Property Division in a Divorce
Community Property in California
In California, community property is property acquired during the marriage that is not an inheritance or a gift. Any property purchased with community property remains community property. Community property which produces income renders the income, community property.
Separate Property in California
Separate property in Orange County is any property acquired before the marriage or after the date of separation or property that was received as a gift of an inheritance. Any property purchased with separate property remains separate property as long as only separate property is used to purchase or maintain the property.
Quasi-community property is any property purchased in another state which would be considered community property if it had been purchased in the State of California or if the parties had been lawfully married at the time of purchase.
Transfer of Property Between Spouses (Transmutations)
During the marriage, the parties can change the nature of their property by written agreement. California Family Code sections 850-852 allow a couple, by written agreement, to transfer or “transmute” community property to the separate property of either spouse or from the separate property of either spouse to the community. In legal jargon, this is referred to as a transmutation. A transmutation is fulfilled when spouses transfer property between themselves during the marriage changing the character of the property. There are three types of transmutations;
The transfer of community property to the separate property of one of the spouses;
The transfer of separate property of one of the spouses to the community property of the spouses; and
The transfer of separate property of one of the spouses to the other spouse’s separate property.
In order for a transmutation to be valid in a divorce the written agreement must contain the necessary language to to transfer property. In addition to a written document, it is imperative that the adversely affected party sign the document willingly without coercion or duress. If it is not entered into freely, the document is irrelevant in a divorce and the property will revert back to its original ownership.
Gifts Given During Marriage
In California, the court determines how to distribute a gift given between spouses in a divorce—to the one who received it or to both equally. If a gift is awarded to either the receiving spouse, that spouse keeps it in its entirety as his or her separate property, and there is no offset to the other spouse for the value of the gift. If it is considered community property, the value of the gift is awarded to each spouse equally. In most divorces, a gift is awarded to the spouse who received it.
To determine how to award a gift given in the marriage, the court analyzes whether or not the gift is “substantial in value, taking into account the circumstances of the marriage,” California Family Code Section 852(c). The closer it resembles the parties’ station in life, the more likely that the courts will award it to the spouse that received it. The court will also ask if the gift was used principally by the spouse that received the gift. If the gift was used by the receiving spouse, the court will be more likely to award it to the receiving spouse.
Commingling Separate Property and Community Property
It is possible for parties to commingle community property and separate property. Depending on the type of property commingled, this may result in the community owning an interest in separate property or one spouse owning an interest in community property. In order to avoid this result, the best thing that spouses can do in a marriage to preserve their separate property is keep to their separate property separate. If it is not possible to keep everything separate, detailed records should be maintained.