Community Property vs. Separate Property: Which Is Which?
One of the primary considerations for any couple contemplating a divorce is how their property will be divided. While the question seems rather simple on its surface, it can become fiendishly complicated, as most couples own some property as individuals and other property jointly as a couple. Before negotiations on property division can begin, you must determine which is which. To do this, California law splits all property into “separate property” and “community property.” The term “property” includes real property, personal property, income, debts, pensions, businesses, life insurance policies, and anything else that has value.
Separate property is property that one spouse owns in his or her own right as an individual. It includes:
- Property owned before the marriage
- Property acquired after the date of separation
- Inheritances or gifts from third parties received by the spouse during the marriage
- Rents, profits, and other income earned from separate property
- Property that the spouse purchases with his or her separate property
Separate property remains the property of the spouse who owns it during the marriage. So long as that property is kept separate during the marriage, it is typically not subject to division upon divorce.
The law treats a marriage as the joining of two individual persons into one legal “community.” Therefore, any property that either spouse acquires during the marriage is considered to be owned by that community (i.e., jointly). This includes:
- Wages earned by either spouse during the marriage
- Property purchased by either spouse with money earned during the marriage
- Financial obligations either spouse accumulates during the marriage
- Contributions to either spouse’s pension plan made during the marriage
- Businesses started by either spouse during the marriage
In community property states like California, each spouse owns one half of the community property, which is then typically divided equally upon divorce.
What about Commingled Assets?
The line between separate property and community property is not always clear. In some cases, property can become partially separate property and partially community property through “commingling.” This can occur in several ways. For example, commingling can occur when one spouse owns a home before the marriage but then uses marital funds to pay the mortgage or make improvements, which add to the value of the house. In that case, the house is separate property, but the increased equity in the house is community property. Commingling can also occur when a spouse makes contributions to his or her retirement plan both before the marriage (separate property) and during the marriage (community property). Division of commingled assets in a divorce can be especially tricky and normally requires the assistance of an attorney.
Contact our Orange County Property Division Lawyers for More Information
Property division in a divorce — especially for high net-worth couples — can be extremely complex and often acrimonious. To ensure the most advantageous outcome possible, you should seek the assistance of counsel to represent your interests during a divorce. To get started, please contact our Orange County property division lawyers by calling us at 949-474-0800.