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Understanding California’s Community Property Laws

February 10, 2021 — by John Conger
Tags: Divorce Division Of Property

Model house held up by stacks of coinsWhen a couple divorces, all of the assets that they share need to be divided. This can be one of the most contentious aspects of a divorce. Understanding divorce laws in the state a person resides is important, because they have a direct impact on a divorce settlement.

California is one of several community property states. Divorce attorneys from Shore, McKinley, Conger & Jolley, LLP help their Stockton and Walnut Creek, CA, clients understand California’s community property laws, and what it means for their divorce.

What Is a Community Property State?

A community property state is one that views all the property, wealth, and other assets that a couple acquires throughout the duration of their marriage as communal property. Under the law, communal property belongs equally to each spouse. Assets that are subject to community property laws include:

  • Houses
  • Investment properties
  • Automobiles
  • Retirement and investment accounts
  • Businesses

How Are Assets Divided in a Community Property State?

Because the state views marital assets as community property, divorce laws dictate that they are divided equally between the two spouses.

Obviously, physical assets like a home, furniture, or automobiles cannot be split in half. However, community property laws do not require an “in kind” division of assets, meaning that each item needs to be shared. Instead, community property laws ensure that each spouse receives an equal share of the couple’s net community estate.

Calculating the Net Community Estate

To calculate a couple’s net community estate, the value of all the assets the couple acquired during their marriage is added together (including property, bank accounts, investment and retirement accounts, and any businesses). Next, the couple’s debts are calculated in the same manner. The sum of the couple’s debts is subtracted from their assets to determine their net community estate.

Each spouse is entitled to half of the net community estate, but the specific way that the wealth is divided can vary based on specific needs. For instance, one spouse may be awarded the marital home, while the other is awarded investment property or other assets that are equal in value to their half of the home. As long as the final division of assets is 50/50, it is considered a proper division.

Are My Personal Assets Protected?

Community property laws only apply to marital property, or those assets that are acquired during marriage and are shared between the two spouses. This means that any separate assets are protected.

Separate assets include property or wealth that one spouse acquired prior to the marriage, or gifts or inheritance that were given solely to one spouse.

Are There Any Exceptions to Community Property Laws?

The only exception to California’s community property laws are marriages with an existing prenuptial agreement. If a prenuptial agreement has been signed by both spouses and it is found to be valid, marital assets will be divided as dictated by the prenuptial agreement. Any assets that are not covered by the prenuptial agreement are subject to community property laws.

Learn More About California’s Property Laws

If you have more questions about California’s community property laws, the divorce attorneys at Shore, McKinley, Conger & Jolley, LLP would be happy to provide you with answers. To get in touch with our legal team, send us a message online or call our Stockton law firm at (209) 477-8171.