What Is California Community Property in a Divorce?
- California Family Code ("CFC") Section 760 defines community property by exclusion, as that property acquired during the marriage which is not separate property. Under CFC Section 770, separate property includes all property that spouses owned before marriage or acquired after the date of separation, all property acquired by gift, devise (meaning through a will or similar testamentary instrument), or inheritance, and any property that a spouse may have earned before the marriage but actually received during the marriage. In most cases, community property will include earnings of each spouse during marriage, and any assets purchased with community funds.
- Generally, community property is divided evenly between each spouse upon divorce, while separate property is retained by the party who originally acquired it. These general rules may be modified by specific agreements between the two spouses, including prenuptial agreements and agreements to change the character of the property during marriage (a process known as transmutation). California law also makes equal division of "quasi-community property": property that was acquired by a married party in a non-community property jurisdiction, but which would have been community property had it been acquired while the property was domiciled in California.
- California courts follow the "general presumption" that any property which spouses acquire or possess during marriage belongs to the community; those wishing to establish such property as separate must present evidence to the contrary. CFC Section 760 also establishes a rebuttable presumption (meaning that it may be rebutted by evidence) that any property which the two spouses acquire via credit during the marriage is community property.
- When both community property and separate property funds are commingled (for instance, in a single bank account), the commingling does not change the character of the funds. Both the funds themselves and all assets that may be acquired with those funds remain either separate or community property, depending on their source. However, establishing the fact that an asset was purchased with separate funds from a commingled account may be difficult. California courts accept two methods for doing so: the exhaustion method, which entails proving that on the date of purchase, all community assets in the account had been used to pay family or other community expenses; and the direct method, in which the claiming spouse shows that separate property was available in the account on the date of purchase and that the purchase was made with separate intent.
- The 1928 case of Estate of Clark established "tracing" (meaning, tracing the funds used to purchase assets to either separate or community sources) as an acceptable method to determine whether property was acquired separately or by the community. Difficulty can arise when both community and separate property have been used to purchase an asset (such as a house). California generally awards divided title to such an asset (or its value, if sold) in proportion to the contributions of the community and separate estates. However, determining the extent of such contributions to both the purchase price and any improvements and appreciation on the property is an extremely complex analysis.
- Certain assets are generally treated as community property in California (although exceptions based on singular fact patterns are always possible): recoveries from personal injury suits, if the cause of action arose during the marriage; stock options awarded to one spouse during marriage, even if the options should vest after divorce; and benefits of a pension earned during marriage, even if the benefits are received after divorce. Some assets (such as education of one spouse earned with community property) are not considered community property in and of themselves, but the community may be entitled to reimbursement of contributions to those assets.