signature without their spouse’s signature
- Conditions of performance expressed under the loan agreement
- The character of any collateral used to secure the loan
Contact Hanson, Gorian, Bradford & Hanich Online
Are you in the middle of a tough divorce involving complicated financial
issues related to property division or family support payments? If so,
you can definitely benefit from hiring a licensed attorney to represent
your interests and advise you on pertinent legal issues. At Hanson, Gorian,
Bradford & Hanich, our attorneys are committed to advocating for you
and your family’s best interests.
Call our office at (951) 506-6654 to schedule a consultation about your
case with one of our attorneys, or
complete our online request form today.