The division of assets and debts can be one of the most complicated – and contentious – parts of any divorce. The determination of what constitutes community and separate property can be extremely difficult when, as is often the case in divorce, property is invested with powerful emotional significance, and when the nature and value of the property itself is not straightforward.
California is one of nine states that separates property into two classes, community and separate, and California law requires a determination of whether a given asset qualifies as community or separate property. The distinction is crucial, and the parties do not always agree on an asset or debt’s classification. Under California law, it is presumed that all property acquired during marriage is community property and owned equally by the spouses. Similarly, assets acquired with the labor or earnings of either spouse during marriage are also presumed to be community property. However, there are exceptions to that simple rule, including, for example, property obtained by gift or inheritance.
Unfortunately, not all assets lend themselves to simple characterization. The division of certain assets, such as pensions and stock options, involves more complex considerations and may require the input of an actuary or forensic accountant.
Even when the parties agree that an asset is community property, however, and it should therefore be divided equally, their agreement may not extend to the value of that asset. Some values are straightforward, but others, like the value of a closely-held business, leave a great deal of room for interpretation and differences of opinion. In those cases, it is important for litigants to work with an experienced family law attorney.