Division of Property

Division of Property Lawyers

At the end of a marriage, the couple is left with an array of items and property that has been acquired during the marriage. At the end of the marriage, obviously, the items cannot be split in two, so they must be divided between the two spouses. There are three steps that determine how property is divided after a divorce:

1. Characterization: The property must be determined as community property, separate property or quasi-marital property.

Community Property: All property that was acquired during the marriage and before the separation, other than gifts and inheritance, is classified as community property. Earnings and income from a spouse’s labor, time or skill during the marriage is also considered as community property and can include:

• Stock in lieu of salary
• Employer contributions to an employee profit-sharing plan
• Incentive stock options
• Real estate from the employer as deferred compensation in lieu of a pension
• Vacation pay or the right to receive other financial benefits upon termination of employment
• Other employment fringe benefits
• Profits from a spouse’s business (sole proprietorship, partnership or a closely held corporation).

Separate Property: Any property acquired before the marriage. The court must determine the date the property was acquired and for property characterization purposes this means when the original right to the property occurred, not when the property matured.

Property that is acquired during the marriage by ”gift, bequest, devise or descent“ is considered separate property.

Any earnings or accumulations after a judgment of legal separation are considered separate property.

Quasi-Marital Property: In the case of a marriage annulment, the California ”quasi-marital property“ law finds community property rights in favor of the spouse who has ”putative spouse“ status, meaning the spouse who was found to have good faith belief in the validity of the marriage.

2. Valuation: The property must be given a value by agreement or appraisal.

Valuation is determined based on the following processes:

• Obligation to Disclose Value: Each spouse has the obligation to fully disclose to the other spouse the full value of any property.
• Parties May Agree on Value: Each spouse is free to enter an agreement with the other spouse regarding the value of a community property. This option is the most encouraged by the courts.
• Fair Market Value: If either spouse is unable to come to an agreement using the previous two methods, the community property value is determined using fair market value. This value may be higher or lower depending on item.
• Date of Valuation: Property must be valued ”as near as practicable to the time of trial“. As property value changes as time progresses, it is required that the property value be determined based on the date of trial or as close as possible to this date.
• Proof of Value: Valuation evidence may be required by either expert testimony or the owner’s testimony.
• Comparable Sales: Value of the item may be determined by recent sales of similar items. This is commonly used during a expert testimony.
• Buy-Sell Agreement: An agreed upon buy-out price or buy-out formula for a business interest.

3. Division: The final step in the property division process, the even distribution of all property.

If the spouses are unable to come to any kind of agreement regarding any property, the court has the right to determine the manner of division in order to accomplish a net equal division between both spouses. Courts use the following methods in dividing property between both spouses:

• In-Kind Division: The court divides all assets such as bank accounts and stock shares equally between both spouses; both spouse is awarded half of the entire asset.
• Asset Distribution or Cash-Out Division: The court will distribute one or more items to one spouse, while distributing items of equal value to the other spouse.
• Division of Proceeds: The court orders an asset as sold and the proceeds from the sale are divided equally between both spouses.
• Deferred Partition by Conversion to Tenancy in Common: The court gives each spouse an undivided half of certain items (usually real estate) and the division is deferred until the property is sold and the proceeds can be evenly divided.

The division of property can be very difficult, especially emotionally, for many couples. Most prefer to avoid confrontation and make it as easy as possible, but there are always certain things that either spouse is unwilling to part with. For the best results you should hire an experienced attorney to represent you and see that all of your interests are taken care of.