What is community property?
You might know already that California is a community property state. But what exactly does that mean? In a California divorce, the Court will characterize your assets and liabilities as “community property” or “separate property” to determine how each of them will be divided. While community property can and will be divided by the court, separate property can only be confirmed to the party it belongs to. It is important to understand the difference between the two, especially since you will be asked to characterize all your property in your financial disclosures.
What is “community property”?
Generally, community property is any property acquired by a spouse during the marriage, including property outside of California. Family Code § 760. There are, of course, exceptions to this general rule, and you should consult with a family attorney to make sure you characterize your property properly when making your financial disclosures.
What is “separate property”?
Separate property is any property acquired before marriage, after separation, or during marriage by inheritance, gift or devise. Family Code § 770.
Unsure if your property is community property or separate property? Ask yourself these questions, and make sure you consult with a family law attorney to confirm you’re right about how a court would characterize your property:
Did you have a prenuptial agreement or transmutation agreement?
If there was a valid premartial or transmuation agreement between the spouses laying out how some or all of the assets and liabilities should be characterized in the case of a divorce, your agreement will control how your property is characterized.
When did you earn or buy it?
If you earned it or bought it during marriage, it is probably community property. Family Code § 760. This includes property outside of California. If you acquired it before marriage or after the date of separation, it is your separate property. Family Code § 770.
Where did the funds come from that you used to purchase it or pay down the loan?
If a particular asset or liability was paid for with community property funds, then it would be considered community property. However, if you used separate property to pay for it, or for a portion of it, then you may be entitled to reimbursement for the separate property portion. Family Code § 2640(b).
Whose name is on the title?
Property acquired during the marriage with joint title is presumed to be community property. In fact, the presumption of community property applies even when title is in only one spouse’s name. See Marriage of Dekker (1993) 17 CA 4th 842, 848 n8. This presumption can be overcome only by either a clear documentary evidence showing the property was acquired as separate property OR proof that the spouses made a written agreement that the property is separate property. See v. See (1966) 64 C2d 778, 783; Marriage of Haines (1995) 33 CA4th 277, 289-290.
Where were you living when you earned or bought it?
Any property that would have been characterized as community property had it been acquired while either spouse was in California is considered quasi-community property. Family Code § 125. Any property acquired in exchange for quasi-community property is also quasi-community property. For a California court to have authority to treat the quasi-community property as community property, both spouses must have changed their domicile to California AND legally change their marital status in California. Marriage of Roesch (1978) 83 CA3d 96,106-107.
Did you inherit it or receive it as a gift?
Property acquired as a gift or inheritance is separate property, not community property, even if it was acquired during the marriage. Family Code § 770(a).
What source of income or assets did the lender consider when lending to you?
The characterization of property acquired on a loan is determined by what the lender intended to rely on for the loan. Loan proceeds acquired during marriage are presumed to be community property, but this presumption can be overcome with a successful showing that the lender intended to rely solely on a spouse’s separate property. Marriage of Bonvino (2015) 241 CA4th 1411, 1423.
While the rules are mostly straightforward, it can be tricky to make sure your property is properly characterized. Make sure you consult with an attorney if you are unsure about whether your property is community or separate - it is important to be clear and accurate in all of your financial disclosures.