Many people know California is a community property state and that the parties share equally in the community property, but they do not know what the ramifications of this rule are. Whether you have significant assets such as real estate holdings, interests in businesses, or a professional practice, there are key questions involved in property division.
What Is Community Property?
Community property must be divided equally between the parties. Often, one party will incur significant debt during the course of the marriage and the other party will take issue with its characterization as community debt. The origin of property may have to be traced to ensure your rights are protected.
Property purchased during marriage is community property (with some exceptions). One very common example of an exception is purchases of real estate as the separate property of one spouse. Transactions of this nature have a profound effect on property division. If a party contributes separate property to the community and the parties later divorce, the contributor can often receive the separate property contribution back.
The most common scenario is when a spouse makes a down payment on a house from separate property funds. If the couple divorce, the contributing spouse can receive his or her down payment “off the top” before the parties divide the equity in the house. In order to receive the credit, the contributing spouse must be able to prove the source of the down payment contribution was separate property and there must be equity in the property sufficient to provide the credit.
In a complex property division, experienced family law attorneys are required. The help of experts in other fields such as forensic accountants, business appraisers, real estate professionals, and the like may be necessary as well, depending on the circumstances.