One of the more complex aspects in the divorce process is the division of assets accrued throughout your marriage, particularly if it is a high-asset case, or where businesses or stock is involved.
California is a community property state, which means that all assets and debts acquired during the marriage belong to both you and your spouse equally. Assets include income, savings, real property (houses), vehicles, and other personal property acquired; debts accrued during your marriage can encompass credit card debt, loans, medical bills and other liabilities. These assets and debts must be apportioned between you and your spouse upon the dissolution of your marriage. Discussions on how to divide property can occur during mediation between you and your former spouse, or settlement officer conference. Often the final property agreement is negotiated by your attorneys who work closely with their clients to resolve the issues.
If an agreement cannot be reached, then putting the property issue(s) before the Court will be necessary in order to determine which party will be granted what property; the court will first take into account any pre or post-marital agreement that may have been signed. These agreements serve to protect the assets of the parties in a marriage in the event of the marriage’s dissolution. If no such agreement exists, and the parties cannot settle the matter through mediation or negotiation, the court will then hear argument and review evidence concerning the division of property and other assets in question and make orders to effectuate an equitable division.
Once the characterization (separate or community property) of the assets and debts has been determined, community property assets will be divided equally between each spouse and separate property awarded solely to the spouse who has successfully proven their separate property claim.
Real property can pose difficult issues when it comes to division and is typically reserved for trial. The issue becomes less difficult to resolve if joint funds were used to purchase the home, giving the community equal interest in the real property as well as encumbrances on the property. When this occurs, the court is likely to find that the home should be sold and the proceeds from the sale distributed equally between the parties. An issue that often arises is when one party wants to ‘buy out’ the other, by the “buyer” giving the “seller” their half of the fair market value (FMV) of the home. This generally requires agreement and cooperation between the parties to agree upon the FMV and effectuate the sale.
Things become even more complex, however, if the property was purchased by one spouse prior to marriage, while the other may or may not have contributed to mortgage payments at some point after marriage. In these cases, a determination will have to be made on how much shared responsibility the contributing spouse has for the home, how much the reimbursement claims for a spouse’s use of the property after the date of separation or for the amount the spouse contributed toward the home during the marriage.
If your divorce involves assets with a high net-worth, it may be necessary to seek qualified experts, including forensic accountants, to trace finances, determine the appropriate division and amounts for reimbursement, and other experts to provide formal appraisals of property or personal assets such as art, jewelry, vehicles, etc.
After determining character of assets, the appropriate division and amounts for reimbursement, the attorneys are more often able to determine the correct division and negotiate settlement of property.
Division of Debts
Like with the division of assets, any debts acquired during marriage are considered community property to be equally divided between spouses. Debt is, itself, a major facet of life, and anything from credit card debt to medical bills, student loans, gambling debt, mortgages and car payments, etc, can be considered in a divorce, and must be characterized in order to be apportioned.
This means that it can be vitally important to legally establish the date of separation—which is an important legal issue where attorneys with particular experience can make a significant difference and impact to the financial division.
Under California law, the following two factors need to be presented, with evidence, to prove that a relationship ended on a specific date: (1) the stated legal intent to end the marriage (i.e. you and your spouse declare that you are separated or getting divorced and (2) an act in furtherance of your intent to permanently end the marriage (which could be physical separation where you and your spouse are no longer cohabitating, or it could mean moving to a different room in the house and then taking action to not hold yourself out as married).
Physical separation is generally easy to prove. The court may decide that the decision to sleep in different rooms in the same residence is sufficient, if there are other acts taken which demonstrate the furtherance of your intent to separate. If your intent to separate permanently is in writing, the date it was signed by both parties will typically be counted as the official date of separation; if there is not a writing, but you make the declaration of your intent to separate and take an act in furtherance of your intent to separate, this can be shown to prove date of separation. As with the division of assets, any debt incurred after the established date of separation will be counted as separate property or the sole responsibility of the party who acquired the debt. Date of separation can be a complex issue, it can be unknowingly reset, thus having experienced attorneys to assist with this issue is highly recommended.