California Community Property Laws
Divorce isn’t just emotionally draining, but physically exhausting as well, especially when it comes to property division. Divvying up marital assets has all the stress of a big, cross-country move, except worse, because if push comes to shove, you can’t just mindlessly throw everything into the trailer and hope it all gets there in one piece. According to California community property law, the life you’re splitting technically belongs to both you and your spouse equally, so trying figure out a way to divide it in a way that’s fair for both parties is a delicate, precise, and stressful process.
Luckily, you don’t have to figure it out all on your own. In this article, we’ll break down the basics of California’s community property laws, including how it impacts divorce, and what you can expect when dividing up property post-marriage.
California’s Community Property Laws
First off, California is a community property state, which is a fancy way of saying that all assets acquired during the marriage belong to the spouses equally. This includes paychecks, but can also refer to physical property, and anything else you might have purchased with joint funds—regardless of whose name is on the paycheck, bank account, or title. When determining community property, anything earned, purchased, or acquired during the marriage by either spouse goes into the joint pot.
Community property laws also extend to debt acquired during the marriage, meaning whatever debts are owned by one party, are technically owned by both (again, regardless of whose name is on the loan).
California’s Separate Property Laws
Of course, people don’t usually enter a marriage empty-handed. Even poor college students living on Ramen and Cheerios can usually point to a car, bike, or laptop in their name. These items would be classified as separate property, and—since they belonged to the individuals before marriage—they would also leave the marriage with whoever brought them. This concept includes property that was purchased with separate funds—say if you sold that beat-up car to buy a nice motorcycle after graduation. Following the money backward, that motorcycle would be considered separate property, since it was purchased with funds from property you brought into the marriage.
Similarly, gifts and inheritances made out to one specific individual would also be non-divisible upon divorce—even if they were received during the marriage. And, just in case anyone is curious, California law specifically states that, as an engagement ring was technically a gift acquired before marriage, it qualifies as separate property, and would, therefore, leave with its owner upon divorce.
Dividing Community Property
Because marital property is owned equally by both spouses during the marriage, it has to be divided up equally if it ends. An easy equation to figure out if you have exactly ten pens, and can give five to each side. But how does it work when you only have one house? One lawnmower? One set of authentic, Japanese sushi dishes?
The thing is, equal ownership and equitable division don’t necessarily mean everything will be divided 50-50. We’re not splitting babies here—lawnmowers definitely won’t work as well when chopped in half. Instead, the focus of a community property split is on making sure the division is equal in spirit, so to speak. It means that each spouse will walk away with half of the total marital property value.
So, that might mean you get the sushi dishes, while your spouse lays claim to the Thanksgiving china. All you have to decide next is if you’d rather have the lawnmower or the snowblower, and what you’re willing to bargain with, if your spouse ends up wanting the same thing.
Commingled and Transmuted Property
In a perfect world, all these community and separate property labels work great. But real life isn’t perfect, and none of us are as good at keeping track of expenses as we should be. So what happens if you can’t prove who owns what? What if the separate property gets mixed into the community pot? This is where commingled and transmuted property come into play.
In California, assets that are both separate and community property are considered to be commingled property. This can be anything from a bank account that contains both separate and community funds, to real property purchased with mixed money.
For example, let’s pretend you didn’t have enough money from the sale of your car to buy that motorcycle. Let’s go further, and say the price was $1,000, but you only got $700 from your car, so you decided to draw $300 from the shared, marital pot in order to pay the reaming balanced. Now you’re good to go, but because you combined separate and community funds, the motorcycle would now be considered commingled property.
When splitting the value of commingled property, courts will try to follow the asset’s history back to its origins. If the money trail is clear, they’ll usually just divide the percentage amount accordingly. In our example, 70% of the motorcycle belongs to you outright, while 30% belongs to the marriage partnership as a whole. This means we can add another 15% ownership onto the seventy you already have (since half of all community property belongs to you, too). So, upon divorce, the motorcycle would be classified as 85% your separate property, and 15% your partner’s. In order to own it outright, you would need to find some way to make up that 15% to your spouse.
The conundrum of commingled property is a cautionary tale of why you should always keep good money records during your marriage. In our example, the percentages were pretty clear cut, but in cases where it isn’t so obvious, your motorcycle may end up “transmuting” into community property, if you can’t prove where the money came from.
At its most basic definition, transmuted property is simply property that has been “transformed” from one state to another. This is usually done on purpose, through a signed contract between the two parties (such as with a post-nuptial agreement), when couples want to change the status of a property from separate to community, or vice versa.
However, transmutation can also happen on accident. For example, if you can’t prove that the money for your motorcycle came from separate property funds, a judge might be forced to rule that the commingling of assets has transmuted whatever separate property ownership you had, into community property.
California Community Property Law Attorneys
After living together for an untold number of years, it’s understandably easy for people to slip into a routine, and stop keeping track of where their assets originated, making property division one of the most time-consuming tasks of a breakup. If you or a loved one are dealing with divorce, and have questions about how California community property laws will affect your specific situation, we may be able to help. Call us at (209) 989-4425, or get in touch online to schedule your consultation today, and let our team of experienced family law attorneys make sure your property division is handled with the utmost care it deserves.