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What is Community Property in California?

You often hear terms being thrown around like community property and separate property.  What exactly does this mean and how does it impact a married couple in California? Before we can get into the differences between community property and separate property, it is useful to get a background on the difference between community property jurisdictions and common law jurisdictions.

Community Property vs Common Law Jurisdictions

All states in the United States follow one of two legal systems when it comes to property ownership between spouses: common law or community property.

In community property states, such as California, any assets acquired or income earned after the date of marriage is categorized as community property. This includes property that is acquired even under just one spouses’ name.  Separate property is defined as property acquired by a spouse before the marriage, during the marriage by gift, devise, or bequest, and after the date of separation.  If you do not have any agreements in place when you get married (such as a prenuptial agreement), then assets and income acquired during marriage will follow the property laws of California and be generally be categorized as community property.

In common law jurisdictions, as a general rule property acquired during marriage, if it is titled under one spouse’s name, will be considered the separate property of that spouse. Now that does not mean that the stated property will automatically belong to the spouse who’s name it is under upon a divorce; but this is the presumption that it creates.

How is community property divided in California?

California law requires that the community estate be divided equally if there is no written agreement regarding a particular division of property.  This translates to a mathematical formula where the joint obligations of the parties are subtracted from the total fair market value of the community assets, which then yields the community estate.  Each spouse must receive half the of the net community property estate unless an agreement to the contrary exists.

The law does not require that each physical object needs to be divided.  What is required is that at the end of the dissolution, each party receives an equal amount of the net value of the community property assets.  (Please note that the parties can waive equalization however upon a divorce in some circumstances.)

Typically it is not difficult to ascertain whether an asset is separate or community property. The timing of the acquisition or the transaction is the most important factor to consider.   However, there are complex situations that arise where a more in-depth analysis is needed to determine if a property is community property, separate property or quasi-community property.  For example, if there is a house that was owned by one spouse prior to marriage, but during the marriage the community contributed towards the mortgage payment and improvements, then there is likely a community interest in the property, even though the house was separate property.

How are pension or employment benefits divided?

Generally speaking, when a spouse accumulates an interest in a retirement, profit-sharing, pension, or other employment benefit plan during the marriage, the portion that was accumulated during the marriage is community property and is subject to division in the dissolution. The portions that were contributed to the plan before marriage or after the date of separation are separate property and therefore not included in the division.  There are a few ways that pensions are divided as they can be a more complicated asset to divide in a divorce.

Sanjay A. Paul is a California licensed attorney and owner of Dream Law, a Los Angeles based law firm that focuses on Family Law and Immigration matters. He can be reached at (626) 325-0770