Many people assume that in “community property” states like California, divorcing spouses each get 50% of all their combined assets. That’s not precisely the way it works. It’s more complex than that.
First, the laws vary somewhat among the community property states. Let’s take a brief look at how it works in California.
What is considered “community” property?
Only marital property is considered community property. Marital property includes most assets acquired by the spouses, either individually or together, during the marriage. These include:
- Income earned by either spouse during the marriage (including wages and other work-related income as well as “passive” income like interest and dividends)
- Property acquired during the marriage that was paid for by that income
- Separate funds used toward community assets
The last one involves something called “commingling.” For example, if a spouse used part of an inheritance or gift (which typically are considered separate property) to buy a house the couple lived in together, those funds likely would be considered community property.
That’s why it’s crucial to understand the concept of commingling before putting funds that were inheritances or gifts into a joint bank account or jointly owned property or into property that was owned by one spouse prior to the marriage. For example, if you kept a condo that you owned prior to the marriage, and you and your spouse used joint funds to redecorate and maintain it, that likely will be considered marital property in divorce.
Other important things to know about community property
For purposes of dividing marital property in a California divorce, it doesn’t matter what percentage of the funds used to acquire an asset belonged to one spouse. It’s still subject to 50-50 division. Further, it doesn’t matter whether both spouses’ names are on the deed, title or other ownership document. That’s irrelevant to community property division.
You don’t have to follow community property division law if you and your spouse reach a property division agreement of your own. That agreement does need a judge’s approval, so it can’t be blatantly unfair to one party or another. Further, a prenuptial or postnuptial agreement can let you sidestep community property division. Again, these agreements can’t be egregiously unfair to one party.
It’s a lot to think about. If you’re considering divorce or you believe your spouse is, the sooner you seek legal guidance, the better you’ll be able to protect your rights.