Division of Community Property
California is what is known as a "community property" state, which means that upon divorce, the parties' assets and debts acquired during the marriage, commonly known as the community estate, will be presumptively divided equally between the parties. However, this does not mean that each asset and each debt will be split exactly in half. Rather, the parties and/or the Court may assign assets and debts in whole or in part to either party, as long as the net final distribution is equitable. If the assets and debts cannot be divided equally, then the party receiving the lion's share may have to make a payment to the other spouse to equalize the distribution. This payment is commonly known as an "equalization payment". Therefore, regardless of who receives what asset or debt, absent an agreement to the contrary, the outcome will be an equal division of the marital estate.
Pending the dissolution, automatic temporary restraining orders are in effect against both parties, as shown on the Summons form that accompanies the Petition for Dissolution of Marriage. In part, these orders prohibit the parties from transferring, encumbering, hypothecating, concealing, or in any way disposing of any property, real or personal, whether community, quasi-community, or separate, without the written consent of the other party or an order of the Court, except in the usual course of business or for the necessities of life.
Each spouse is a "fiduciary" of the other. This means that each spouse bears the highest duty of disclosure at all stages of a divorce and must responsibly manage any asset within the community estate. For example, if one spouse breaches his or her fiduciary duty by hiding a community asset during a divorce proceeding, that spouse risks losing 100% of the asset, not just his or her community share. The hiding spouse also risks payment of monetary sanctions and payment of the other spouse's attorney fees.
If after separation, a spouse pays from his separate property the community debts, such as the community credit cards or mortgage, the paying spouse may be entitled to reimbursement from the community estate. Also, if a spouse has the exclusive use of a community asset, such as the house, that spouse may have to pay rent to the community estate.
During a divorce, often parties must trace assets going back in time to determine the separate nature of property acquired by one of the parties during the marriage. Often, a skilled forensic certified public accountant needs to be retained by a party as an expert to achieve a desired result. If a spouse is able to successfully trace property back to its original separate property state, then he/she may be entitled to reimbursement from the community estate.
Division of community property is a complex area involving many issues. Competent legal representation is essential to the proper division of community assets and debts.
For more information and a consultation with T. Elizabeth Fields please call (310) 860-7661.