What Assets and Liabilities Are Divisible Upon Divorce?

What Assets and Liabilities Are Divisible Upon Divorce?

Posted By Hanson, Gorian, Bradford & Hanich || 22-Nov-2019

Community Property in California

When a couple gets divorced in California, a court will distribute their property according to principles of community property. Under California law, the parties to a divorce case will get an equal share of community property, which is defined as any property that the parties acquired during their marriage and before the date of separation. Conversely, assets that each partied acquired in their sole name before marriage, after the date of separation, or during the marriage through gift, bequest, or devise, is considered the acquiring spouse’s sole and separate property and is, therefore, not subject to division upon divorce.

Assets That are Divisible Upon Divorce

Although the California Family Code refers to community “property” as being divisible upon divorce, the term encompasses more than just tangible assets like cars, furniture, and jewelry, to include investments, financial accounts, and even intellectual property.

The central feature that courts look to when determining issues of community property is the date that a particular asset was acquired. Moreover, all property that the parties own is presumed to be community property subject to equal division upon divorce. A party claiming that a particular asset is their sole and separate property that is not subject to division must provide clear and convincing evidence that the asset is not community property.

As a result, anything in which a party can acquire an ownership interest can be characterized as community or separate property. For example, the wages that a party earns as compensation from their employer are subject to characterization as community or separate property.

The following assets have been subject to equal division as a community asset upon divorce:

  • Compensation for work
  • Employment benefits
  • Retirement savings and pension plans
  • Royalties for intellectual property
  • Business interests
  • Lawsuit damages

Liabilities That are Divisible Upon Divorce

In general, community property is liable for debts that either spouse incurred before or during their marriage. However, one’s earnings received during marriage are not liable for premarital debts. To protect one’s earnings from premarital debts, they must be held in a separate deposit account from which the other spouse cannot withdraw and must stay free of commingled community funds.

For example, funds in a joint bank account shared by spouses can be reached to pay for a loan that the spouses received during their marriage. However, if one spouse deposits their wages into a separate bank account that the other spouse cannot access, a creditor who provided the couple with the loan cannot reach those wages to satisfy their community debt.

Importantly, a spouse’s separate property is not liable for the other spouse’s premarital debts. For instance, if one spouse receives trust income as part of their inheritance from a deceased family member, that income cannot be used to satisfy the other spouse’s premarital student loans.

To Learn More, Call Hanson, Gorian, Bradford & Hanich

Are you in need of legal advice regarding an issue concerning California community property laws? If so, you should reach out to an experienced attorney from Hanson, Gorian, Bradford & Hanich. Our legal team has what it takes to advise you on sophisticated financial issues that arise from California’s system of community property.

For an initial consultation, please call us at (951) 506-6654 or contact our office online today.

Categories: Divorce, Property Division