There is a strong presumption under California law that assets and debts a couple accumulates during marriage are community property. California law also provides that property spouses acquire before divorce but after the date of separation is separate property. The date of separation is not necessarily the date one spouse moves out of the marital home. Instead, it is the date that one spouse decides to end the marriage, and it requires some act of physical separation combined with other actions clearly demonstrating that the spouse has decided to end the marriage.
Whether you handle your own property division or a court handles it for you, there are three crucial steps to the process:
- determine whether the property (or debt) is marital or separate
- agree on a value for marital property, and
- decide how to divide the property.
The spouses—or the court if they can’t agree – generally assign a monetary value to each item of property. Appraisals can help a couple determine the value of real property as well as items like antiques or artwork. Retirement assets can be very difficult to evaluate and may require the assistance of an actuary, C.P.A., or other financial professional.
Spouses can divide assets by assigning certain items to each spouse, by allowing one spouse to “buy out” the other’s share of an asset, or by selling assets and dividing the proceeds. They can also agree to hold property together even after the divorce. Although continuing to hold property together isn’t a very attractive option for most people, since it requires a continued financial relationship, some couples agree to keep a family home until children are out of school. Others may keep investment property, hoping that it will increase in value.
The couple must also assign all debts accrued during the marriage, including mortgages, car loans, and credit card debts, to one of the spouses. Couples dividing debts should be aware that their separation agreement or divorce order is not binding on creditors, who may continue trying to collect a community debt from either spouse. If a debt is assigned to one spouse, the other can ask the court to put a lien on that spouse’s separate property as security for payment of the debt. However, it’s a better practice to try to pay off all the marital debts when the divorce is finalized—if you are selling the family home or one spouse is buying the other out, there’s often a refinancing of the house loan that provides an opportunity to do this.