Dividing Property and Debt
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.
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.
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.”
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.
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.
- Debts from before marriage are the separate property of whoever incurred them.
- Loans for the education and training of a spouse are treated as the separate property of that person.
- Property that was acquired before the marriage or at any time was given specifically to one spouse by gift or inheritance.
- Income from non-marital assets derived during marriage unless the income was treated, used or relied upon by the parties as a marital asset.
- Debts and property referenced by a valid written agreement of the parties to be excluded from the marital assets.
- 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.
- Assets acquired during marriage, individually by either or jointly by them.
- 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.
- Gifts given between spouses during marriage.
- All funds accrued during the marriage in retirement, pension, profit-sharing, annuity, deferred compensation, and insurance plans and programs, whether vested or not.
- All real estate held by the parties as tenants by the entirety, whether or not acquired prior to marriage.
- All of the above applies to debts as well as assets.
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.