How Can I Protect My Assets in a California Divorce?

When clients first come to our firm, they are often concerned about what will happen to their assets when they get a divorce. They’ll ask, “What’s going to happen to my investments? My house? My nest egg?” Cash in bank accounts, 401k and IRAs, stocks and bonds, real estate, land, inheritances, classic cars, entire businesses, artwork and collectibles – divorce touches on all of these things, but to what extent?

Often, clients have heard plenty of horror stories...they’ve had friends who went bankrupt after a divorce. Friends or family who “lost everything” in their divorce. They’ve heard about divorce leading to absolute financial ruin, so naturally they’re concerned about how their heard-earned assets will be affected by divorce. Since California is a community property state, does that mean everything will be split 50-50? Most importantly, what can you do to avoid financial devastation?

We have good news for you. When you hire a skilled divorce lawyer, there is NO reason why your divorce should mean financial ruin. There’s a lot that a good attorney can do to protect the bulk of your assets, even if you’re a high-net worth individual.

How courts in California divide marital assets are fairly black and white – all marital property is owned equally by both spouses. However, that doesn’t mean spouses can’t negotiate something other than a 50-50 split. There’s a lot of room for negotiation, especially when the settlement can be negotiated outside of court.

Do You Have a Prenup or Postnup?

For high-net worth couples, it is very helpful to have a prenuptial agreement in place or at least a postnuptial agreement. With a prenuptial agreement for example, instead of wondering what will happen to the marital residence, the vacation home in Aspen, or the fine art collection, such issues are already sorted out in the prenup and there’s no question about how these assets would be divided.

If you’re already nearing divorce and you never drafted such an agreement, it may be too late to do it now. Here is the first thing you need to know about property division in a California divorce: All marital property is owned equally by both spouses regardless of who earned it or whose name is on the title. Separate property however, is not subject to division in a California divorce. So, what counts as separate property?

Separate property includes:

  • Property owned by a spouse before the marriage
  • Inheritances received by one spouse before or during the marriage
  • Gifs received by one spouse before or during the marriage

Separate property is not divided in a California divorce, with limited exceptions; for example, when a spouse financially contributed to the “enhanced value” of separate property during the marriage. In some instances, separate property can be classified as marital so it all depends on whether it was co-mingled with a spouse’s money or if a spouse’s sweat equity or financial contributions increased the value of separate property.

Marital property on the other hand, is subject to division in a divorce. By law, each spouse has a 50% share in marital property, which refers to all assets acquired during the marriage. Marital property includes but is not limited to:

  • Cash in bank accounts
  • Real estate
  • Investments
  • Businesses
  • Fine art collections
  • Retirement accounts
  • Automobiles, motorcycles, boats and ATVs
  • Stocks and bonds

California is one of a handful of community property states. Under California law, if the spouses do not work out a property division agreement on their own, a California judge will divide their property for them and in this case, the judge will divide the couple’s property according to California’s community property laws. Meaning, the judge will first determine which property is marital and which property is separate. From there, the couple’s marital property will be divided equally between the spouses.

If you have substantial assets, you may not want to divide your marital property in half. You may have other ideas. The only way to maintain the best possible amount of control over the process is to negotiate a fair settlement outside of court. Because once your case is forwarded to a judge, you have no say in the matter. Not only do you lose control, but you spend more money because divorce litigation is a lot costlier than a collaborative divorce.

Divorce litigation sounds intimidating because it is. You’re leaving your hard-earned assets in the hands of a judge who doesn’t know you, who doesn’t know your spouse, or what led to the dissolution of your marriage. In fact, the looming threat of divorce litigation is one key reason why you need a good divorce lawyer who will be your advocate and negotiate a fair settlement on your behalf.

When Does Court Become Necessary?

Ideally, you and your spouse will be able to negotiate a fair divorce settlement that you can both live with. However, not all divorces can be negotiated out of court and there are times when a client of ours has no other choice but take their spouse to court.

If your spouse has been physically abusive, or if they refuse to cooperate or negotiate, or if they are lying, hiding assets, attacking you personally, insulting you, escalating demands, constantly delaying things, withholding money, or denying you access to your children, chances are you have an adversarial divorce and court may be your last resort.

When you’re left with no choice but to go to court, you need a skilled divorce lawyer fighting in your corner, and our attorneys at Claery & Hammond, LLP are highly skilled at both collaborative and adversarial divorces. For expert advice, contact our firm today.

Related: Who Gets the House in a California Divorce?