California law concerning the division of community property in the event of divorce or legal separation is exceedingly complex. Even parties who have had short marriages will benefit from competent legal representation, and it is always wise to have an attorney help you when your marriage or domestic partnership break up is amicable. Today more than ever before people are also concerned about how debts are treated and assigned between spouses, and what to do with negative equity in homes and the potential downstream tax liabilities that sometimes flow from that situation.
The basic rule is that everything that is acquired by married persons or domestic partners from the date that the legal relation begins (date of marriage or registration of DP), to the date of separation, is presumed to be a jointly owned community property asset regardless how title is held, or even what the agreement of both parties was or what one person's undisclosed intentions may have been. When people begin to untangle their financial affairs in divorce they usually find that the law treats them as if a number of consequences were known by them when the truth is that they were rarely if ever contemplated. These consequences may tend to benefit one spouse at the time of dissolution, and perhaps naturally that spouse often wishes to take advantage of that benefit despite what may have previously been discussed and agreed. "Pillow talk" and verbal agreements have virtually no legal effect in California marital dissolutions if they are later challenged or denied.
The community property rule is riddled with important exceptions, however. There is a class of altogether different property that must be identified and distinguished termed 'separate property.' Separate property includes not only what parties bring into the marital relationship and owned prior to the date of marriage, but also consists of property acquired during marriage that comes from a gift or inheritance to one spouse or domestic partner alone. Often this becomes a disputed question of fact if the property has any significant value, especially when that outside contribution is commingled with the community property. A common example is the gift from parents that is used to buy a home, or to pay down a mortgage or credit line, or is used as a down payment on a vehicle. Not infrequently many years pass before the receiving spouse asserts a claim for reimbursement.
Other complications arise where one party deeds off a property for reasons that bear no relationship to any agreement between the spouses, as where a lender requires it in order to fund a loan. In such instances a "transmutation" occurs by operation of law so that the spouse who signs the quitclaim or other title transfer document thereby may lose his or her community property interest in the asset. However under such circumstances they may at least have what lawyers call a "tracing right of reimbursement" under Family Code section 2640 for the community property or separate property equity in the property on the date it was transmuted.
We find that the average case contains all kinds of permutations of community property questions, and this is especially true as the length of marriage increases. Our law office has the ability to help in very important ways with property divisions and is equally committed to ensuring that all assets are divided equitably.
One thing is certain, however: Parties who don't seek competent legal representation are taking a major gamble that probably will not serve them well. Making sure that all your legal rights are protected right now may have a profound effect on the quality of your life going forward.
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