During any divorce, dissolution, and legal separation the couple’s assets must be divided. This can be a very complex task or it can be a very simple task depending on the size and makeup of the parties estate. The basic concept for property division revolves around the community property scheme of ownership of marital assets. In the absence of a prenuptial or postnuptial agreement here’s how community property works in a nutshell:
- All assets and debts owned by each party before marriage are that party’s separate property. Those assets and debts generally will stay separate property even after marriage or registration of a domestic partnership.
- Most assets and debts acquired after the date of marriage or registration and acquired before the date of separation will be considered community property, which means that each party owns one-half (1/2) of those assets and debts.
- Lastly, assets and debts acquired following the date of separation and before finalization of the dissolution or legal separation will generally be the separate property or debt of the party acquiring it.
- There is actually quite a bit more to California’s community property scheme but if you understand the concepts outlined above your about 90% there.
The division of property entails discovering all assets and debts owned and owed by each party and characterizing the asset or debt as the separate property of either spouse or the community property of both parties. The judges in our Courts are limited by the law in how they can divide property; however, when parties make their own agreements they can craft a property division that is right for them and maximizes the value to each party. That is where an experienced and competent attorney such as the Mesnik Law Group can be invaluable. We can help you with creative solutions and help you avoid pitfalls commonly encountered by those without competent counsel.
Complications and difficulties commonly arise in a number of property division situations. Below are several examples:
Homes, vacant land, commercial property, and investment property are frequently acquired over long periods of time otherwise known as a mortgage. When those periods of time overlap with a marriage, registration, or separation you have a situation where the asset may have a separate property component and a community property component. The California Courts have created formulas such as the Moore-Marsden formula to help determine each party’s interest in the asset. This can be a complicated task frequently requiring the use of experts or accountants.
Retirement Accounts and Pensions
Retirement accounts such as a 401(k), a 403(b), and Individual Retirement Accounts aka IRA and Pensions are also assets frequently acquired over long periods of time. However, the method for division of retirement accounts is very different than that of real property. Generally the account is characterized by when the contributions were made or when and what portion of the pension was earned before, during, and after the marriage or domestic partnership. Pensions valued by years of service are frequently divided by using the Brown Time Rule, which evaluates the ratio of service during the marriage or partnership to that before or after the marriage or partnership. Division of retirement accounts must also adhere to federal ERISA regulations. It is imperative that you hire an experienced attorney to assure you or your spouse’s retirements are divided fairly and properly.
Division of family owned businesses can be one of the most complicated and contentious parts of any dissolution proceeding. The business must be valued which in the case of closely held businesses such as a medical practice, law firm, or sole proprietorship can be an extremely difficult task. Frequently the parties’ perception of the value of the business are wildly different leading to an impasse during settlement negotiations. Experts and accountants are commonly used to help determine a fair value for the business.
Contact us for further information to help determine a fair division of your property.