Division 7 of the California Family Code contains the statutory language relating to dividing community property in the San Diego Family Courts. The law is designed to be straightforward and simple to understand. However, in practical application these “straightforward” rules can be very difficult to understand and apply to a particular case for a variety of reasons.
Our San Diego property division attorneys at Wilkinson & Finkbeiner know the importance of understanding community property division law cannot be understated. If your attorney does not understand the fundamental concepts of how property is actually divided, or if your attorney cannot adequately handle complex property division cases, you should contact our office today for a private consultation. We provide a consultation for property division issues and will help you understand how the court may deal with your specific case, and we will provide you with options that you will easily understand.
San Diego Division of Assets Resources
- Community Property and Title Presumptions
- Separate Property
- Determining Marital Property
- Issues Determining Separate Property
- Valuation of Community Property
- Misappropriated Property
- Personal Injury Proceeds and Community Property
- Property Located in Another State
- Division of Retirement Accounts, Pensions, Stock Options
- Preliminary Declarations of Disclosure
- Determining the Character of Property
- Date of Separation
- Business Interests and Valuation
- Deferred Compensation
Community Property and Title Presumptions
Title Presumption. Property acquired during marriage that is held in joint names between a husband and wife or domestic partners is presumed to be community property in nature under the law, and includes property held in title as community property, joint tenancy, tenancy by the entirety, and tenancy in common. The only way to rebut the presumption that property acquired in joint names during marriage is to show the title document for the property which contains a clear written statement that the property is not community property but is the other party’s separate property, or a separate document containing a written agreement between the parties concerning the character. This important rule is set forth in California Family Code 2581.
This section is extremely important in California Family Law and divorce matters, because if property is acquired in joint names during marriage, even though it is separate property in character, the property is presumed to be community property. Here is an example: Let’s assume a husband and wife marry in 2000. In 2005, the husband’s parents pass away and leave an inheritance to him. Normally, the property that is passed from the husband’s parents to the husband would be separate property. However, assume for purposes of this example that the property passed is given to the husband and wife’s name. In this example, the inheritance will likely be community property in character because neither exception to the Family Code 2581 section applies.
Community Property Presumption. Community property is all property acquired during marriage by the parties that is not separate property. This includes property that is only titled in one party’s name. Typically, it doesn’t matter whether property that is community in character is titled jointly or in just one spouse’s name.
Separate Property
Separate property is property that is brought into the marriage by a party, property acquired after the separation of the spouse’s, income received by a party after the separation of the parties, or property acquired by gift, bequest, devise, or inheritance.
What is Considered Marital Property?
Our San Diego property division lawyers and specialists will assist you with every issue surrounding valuation (including procuring the advice of valuation experts including realtors, personal property appraisers and appraisers) and distribution of marital assets, including dividing marital or quasi-community property such as the following:
- Family residence
- Other real estate holdings including investment properties and rental units
- Business ventures, including closely-held businesses and S-Corporations
- Stock options and deferred compensation such as pensions
- Retirement plans (401(k), IRA, pensions, military, PERS, etc.)
- Collectible items, including antiques, coin collections
- Insurance policies and insurance proceeds
- Inheritances, gifts, devises (although these might likely be separate in nature)
- Personal property, including furniture and electronics
- Some intangible things people believe are property are not, including goodwill, creditworthiness, and unvested pension benefits
Identifying Separate Property When Property is Commingled
Perhaps the most difficult issue with division of property upon the divorce of parties is how the court will deal with property that is of mixed character, meaning that it is separate property but has a community property component and therefore the non-owning spouse has some interest in the property upon divorce or legal separation. The most common scenarios involve situations where one spouse brings real property into the marriage but pays for various associated expenses (like a mortgage) with community property money, where one spouse commingles his or her separate property with community property, and where a spouse brings a separate business interest into the marriage but continues to work on or in the business during marriage.
When real property is brought into the marriage and then the community pays certain expenses, the most common method to value the community’s interest is to look at the Moore Marsden formula, which takes into account the payments toward mortgage principal and appreciation.
When separate property businesses are brought into the marriage and then the owner spouse continues to operate the business during marriage, the most common method to value the community’s interest is to look at the two valuation methods known as the Pereira method and Van Camp method. These methods value the community’s interest by assigning a reasonable rate of return on the separate investment, or by assigning a reasonable salary on the owner spouse’s efforts during marriage.
Valuation of Community Property
During most divorce proceedings it is necessary to value items of community, separate or mixed, property. This may be done by testimony in court. Either party may testify based on his or her personal knowledge of the item, through a party’s research using tools such as Kelly Blue Book, or through expert testimony or reports.
Either party may offer expert testimony regarding the value of an asset or obligation. Alternatively, courts may appoint an expert pursuant to Evidence Code 730 to provide the court with a written valuation of an item of personal or intellectual property, or business interests. Such an appointed expert’s report is submitted to the court upon agreement between the parties, or upon the motion of either party, and is subject to cross-examination by either party.
Typically, in proceedings involving the division of large community estates, valuation experts can be extremely helpful. For example, experts may be appointed to value items of personal property including jewelry, artwork, or antiques. Real estate salespersons and appraisers can provide valuable information regarding the value of real property.
For example, if the parties own a real property family residence in San Diego that is worth $400,000 as of the party’s date of separation but is worth $450,000 as of the date of the party’s divorce trial, which could occur years after the case is filed, the court will value the property at $450,000. The court is permitted to allow an alternate valuation date if one party files a motion requesting such an alternate valuation date, and the facts require using the alternate date.
Depending on the circumstances involved in your matter, consultation with an expert attorney in the early stages can be an invaluable tool in the preparation of the overall litigation strategy.
Misappropriated Property
Property that has been determined to have been deliberately misappropriated by one party may be awarded to the other party entirely. For example, if a wife changes title to a bank account to her name alone in an attempt to exclude the husband and the community from these monies, the court has the power to award all the money taken by the wife to the husband.
Personal Injury Proceeds and Community Property
Personal injury proceeds that are acquired during marriage due to one party’s injury are the subject of special division rules. Here is how the court divides personal injury proceeds that are received during marriage:
- Step One: The court must analyze when the party’s injury occurred to determine if the proceeds, even if actually received after the parties’ separation, would be community in nature but for these special division rules set forth in Family Code 2603.
- Step Two: When the parties divorce and the court is given the task of dividing community property, the court will be obligated to assign the injury settlement proceeds to the injured spouse, unless an exception applies.
- Step Three: The court may consider whether the injury proceeds were too commingled with other community property so that they are no longer distinguishable. In these cases, the injury proceeds will be divided equally as community property.
- Step Four: The court may consider the economic needs of each of the parties and determine that it would be unjust to assign the personal injury proceeds to only the injured spouse.
- Step Five: Even if the court determines that it would further the interests of justice to give some of the personal injury proceeds to the uninjured spouse, the court must still provide at least half of the monies to the injured spouse.
Property Located in another State
Property located in another state that is acquired during marriage may be divided by the Family Law court in San Diego if the property was acquired during marriage. Such property is called “quasi-community property” because it would be community property in nature if it was located in California, but since it is located in another state it is still treated like community property for purposes of division.
Division of Retirement Accounts, Pensions, Stock Options
In many circumstances, stock, stock options and retirement accounts such as IRAs, 401(k)s and pensions are difficult to value and divide upon divorce. The reasons are many and include the fact that most often retirement accounts are difficult to ascertain the present value. These assets cannot be liquidated without significant penalties and tax consequences. Stock, stock options and restricted stock units are also difficult to divide because only one spouse receives these assets as employment compensation and it is difficult to value them because they are associated with the variable stock value of the company. They are also given as compensation on a varying schedule, so they are not regularly recurring in the same amount.
For more information about division of community property, call our office today for a confidential consultation. We are happy to help.
Preliminary Declarations of Disclosure (Family Code 2100-2113).
A divorce lawyer’s first step in analyzing a case is to review and organize the Income & Expense Declaration and Schedule of Assets and Debts forms, which must include accompanying statements and is filled out by both parties during the “disclosure” process. Our family law specialists provide this form to all new clients immediately so they can begin to formulate the list of assets and debts to complete the form in a timely fashion. This speeds up the likelihood of prompt resolution to the case so that parties can reach an expeditious settlement, or the case moves forward through various hearings more quickly. Parties are required to update and augment the form during the course of the divorce. The Schedule of Assets and Debts form contains a complete list of all assets and debts owned by the parties, including both community and separate property. Since the disclosures are signed under penalty of perjury, it is important that the form be completed honestly and completely.
Assessing which assets are community properties and which assets are separate property can often be a difficult undertaking. We have the experience and understanding to assist you with characterizing such assets and determining the best course of action to divide properties in a divorce case. Many times we use the services of a financial planner or tax professional, including CPAs, to assist in securing the best strategy for the ultimate division of assets and debts. The California Family Code has very detailed provisions relating to characterization and division of property resulting from a marital relationship. Some properties may be of a mixed character, both community and separate. There are also increasingly technical and relevant appellate cases that interpret these Family Code sections. Hiring an experienced San Diego County divorce lawyer at Wilkinson & Finkbeiner, LLP will help form the best strategy for your case. We service all geographical areas of San Diego County, California, and litigate in the family law courts located in downtown San Diego, Chula Vista, El Cajon, and Vista.
Characterizing Property and Preliminary Issues
Your San Diego property division lawyer’s analysis of your case involves determining the character of property and discussing whether any outside influences may apply to such characterization. The following are questions you should consider answering and immediately informing your attorney of, if any of these apply or may apply to your case:
- Whether the parties entered into a premarital agreement
- Whether the parties entered into post-nuptial or community property transmutation agreement after the date of marriage
- How title is held
- Whether either party has a right to reimbursement of separate property
- Whether either party deeded property to the other during marriage
- Whether a breach of fiduciary duty claim exists resulting from transactions between the parties during marriage
- Whether community property was contributed to acquire separate property or pay down separate mortgages
Determining the character of property can be a highly technical and time-consuming endeavor. Property can be community, quasi-community, separate, or combination (mixed) in character. Quasi-community property means property acquired outside the State of California that would be community if it had been acquired within the State. Our attorneys are experienced in analyzing property and determining the nature of property according to the law. Time of acquisition of an asset or debt is an important initial question. Assets and debts acquired during marriage are presumptuously community in nature. Assets acquired before marriage and by gift, bequest, devise or inheritance are separate in nature, and generally include the increase in value, or appreciation, of those properties. Of course, there are exceptions to these general rules, such as where assets are commingled or transmuted. While these concepts may seem quite straightforward, in most cases the characterization of assets is very complicated.
Date of Separation
The date of separation is a legal term with significant importance. The date of separation occurs when spouses physically separate from each other and one spouse subjectively intends to end the marital relationship and does an act to objectively manifest his or her intent. The date of separation is important in all marital dissolution and divorce cases because the acquisition of assets or debts after the date of separation by either spouse will be considered their separate property. For example, contributions to pension plans, earnings, purchases of vehicles and other assets acquired post-separation are separate property. Importantly, post-separation acquisition of debt is an important issue in many divorce matters. For example, credit card charges by one party after the date of separation are assigned to the acquiring spouse, even if the debt was incurred on a credit card in joint names.
Business Interests and Valuation
San Diego Divorce cases involving the valuation and division of business interests can be extremely complicated not only because businesses may be inherently complicated to value, but because self-employed spouses may cause litigation to be more confusing or protracted due to child support or spousal support issues.
There is no solid valuation rule for the courts to apply to valuing business interests. Of course, the financial records of businesses including tax returns, profit and loss statements, balance sheets, customer invoices, financial investments, and so forth are important pieces of information. Of significant concern is the type of business, number of employees, and market share of the business.
Generally, courts apply either the marketable (fair market value) rule or investment value rule to arrive at a valuation figure. Other standards of value are not prohibited.
Deferred Compensation
Deferred compensation assets in marital dissolution proceedings can be divided by the court if they are community or partly community in character. Deferred compensation includes pension plans, government (including military) pensions, and stock options for example. Experts are often needed to assist in valuing these assets.
Often it is prudent practice to file a joinder motion to ensure that the plan administrator is cordoned into the family litigation when a deferred compensation package exists and is under the family court’s jurisdiction.
Finally, many deferred compensation assets are divided in divorce proceedings using the Time Rule, and a specific order is created to effectuate the division of such assets. The specific document utilized by parties is referred to as a Qualified Domestic Relations Order, or QDRO.
Contact a San Diego County Property Division Lawyer
For further information or to discuss the valuation and division of your marital assets, or to determine if an asset is considered marital property, we invite you to schedule a confidential consultation with an experienced San Diego property division lawyer by calling us at (619) 284-4113.