What California Community Property Law Means For You & Your Spouse

What California Community Property Law Means For You & Your Spouse

California community property law can seem complicated at first, but luckily you don't have to be an expert in order to understand how it will affect your marriage. If you and your spouse are planning on getting married or divorced in California, there are a few vital things you need to know about the community property laws before signing any documents or exchanging vows. Community property law means that all marital assets are split evenly between spouses, even if one spouse contributed more to their accumulation than the other.


Community Property In California

Community property is actually a system of ownership that applies to married couples in some states, including California. The distinction between separate and community property doesn't matter until the couple divorces or one dies; at that point, the survivor can claim an equal share of both types of assets.

Separate property is items such as cars, artworks, and investments purchased with money earned by just one spouse. In California, it's possible to own real estate together as joint tenants (both owners have a 50% stake) or tenants-in-common (each owner has their own percentage stake).

A tenancy-in-common is when two people don't want to put up half the price for a house, but they both want to live there. In these cases, they would agree on what percentage each owns.


What Are Community Property Rights?

Under the provisions of Community Property Rights, spouses are entitled to 50% of each other's income, profits, or gains acquired during their marriage. Income includes money earned from wages, bonuses, commissions, overtime pay, retirement plans such as pensions or 401(k)s, interest, and dividends on investments such as stocks and bonds.

Profits include any increases in the value of assets that have taken place since being purchased. Gains refer to any assets acquired through inheritance, lottery winnings, gifts, divorce settlements, or the sale of real estate. The only exception is when an individual has gifted away his or her own share.

A common misconception about Community Property Rights is that it applies to all couples in a relationship, including those who are not married but living together with a common understanding of how financial decisions will be made and split between them.

However, this isn't true. In order for one person to claim rights under Community Property Rights, they must be legally married and comply with certain state requirements (such as filing taxes jointly).


How Does Separate Property Work?

Separate property is any individual assets one party brings into the marriage or acquires during the marriage - other than by gift, bequest, devise, or descent. The following are considered separate properties:

1. Assets acquired before the marriage;

2. Assets acquired after separation but prior to divorce;  

3. Assets acquired after a judgment of legal separation if it does not include a provision awarding spousal support (such as child support) or division of assets (such as real estate).

What this means is that if one person starts their own business before they get married and makes money off that business, then that's their separate property. If someone inherits a house from their parents during the course of the marriage and doesn't live in it together, then that's also going to be considered their own separate property.

So if you buy something with your personal credit card while you're married, make sure that it is either given to both of you as joint tenants with the right of survivorship so that whoever survives will automatically own 100% of the asset.

Better yet, put all shared purchases on one bank account under both names so there can't be any confusion about what's shared property versus what's separate property. That way, neither partner can say - It was my money when in reality, it came from both people's pockets.


How Are Assets Divided In California?

California is a community property state. This means that, by default, all assets acquired during the marriage are considered jointly owned by both spouses - regardless of which spouse holds title to the asset or whether one spouse has contributed more to the actual acquisition of the asset than the other.

However, this can be modified by agreement between the two spouses in their prenuptial agreement or in a post-nuptial agreement. For example, an agreement may specify that only one spouse's name will appear on the deed of a house; or it may provide that one spouse will hold title to certain income-producing investments.


How Is Debt Divided In California?

As you know, California is a community property state, which means that all income acquired during the marriage, regardless of who earned it, is equally owned by both spouses. The only exceptions are if one spouse used their individual funds to purchase a major asset (such as a home) or if the couple agrees otherwise in writing.

In other words, there's no such thing as separate property in California. What this means for you - You will have to share any debt incurred during your marriage. If you file separately, not only will you be on the hook for paying back what each of you owes, but also for any additional debts your spouse incurs after filing for divorce.

Plus, creditors may be able to pursue either party based on outstanding debts from before or after the separation date. If you want to avoid those headaches, consider waiting until after divorce proceedings are finalized before making major purchases with credit cards or taking out loans.

Is Everything 50/50 In California?

California is 1 of 9 states that recognizes some form of community property, which governs the distribution of property acquired during the marriage. It's vital & essential to note that not everything is divided equally under this system - It only applies to assets obtained during the marriage or by gift or inheritance to both spouses.

California also allows a surviving spouse to inherit the deceased spouse's interest in a family business, while other state laws may not recognize such an interest as marital-property subject to division in a divorce decree. There are also differences with regard to who gets what if there are children from the marriage.

In general, California courts will do what they can to protect and provide for the welfare of minor children; however, different courts have different rules when determining whether a particular asset belongs to either party or their minor children.


Community property laws are complex, but they can have a major impact on how assets are distributed in the event of a divorce -or- death. As you plan ahead, consider consulting an attorney to discuss how the laws might affect your family situation. Doing so now may save you a lot of heartache down the road. Here are a few vital & essential things to consider:

? Consult an attorney now about community property laws;

? Plan for what happens if your partner dies before you;

? Consider how the laws will apply if one partner's income is higher than the other's;

? Plan for what happens if one partner decides to leave their job and start a new business;

?  Consider whether it makes sense to keep a joint checking account when one partner earns more than the other;

? Determine how much housework each person is responsible for;

? Keep separate financial accounts, as this will prevent one spouse from depleting funds that should be spent on household expenses;

Be aware of any marital settlement agreements that were signed during the marriage.

Jos Family Law