One of the most important elements of a divorce proceeding is the division of property. California considers most property in a marriage community property, which is divided in a particular way by the court. Keep reading today’s blog to learn more about what is considered community property and how community property is divided between spouses.
What Is Considered Community Property?
To review, there are 3 different types of property division when marriage leads to a divorce. The property is split between the spouses based on its classification. Community property is when your spouse owns a one-half interest in your regular income that does not come from any separate property. Note that this applies even if the earnings are in an individual account without your spouse’s name. Quasi-Community property is treated like community property under California law and refers to property owned or acquired in another state prior to the move to California.
On the other hand, separate property is property acquired before the marriage or after the divorce process and thus is not divided. Note that any property that was gifted or inherited during the marriage is considered separate property.
California is a state that follows community property rules, such that a couple’s property should be divided equally. In fact, California legislature defines community property as “all property, real or personal, wherever situated, acquired by a married person during the marriage while domiciled in this state.” As a result, all property that a couple acquires during marriage is considered community property in the state. A couple’s community property must be divided equally if there is no written prenuptial agreement specifying a particular division of property. In most cases, each spouse will receive half of the net community estate.
Division of Pension Plans
California community property laws don’t call for an "in kind" division of community property where spouses would need to divide each physical object. Instead, community property division in the state simply requires that the net value of the assets received by each spouse is an equal 50/50 split of the estate’s value. In some cases, one spouse might be awarded the family residence, while the other spouse receives the family business and investment real estate. What community property laws care about is that each spouse gets assets that are equivalent in net value.
Keep in mind that only community property is divided in a divorce. Separate property that a spouse owned prior to marriage or received through gift or inheritance belongs only to that spouse. The only exception would be if the separate property becomes mixed or comingled with community property, such as if a spouse owned a rental home prior to marriage but used marital funds to remodel, furnish, and maintain the home.
Note that under California laws, any interest or income accumulated in a 401(k), pension, military pension plan, or profit-sharing plan during the marriage is considered community property. However, retirement accounts will not be divided in a divorce because contributions made prior to marriage are one spouse’s separate property.
Pension plans are generally divided in one of two ways – reservation of jurisdiction or cash-out. Reservation of jurisdiction is the most common way divorcing couples handle pension plans. Under this method, the court orders that when the employed spouse retires, the other spouse will receive a percentage of each pension check. The specific percentage is calculated by dividing the years when the spouses lived together as husband and wife by the total number of years that the employed spouse has been participating in the pension plan. For example, if one spouse had 30 years of contributions into a pension plan, with 15 of those years during the marriage, the community property share of the pension plan would be 50% (15 divided by 30). Thus, the other spouse would be entitled to 25% of the spouse’s pension checks (half of 50%).
Note that under a reservation of jurisdiction, the non-employed spouse can elect to receive their share of the employee spouse's pension benefits at the earliest time that the employed spouse could retire. In this case, if the employed spouse chooses not to retire at the earliest opportunity, that spouse will have to pay the non-employed spouse what they would have received if they had retired. An attorney can help better clarify this kind of scenario.
The other method of dealing with a pension involves obtaining a “cash-out.” This is handled by an actuary, who is an expert who deals with statistical and financial evaluations of insurance policies, annuities, and pensions. By reviewing the plan description as well as the accumulations on the account of the employed spouse, the actuary can determine the current value of the community share of the pension plan so that the employed spouse will receive the pension plan in its entirety while the other spouse receives other community property assets of equivalent value.
What About the Home?
Divorces involving kids can be a little more complex to navigate when it comes to home property. It is common for the primary custodial parent to be allowed to live in the marital home with the children until the divorce is finalized. During that period, the spouse who lives in the home is still required to make all mortgage, property tax, and homeowner insurance payments when due, though the other spouse may be required to make those payments if there’s a major difference in the spouses’ incomes and resources.
In some cases, a judge may award the marital home to the custodial parent permanently and consequently grant the other spouse a larger share of the marital estate. In situations where a couple can no longer afford the marital home or there aren’t children in the mix, a judge will typically order the couple to sell the home and split the proceeds.
Seek an Experienced Divorce Advocate
If you are pursuing a divorce and have questions about property divisions, contact an attorney immediately. It can be difficult to navigate asset division, from marital earnings to pension plans to the marital home. The experienced attorneys at Claery & Hammond, LLP can provide you the legal support you need in your San Diego divorce.
Contact Claery & Hammond, LLP for a free case evaluation today.