Dividing Property and Debt

dividing property and debt during divorce

Determining Date of Separation

California uses the date of separation as the essential date for determining property interests for the purpose of dividing property and debt during divorce. Property acquired by a spouse after the date of separation is considered to be that spouse’s separate property, while property acquired before the date of separation is community property.

Income, Debts and the Date of Separation

In California, when considering dividing property and debt during divorce, the assets owned by the spouses can be community or separate property for the purpose of the divorce. It is important to set aside what assets (or liabilities) are separate assets for each spouse. The divorce court is required to set apart each spouse’s separate property but shall divide the community property and liabilities between the spouses.

determining date of separation

California’s Legal Test To Determine Date of Separation

If the date of separation is unclear or the parties disagree, the court will look at two different tests to determine the separation date: an objective test and a subjective test.

To answer the objective test, the court will determine when you started living apart from each other. That usually happens when one of you moves out of the family home. In today’s tough economic times, however, that is no longer an option for some, because it’s often too expensive to maintain two separate residences. Even if spouses are still living in the same home, there are other ways to establish physical separation, even if the parties are living under the same roof.

As the California Courts put it, “Our conclusion does not necessarily rule out the possibility of some spouses living apart physically while still occupying the same dwelling. In such cases, the evidence would need to demonstrate unambiguous, objectively ascertainable conduct amounting to a physical separation under the same roof.”

Physical separation is not enough to show that you are separated. Some people are living separate from each other for extended periods, but do not intend to end their marriage. That intent is the subjective part the court will consider. At what point did one or both of you think that the marriage was over? When did you decide you no longer wanted to stay married? The court will look at your conduct toward each other to see when the marriage “ended.”

The combination of findings from each of these tests will be used by the court to establish the date of separation. This date will then be used going forward throughout the divorce process for the purpose of dividing property and debt during divorce in California.

California courts by law are required to distribute community property assets equally between the parties unless there is justification for an unequal distribution.

Community, Separate and Mixed Property – Dividing Property and Debt During Divorce

Married couples often have a mix of separate property, community property and property that has become a mix of both. The following information will provide some understanding of how California law and the court may look at the different types of property and how they will address dividing property and debt during divorce or legal separation.

Separate property belongs to just one spouse. Separate Property includes:

  1. Debts from before marriage are the separate property of whoever incurred them.
  2. Loans for the education and training of a spouse are treated as the separate property of that person.
  3. Property that was acquired before the marriage or at any time was given specifically to one spouse by gift or inheritance.
  4. Income from non-marital assets derived during marriage unless the income was treated, used or relied upon by the parties as a marital asset.
  5. Debts and property referenced by a valid written agreement of the parties to be excluded from the marital assets.
  6. With a few exceptions, income, accumulations and debts of either spouse that are acquired after the date of separation are their own separate property, whether or not a divorce action has been filed.
Community Property assets are defined as all assets acquired by either spouse subsequent to the date of the marriage and not specifically established as separate property of either spouse. Community property belongs to both spouses equally, no matter who actually earned it. Community Property Assets include:

  1. Assets acquired during marriage, individually by either or jointly by them.
  2. Any enhancement in value and appreciation of non-marital assets resulting either from the efforts of either party during the marriage or from the contribution to or expenditure thereon of marital funds or other forms of marital assets.
  3. Gifts given between spouses during marriage.
  4. All funds accrued during the marriage in retirement, pension, profit-sharing, annuity, deferred compensation, and insurance plans and programs, whether vested or not.
  5. All real estate held by the parties as tenants by the entirety, whether or not acquired prior to marriage.
  6. All of the above applies to debts as well as assets.
If you mix separate and community property together you may have created a situation that is difficult to unravel. In order to sort out community property from separate property, you must be able to trace it–that is, show very clearly where certain money came from and how it was spent. If this happens, dividing property and debt during divorce can become complex, requiring expert evaluation and assistance.

As you can see, in contested divorce proceedings, the date of separation can be very important. The classification of property also is instrumental in deciding how property and debt is divided. Understanding these issues can be very overwhelming. They are key factors in marriages of high profile couples who have a long term marriage and millions of dollars in assets. It is important to understand that most couples going through divorce do not have to be burdened with the technical aspects of this part of California law. Most couples agree on their date of separation and are usually able to work out a division of property that everyone is happy with. This agreement is memoralized in a Marital Settlement Agreement which both parties sign.

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