Complex Property Division

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.

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Property Division and Tax Implications

Dividing property between spouses in divorce (and under certain circumstances, after marriage) results in no tax liability for either spouse. This means you can divide up property between spouses without concern that the division will be a taxable event. (If one spouse is not a citizen, different rules can apply.)

However, when you divide property, you’d better consider future taxes and the tax basis of the property in addition to its fair market value. For instance, if one spouse is awarded the family residence that has greatly appreciated over time, then that spouse may get hit with capital gains taxes. If the couple bought the house for $50,000 twenty years ago and the spouse who receives it in the divorce sells it two years later for $550,000, that spouse faces gains of $500,000 — all of which are taxable only to that spouse.

High net worth individuals with varied assets have to consider tax planning when they divorce. Another issue to remember is that spousal support (alimony) is taxable to the payee and tax deductible to the payor. But the payments must pass certain tests to be considered alimony. Whether you want the payments to spousal support to be characterized in another manner, such as property division, will depend on your particular divorce facts.

Complex Property Division Attorney in Los Angeles, CA

I have practiced law in Southern California for more than 25 years, and my highest priority has always been to put my clients’ needs first. I am willing to negotiate early, settle your case, and take your case all the way to court when needed. My unique approach has helped me receive top ratings from both Avvo and Martindale. If you have a property division matter that you’d like to discuss with an attorney, reach out to me today. I will analyze the facts and apply my strong understanding of the law to obtain the best result possible for your case.