California is in fact a community property states, but it is important to understand what that means and how it affects you and your divorce.
There are two types of property: (1) separate property and (2) community property.
Definition of Separate Property:
Separate Property is defined as “all property owned by the person before marriage, all property acquired by the person after marriage by gift, bequest, devise, or descent, and the rents, issues, and profits (in other words, the money an asset makes) of any item of separate property.” (Cal. Fam. Code § 770 (2022).
Definition of Community Property:
On the other hand, Community Property is defined as “all property, real or personal, wherever situated, acquired by a married person during the marriage while domiciled in California.” (With certain exceptions.) (Cal. Fam. Code § 760.)
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So, what does that really mean? Let's break it down!
All property, real or personal, wherever situated, means any property located anywhere. (Real property includes things like homes, land, and mortgages, while Personal property includes things like cars, furniture, credit card debt, and student loans.)
Acquired means how did the person get the property? Was it by gift, by purchase, or from working? If it was by gift, then it is not community property; it is instead separate property (this includes inheritance). However, if it was purchased during the time of marriage or gotten by working, then it is acquired “during the marriage.”
By a married person during the marriage, simply means, was it during the time the parties were married and not before marriage or after separation.
While domiciled in California? (Domiciled means living in the state of California as the parties primary address.) So, if the parties were domiciled in California but vacationing in New York, it is still part of California’s community property rules.
So why does this matter?
The general rule is that upon divorce, community property is equally divided between the husband and the wife. This is because each spouse has a ½ present, existing interest in the community property. If the property is community property, upon divorce, ½ of the property goes to the Husband, and ½ of the property goes to the Wife. If the property is one spouse's separate property, the entire separate property stays with that spouse.
A common question we see is, can separate property become community property during a marriage?
The simple answer is it depends. Absent a transmutation agreement expressly changing separate property into community property, what likely happens is "commingling".
What is Transmutation?:
Transmutation is when one or both spouses expressly, in writing, change the characterization of property. That means property (an asset or debt) can go from being community property to separate property or separate property to community property.
The key for transmutation to be effective, it must be in writing, signed by both parties, and it must detail the property being "transmuted" and it must be clear that the property is changing characterization.
What is Commingling?:
Commingling is easier to understand and more common. This is when the property’s original owner mixes the separate property with the community property. A simple example is when one party has a bank account that they opened prior to marriage and then continues to direct deposit their paycheck into that account while married. In that example, because the money in that account was acquired prior to marriage, it is considered separate property; however, the direct deposit that goes into the account during the marriage is considered community property. So now that bank account has both separate property funds and community property funds in it.
If you caught that, yes the income from employment is in fact community property, even though it may be going into a separate property bank account. (The only way to avoid this is if the parties have a prenuptial agreement specifying income as separate property.)
How To Avoid Commingling:
Simply do not mix community property with separate property. Keep the two separated.
Book A Consultation to Further Discuss:
We at Wells-Gibson Family Law, APC have experience regarding handling community property and separate property funds. If commingling is involved, it is often a complex issue to trace the funds to determine whether they are separate property or community property funds. Regardless, we have the experience and knowledge to help you through the process.
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