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Tips for Dividing Marital Property

California is a community property state. That means all property acquired during marriage, other than by gift, bequest or devise, is community in nature, and as such, is subject to equal division at divorce. All other property is presumed to be the separate property of the acquiring spouse, and not subject to division.

The process of dividing marital assets and property can be stressful. Here are some tips to speed up the process and minimize the stress:

  1. Make a list.

The first step in dividing marital property is figuring out what you have − so make a list. This list should include ALL assets and debts, whether you think they are separate property or community property. Some items will be easy to remember, but others may require some research. Don’t forget to include things like retirement accounts, jewelry, and family pets. (No matter how much they feel like family, to the courts they are “property.” For more information, see our blog post about pet custody. The list should also include all outstanding debts, such as credit cards, student loans, and taxes.

Next to each item in your list, jot down the date it was acquired. This is important for characterizing each asset and debt as separate property or community property. As mentioned above, property acquired during marriage belongs to the community. Once you figure out the date the asset was acquired, you can begin to characterize it as community or separate. Don’t forget that gifts, bequests and devises are separate property, even if received during your marriage, subject to a couple of exceptions related to how the inheritance is held and whether it was mixed with other funds/property.

While some assets may be easy to characterize, others may present more complicated issues. For example, the community may obtain an interest in property acquired before marriage by any of the following methods:

(a) Transmutation − an interspousal transfer or agreement to change the character of an asset or debt from separate property to community property or vice versa;

(b) Commingling − mixing funds that belong to one spouse with the funds belonging to the other spouse to the extent that each party’s contribution cannot be traced back to its separate property character;

(c) Contribution of Funds − enhancing a separate property asset or debt using community funds (for example, buying a home before marriage, and paying the mortgage with community funds). The contribution of separate property to a community asset also results in a right of reimbursement for the person who made the contribution; and

(d) Contribution of Efforts − increasing the value of a separate property asset or debt with the time, efforts, and skills of one or both parties during marriage.

  1. Set the value.

The second step to dividing marital property is figuring out how much it is worth. For every community property asset or debt, you want to know its fair market value. For checking and savings accounts, that means the current balance; for real property (i.e., real estate), that means the current resale value less any outstanding debts (e.g., mortgage); etc. When valuing personal property items (e.g., furniture, dishes, clothing), ask yourself how much it would sell for at a garage sale.

  1. Leave your ego, and the dishes, at the door.

The last step is dividing the community property. You and your spouse can agree to divide the community property in any manner that you wish.

Remember, if the Court is left with the task of dividing your marital property, it will do so equally. There are many methods of which the court may choose to divide the estate, but ultimately each party must be awarded an equal share. The most common methods used by the courts are In Kind Division (dividing assets by awarding one-half to each party) and Asset Distribution (assigning some assets to one party and other assets of equal value to the other party, with the option of ordering an equalization payment or promissory note at the end).

Whether you are using lawyers or mediation to resolve the property distribution, you want to keep your time and cost at a minimum. Don’t get caught up on the little things like dishes. You can protect your money and save time in the long run if you agree to sell the item and split the profits. Leave your ego at the door, and be reasonable. Instead of spending the money on fees and costs, take your half of the profit and buy a new set of dishes. The same applies to the big assets as well. While the marital home may carry with it endless memories, try to focus on closing the divorce chapter of your life, and move on to creating new memories.

If you are going through a dissolution proceeding or thinking about filing the necessary paperwork to commence a dissolution proceeding, contact Bremer Whyte Brown & O’Meara who’s experienced family law attorneys will work toward alleviating the much anticipated stress that surrounds this process.

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