Readers of this legal blog know that we discuss property division regularly. In a recent blog post, we discussed how property is treated in the property division process. In this post, we will expand on the differences between separate and community property in California.
Essentially, community property refers to the marital estate, which is the estate that is split between the divorcing spouses. This estate includes everything earned or purchased by either spouse during the marriage, including any accompanying debts.
This includes your retirement and pension plans, even if those plans will not payout for decades. Conversely, you may have more debts than you know as your spouse could hide debt in their own name, even though this debt belongs to both spouses. Though, the most common debt is your mortgage on the family home.
Anything you earned, owned and debts incurred prior to the marriage or after the separation is separate property. Though, you must keep this property separate to ensure that it does not become part of the marital estate.
What about unearned stuff?
“Earned” is extremely important in this context. This is because if you did not earn it during the marriage, like in the case of an inheritance or a gift, it is separate property.
What about my car?
Often, each spouse has their “own” cars that they may have only used their own money, and it may even be in only their name. However, each spouses’ car is actually community property because each was purchased during the marriage and paid for with money earned during the marriage.
Although, this is not always the case. For example, if you purchased a car prior to the marriage, sold it and then used only the proceeds of that separate property to buy another car, then this new car would be separate property.
Sometimes, separate property can become community property when it is commingled. This often happens with retirement plans, bank accounts and big purchases. Sometimes, this can result in an asset that has both community and separate value.
For example, if you used money you earned prior to the marriage as a down payment on your family home, that equity amount is separate. The equity built through payments during the marriage is community property.