Most states have equitable distribution laws that require marital assets and liabilities to be divided fairly in a divorce, but California is a community property state. This means that when family jaw judges are called upon to decide these matters because divorcing spouses have not been able to reach an agreement at the negotiating table, they generally must divide marital estates equally even if doing so will lead to an unfair outcome.
The marital estate
The marital estate is all of the assets and liabilities that a married couple own together. Assets that are commonly divided in a divorce include real estate, vehicles, art collections and investment portfolios. Debts that could be divided include student loans, installment loans and credit card balances. A family law judge in California will presume that everything a divorcing couple owns is community property, but that is not always the case.
Separate property
Assets are not divided in a California divorce if a spouse can show that they are separate property. Assets that were obtained or debts that were incurred before a spouse marries are considered separate property and not subject to property division, and so are inheritances and gifts received during the marriage. Personal injury settlements are also separate property. However, assets that would normally be considered separate property can become part of the marital estate if they are comingled with community property. This could happen if community funds are used to maintain or improve them.
Prenuptial agreements
California’s strict community property law can sometimes lead to an unfair outcome in a divorce. Spouses who wish to decide for themselves how their assets should be divided can draft prenuptial or postnuptial agreements. If they do, they should ensure that they disclose all of their assets during negotiations and work toward an agreement that is basically fair.