A Closer Look at Community Property Law in California
As the meme above suggests, things can get really confusing when trying to figure out who gets what in the middle of a divorce. As mentioned in a previous blog post, California law defines Community property as any income, property, asset or debt (yes, even debt!) that is acquired by either spouse during the marriage. And yes, income earned by either spouse during the marriage is also fair game. Separate property is defined as anything acquired by a spouse before the marriage, during the marriage by gift, devise, or bequest, and after the parties separate. In the absence of a prenuptial or postnuptial agreement, everything acquired during marriage is split 50/50 in the event of a divorce.
Below are some frequently asked questions that my clients have:
1) But my spouse cheated on me. Does that mean that I get to keep everything after our divorce or that I will "win" in court? It doesn't matter if your spouse was having a torrid affair with your pool boy or the maid, California is a no-fault divorce state. "No-fault" divorce means that a spouse's infidelity or general douchebaginess (I hereby trademark that term) is completely irrelevant when it comes to dividing the house, dividing the assets, or assigning child support or alimony. No-fault divorce basically means that you do not need to prove that the divorce was the other spouse's fault in order to get a divorce.
2) But I made a lot more money than my spouse during our marriage. Does he/she still get half of everything? Unless the parties signed a prenuptial agreement (prenup) or a postnuptial agreement (postnup), it doesn't matter if one spouse makes $900,000 a year and the other spouse makes $100,000 a year. In the event of a divorce, both parties will walk away with $500,000 each. However, two parties can make other arrangements by writing and signing a prenuptial agreement or postnuptial agreement. For information about prenuptial agreements, click here.
3) But we kept all of our income in separate bank accounts during our marriage. That means that my spouse can't touch my money when we divorce, right? WRONG. Sorry, try again. Unless you and your spouse have a prenup stating that your income is your sole property and your spouse's income is his/her sole property, depositing your paychecks into your separate bank account does not magically transform those funds into your sole separate property. Those funds will retain their community property character and are subject to a 50/50 split in the event of a divorce.
4) But we're already married and we don't have a prenup. That's okay. It's not the end of the world. You and your spouse still have the option of writing and signing a postnuptial agreement. You can do many of the same things with a postnup that you can do with a prenup such as defining what is or is not sole separate property, what is or is not community property, and whether or not the parties want to waive alimony/spousal support. When bringing up the idea of a postnup, ask your spouse nicely though or else you'll end up on the couch.
5) What if my spouse makes financial contributions to my real estate property during my marriage? Just because a piece of real estate property is under your sole name as your "sole and separate property" does not necessarily mean that your spouse will not have an interest in the property in the event of a divorce. This is especially true if he/she makes contributions towards the down payment, mortgage payments, or renovations of the property. Doing so will allow him/her to create a right of reimbursement in case of divorce. That is why it is important to draft a prenup or postnup stating that such contributions by the other spouse will not create a right of reimbursement for the contributing spouse.
6) I don't have a prenup so can't I just put everything I want in a Will or a Living Trust? Unfortunately, it is not that easy. A will or living trust only takes effect if you pass away whereas a prenup or postnup only takes effect if you divorce from your spouse. And a document cannot be a prenup or a postnup without the consideration and signatures of both parties. It would be wise to have both kinds of documents drafted and signed.
That's all for now. Don't hesitate to contact our Firm if you have any further questions or require our legal services. Until then, keep all of this in mind before you walk down the aisle with your partner.
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