How is marital property divided in California?

“I’m worried that my spouse will try to hide assets from me.  How can I be sure I get a fair share of the business and other assets?”

California is what is known as a “community property” state. This means that the parties’ assets and debts acquired during the marriage, commonly known as the marital estate, will be presumptively divided equally between the parties. However, this does not mean that each asset and each debt will be split exactly in half. Rather, the parties and/or the Court may assign assets and debts in whole or in part to each party, providing that the net distribution is equitable. If the assets and debts cannot be divided equally, then the party receiving the lion’s share will then have to make a payment to the other spouse to equalize the distribution. This payment is commonly known as an “equalization payment.” Therefore, regardless of who receives what asset, the outcome will be an equal division of the marital estate.

Pending the dissolution, automatic temporary restraining orders are in effect against both parties as shown on the Summons form that accompanies the Petition for Dissolution of Marriage. These orders prohibit both parties from transferring, encumbering, hypothecating, concealing, or in any way disposing of any property, real or personal, whether community, quasi-community, or separate, without the written consent of the other party or an order of the Court, except in the usual course of business or for the necessities of life.

In addition, each spouse is a “fiduciary” of the other. This means that each spouse bears the highest duty of disclosure and must responsibly manage any asset within the community estate. For example, if one spouse breaches his/her fiduciary duty by hiding a community asset during a divorce proceeding, that spouse risks loosing 100% of the asset, not just his/her community share. The hiding spouse also risks monetary sanctions. Furthermore, if after separation, a spouse continues to pay the community debts, such as the community credit cards or mortgage, the paying spouse may be entitled to reimbursement from the community. Also, if a spouse has the exclusive use of a community asset, such as the house, that spouse may have to pay rent to the community.

During a divorce, often parties must trace assets going back in time to determine the separate nature of property acquired by one of the parties during the marriage. If a spouse is able to successfully trace property back to its original separate state, then he/she may be entitled to reimbursement from the community estate. Property division is a complex area involving many issues. Competent legal representation is essential to the proper division of community assets and debts.

T. Elizabeth Fields, Esq., is the founder and Principal Attorney of the Law Offices of T. Elizabeth Fields in Beverly Hills. A Certified Family Law Specialist, she recently co-authored an article with Kathyrne L. Clark for  Orange County Lawyer Magazine.