One of the most complicated aspects of divorce is dividing the property and debts. The California courts recognize that property and debt division can be so complicated that the cost of making a financial mistake is so great, that divorcing spouses should always speak with a divorce attorney before filing papers.
If you and your spouse own a home, have significant assets, or owe a significant amount of debt, it’s even more critical that you speak with a lawyer before filing the papers.
California is a Community Property State
According to the Internal Revenue Service (IRS), there are nine (9) community property states in the United States, including: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin.
Under the principals of community property, each spouse has contributed labor (and sometimes money) into the marriage and therefore each spouse automatically has a 50% interest in the marital estate, otherwise known as community property.
Under California’s community property law, each spouse is equally entitled to the community assets and equally liable for the community debts, regardless of which spouse’s name is on the account or asset.
Examples of community property (marital property):
- Stocks
- A business or patent
- Life insurance policy with cash value
- Automobiles
- A home
- Furnishings
- Cash in bank accounts
- Retirement accounts
Ideally, you and your spouse will reach an agreement about how to divide your community property, which is usually all assets acquired during the marriage until the date of separation.
Separate property is generally limited to assets and property acquired before the marriage, inheritances and personal injury awards, and assets acquired after the date of separation.
If you and your spouse reach your own agreement about dividing marital property and debts, the court will still need to issue a formal order which finalizes these issues.
This doesn’t necessarily mean that you’ll have to go before a judge. Often, a couple will reach a property settlement agreement and the judge will merely need to sign off on it.
Until the judge signs off on your agreement, the property and debts acquired during the marriage belong to you both equally, even if you have already split up and are living in separate households.
To learn more about property and debt division in a California divorce, contact our office to meet with an experienced Los Angeles divorce attorney for free.