An issue of primary concern for couples facing divorce in California concerns the division of property. California is a community property state, meaning that any asset accumulated during the course of the marriage, unless it was acquired by gift or inheritance, is presumed to be community property and subject to being divided when you divorce or legally separate, regardless of whose name the asset is held in. This includes, but is not limited to, the following assets:
- Joint bank accounts,
- The community residence
- Other real property
- IRA’s, 401k’s and/or pension accounts
In general, each party is entitled to receive 50% of community property when they divorce. The parties are always free to enter into an amicable agreement as to how their assets and debts will be divided, but the court must still determine if the agreement is fair and reasonable. In most cases, the judge will allow such an agreement, especially when both parties are represented by an attorney. Once this agreement is approved and signed by the judge, it will become a court order. If the couple cannot come to an agreement as to how their community property will be divided, the court will make this determination for them.
The process is relatively straightforward:
- Each party should make a list of all of their assets along with their values and record them on a form called a “Schedule of Assets and Debts” (Form FL-142). This form will eventually need to be signed under penalty of perjury, therefore it is important that you are forthright and honest when completing this forms.
- Form FL-142 will then need to be exchanged between the parties and reviewed.
- Once each party is satisfied that all of the community assets and debts have been properly disclosed, the division of property may begin.
How Community Property is Divided In a California Divorce?
The California Family Code calls for the equal division of community property during divorce. This does not mean that each asset has to be liquidated and the proceeds distributed equally, but that each party to the divorce should receive equal value in assets from community property. So, if one party wants to keep the house and the other wants to the savings account and other assets, the parties can figure out how much equity is built up in the house and divide everything accordingly. Likewise, the parties can also use any debt that may be paid by one party to offset any equalization payment that should be paid to the other.
The Division Of IRA’s, 401k’s and Pensions Accounts in a California Divorce
Any amount of pension or retirement benefits that you or your spouse have accumulated during the course of your marriage and until the date of your separation is considered community property and must be divided. Any pension or retirement benefits that accumulated prior to your marriage or after you separate is considered separate property and will not be subject to division. How the pension or retirement benefits that have accrued during the course of your marriage will be divided can depend on a variety of factors. Typically, however, they will be divided on a 50-50 basis, as of the date of separation.
If each party has a community property interest in a pension or retirement plan and each plan is of the same approximate value, each part may keep their own. Otherwise, the accounts will need to be assessed together and reapportioned in an equitable manner. The vehicle used to divide pension assets between divorcing spouses is called a Qualified Domestic Relations Order (QDRO). This is a special court order that is entered separate from the judgment of divorce and that transfers a portion of your pension benefits or retirement assets to your spouse and/or a portion of your spouse’s assets to you. The terms of a QDRO must first be negotiated by you and your spouse (and your respective lawyers) then signed by a judge.
Contact An Experienced California Family Law Attorney For More Information
For more detailed advice regarding your particular situation, you should consult with and experienced California Family law attorney. Some divorces are so complicated that the parties should not attempt to determine the division of property without the help of an experienced professional.
Furthermore, couples sometimes agree to hold property differently than as a community or agree to opt out of community property laws in a prenuptial agreement. If this describes your particular situation, you should consult with an experienced California Family Law attorney if and when the characterization of that property is in dispute.