Division of property in a divorce is one of the most stressful and contested areas in the process. Couples often come into a marriage, each with some form of separate property, most frequently bank and investment accounts, retirement accounts, and/or real property. Over time, people sometimes inherit property and financial assets from family members. Does everything become joint property once you’re married? Absolutely not, but there are specific rules that govern property and its division in a California divorce. Inheritance and community property are two essential concepts in California family law that determine the ownership and distribution of assets within a marriage or upon a divorce. Oakland family law attorney Janice Cho can help you understand the complexities and nuances behind dividing property in California divorces.
Inherited Property
Inheritance refers to the property or assets that a spouse receives from an estate. In California, inherited property is considered separate property, meaning that it belongs solely to the person who inherited it and is not subject to division in the event of a divorce. It does not matter whether you received an inheritance before or during the marriage.
Suppose a spouse inherits a house from their parents during the marriage. In that case, that house remains the separate property of the inheriting spouse. The other spouse has no legal claim to the inherited property during a divorce unless the inheriting spouse combines the asset with community property or transmutes it into community property. While this may seem logical and easy to define, the reality of property division during a divorce is often much less clear-cut and subject to inevitable dispute.
Community Property
Community property is any property acquired by either spouse during the marriage, with some exceptions. Income earned by either spouse, assets purchased with that income, and debts incurred during the marriage are all considered community property. Under California law, both spouses own community property equally, regardless of who earned the income or acquired the asset. If one spouse works and earns a salary during the marriage, that income is considered community property. Suppose the couple uses that income to purchase a home. In that case, the house is also community property, even if only one spouse's name appears on the title.
In a divorce, community property is generally divided equally between the spouses. This 50/50 split is the default rule in California. However, couples can agree to a different division in a prenuptial or postnuptial agreement, a marital settlement agreement, or if a court finds a compelling reason to deviate from the equal distribution.
Commingling of Property
Typically, assets owned by either spouse before the marriage are deemed separate property provided they are not commingled with community assets during the marriage. Commingling occurs when separate property is mixed with community property to the extent that it becomes difficult or impossible to trace the source of the asset.
Suppose you inherit money from a parent or relative and deposit it into a joint bank account with your earned income. In that case, you have blended the separate asset. The inherited funds may lose their separate property character and become community property due to the commingling with the earned income account.
To maintain the separate nature of inherited or premarital assets, spouses must keep these assets separate from community property. Some ways to ensure that property is kept separate during a marriage are to maintain separate bank accounts, avoid using community funds to improve or maintain separate property, and carefully document transactions involving separate assets.
Defining Property Between You
Sometimes, a couple may enter into a prenuptial or postnuptial agreement to clarify the ownership of assets and establish their rights in a divorce. These agreements can help couples delineate which assets are considered separate property and which are community property, providing a roadmap for property division should the marriage end. By taking this proactive step, couples can feel empowered in protecting their assets and ensuring a fair division, should the need arise.
Marriage and Estate Planning
The distinction between separate and community property also plays a significant role in estate planning. In California, individuals have the right to dispose of their separate property as they wish in their will or trust. However, they may only dispose of their half of the community property, as the other half belongs to their spouse. When thinking about getting either a prenuptial or postnuptial agreement, it is important to consider your estate planning wishes at the same time as the issues can become intertwined.
How Oakland Family Law Attorney Janice Cho Can Help
By keeping separate assets distinct from community property and considering the use of prenuptial or postnuptial agreements, individuals can maintain greater control over their financial futures. Janice Cho is here to help you navigate these complexities with our expertise, skill, and compassion.
Call (510) 925-2651 when you need the assistance of an experienced Oakland family law attorney.
Comments