Kimberly Madigan

The attorneys at Madigan & Lewis, LLP have decades of experience dividing assets in complex divorce cases.  In this article, we will provide a simplified overview of the characterization, valuation, and division of assets to help guide you as you contemplate separation or divorce.

California is a no-fault, community property state. 

With some limited exceptions, assets acquired by a spouse during marriage, except by gift or inheritance, are presumed to be community property and usually divided equally by agreement of the parties or by a family law judge following a trial.  Community property includes the earnings of each spouse during marriage and assets acquired with those earnings.¹ 

When you are separating or getting a divorce, one of the biggest issues you will need to resolve is the division of assets and debts.  Married people are not required to split their assets equally.  They have the ability to negotiate and agree upon an unequal division of assets, if they both think it is fair.  In some cases, married people may have previously agreed to and signed a prenuptial or postnuptial agreement governing the division of assets and debts upon divorce.²  Even if you are able to work out a property settlement agreement with your spouse, it is important to consult with a qualified family law attorney and understand the basic legal rules of property division as those rules will inform your negotiation.

When analyzing a property division issue, the first question we look at is whether the asset in question is divisible. 

Not all assets are divisible.  For example, in a notable case involving John McTiernan and Donna Dubrow, a Hollywood married couple, the appellate court agreed with John that Donna was not entitled to half of his enlarged earning capacity on account of his elite reputation as a movie director.³

Second, we must identify your date of marriage and date of separation.  The date of separation can be a big issue in some cases if spouses do not agree on the date and it has a material impact on the asset division.  For some people, the date of separation is the date on which they moved out of the family home, which is easy to determine.  For others, it is the date on which they informed their spouse (by words or actions) that the marriage was over and acted consistently with that intent.  Any subsequent periods of marriage counseling or reconciliation can muddy the waters and increase the likelihood of litigation regarding the date of separation.⁴

Third, we characterize the asset by looking at the date on which the asset was acquired – before the date of marriage, during the marriage or after the date of separation.  Again, assets acquired by either spouse during marriage are presumed to be community property unless they were acquired by gift or inheritance.  Generally, separate property is any of the following:

1. Property acquired by a spouse before the date of marriage;
2. Property acquired by a spouse after the date of separation;
3. Anything purchased by a spouse with separate property money or earned from a spouse’s separate property (e.g., rent from an investment property acquired by a spouse before marriage); and,
4. Gifts or inheritances.  

If you do own separate property, it belongs only to you, provided you did not give it to your spouse, change the asset’s title, or transmute the asset.⁵  

Fourth, we must value the asset.  In some cases, it may be necessary for our office to retain the services of a qualified appraiser or forensic accountant to value the asset.  It is not uncommon for two spouses to disagree on the value of a valuable asset and argue over the valuation date or competing valuation reports.  In appropriate cases, we can avoid costly disputes by appointing a neutral or joint valuation expert.  

Finally, as long as the resulting division is equal, the trial court is vested with broad discretion in dividing community property to ensure that an equitable division is reached.  It should be noted that courts will often use more than one method in dividing assets (e.g., divide some assets in kind and award others by the asset distribution method).⁶

You should also be mindful of the potential tax consequences associated with the division of assets. 

Most property transfers that occur as part of a divorce settlement are tax-free.⁷  However, not all assets are created equal; some may have hidden tax consequences.⁸  For instance, you may elect to keep and sell certain stocks that have gone up in value since they were purchased, resulting in capital gains taxes.  Similarly, it is important to work with a Certified Divorce Financial Analyst (CDFA), Certified Public Accountant (CPA) or other qualified professional before deciding to buy out your spouse’s interest in the family residence so that you can evaluate whether it is a good financial investment for you to make.  The spouse who decides to keep the family residence in the divorce and sells it in the future will be solely responsible for the costs of sale and any capital gains tax liability.  These tax consequences are sometimes overlooked.

Examples of marital property and debts that may be divided during your divorce include the following:

• Closely-held businesses and business interests
• Real estate, including family homes, vacation homes, and commercial real estate
• Bank and investment accounts
• Stock in privately-held companies or public companies
• Retirement accounts, including 401(k)s, pensions, and IRA’s
• Equity compensation, including restricted stock units (RSU’s), performance stock units (PSU’s), and stock options.  
• Private equity interests
• Carried interest and management fees
• Cryptocurrencies and tokens
• Vehicles, boats, and yachts
• Club memberships
• Home furnishings
• Pets
• Artwork
• Jewelry
• Intellectual property
• Life insurance policies
• Credit card debts 
• Secured loans and unsecured loans

For more information, reach out to Madigan & Lewis, LLP, experienced Silicon Valley divorce lawyers who can discuss your situation with you and help you decide the best path forward.  

¹It is a common misconception for clients to believe that if they deposit their community property earnings into a separate bank account titled in their sole name that the money belongs to them.  

²The validity of the prenuptial or postnuptial agreement may become a contested issue in your divorce case.  Accordingly, any prior agreements will be reviewed closely by your family law attorney.  

³Marriage of McTiernan & Dubrow (2005) 133 Cal.App.4th 1090.

⁴See section 70 of the California Family Code.

⁵Transmutations are governed by California Family Code section 852 and outside the scope of this article.  In short, any agreements between spouses to change the character of an asset must be in writing and clearly state the intention of the spouses. 

⁶Practice Under the Cal. Family Code (Cont. Ed. Bar 2022) Property, § 5.85, p. 190, citing Marriage of Cream (1993) 13 Cal.App.4th 81, 89.

⁷See section 1041 of the Internal Revenue Code.

⁸Woodhouse and Guillen, Divorce & Money (13th ed. 2020) pp. 33-34.

This is an excellent article on Gray Divorce by Carol R. Hughes, Ph.D., LMFT!  One in four couples over the age of 50 (or 25%) will be divorced as opposed to 1 in 10 in 1990.  

This article was originally posted here.

We have seen these rising numbers in our own practice.  As noted by Dr. Hughes, the reasons are variable.  As divorce professionals, we have to educate our clients about the impact of Gray Divorce on adult children; their grief and loss is often overlooked.

In 2004, the American Association of Retired Persons coined the term “gray divorce” in its published study about divorce at midlife and beyond. In 2012, researchers Susan L. Brown and I-Fen Lin at the National Center for Family and Marriage Research published their study of the U.S. divorce rate. It indicated that between 1990 and 2010, the divorce rate for U.S. married couples over 50 doubled and more than doubled for married couples aged 65 and older. 

Today, one in four persons who divorce in the U.S. is over 50, contrasted to less than one in ten in 1990. Half of the U.S. married population is aged 50 and older. Brown and Fin projected that, even if the divorce rate for this population remains constant over the next two decades, by 2030, the number of persons aged 50 and older who would divorce will grow by one-third. They named this phenomenon the “gray divorce revolution.” 

Why Is the Gray Divorce Revolution Happening? 

There are numerous reasons for the meteoric rise in gray divorce over the past thirty years. In Brown and Fin’s Council on Contemporary Families article (2021), one reason is what they call the “divorce echo effect.” Often older persons have divorced and remarried. Research has long indicated that second and third marriages have higher rates of ending in divorce. Those who have previously divorced are more likely to divorce again if they are unfulfilled or unhappy in their subsequent marriage(s). 

But Brown and Fin report that the breakup rate of older couples’ first marriages is also increasing. More than half of gray divorces are couples in their first marriages, including more than 55 percent for couples married more than 20 years. Their research indicates that many of these couples have not had contentious marriages but grown apart over the years — the so-called “empty shell” marriages. They also found no more “empty shell” marriages than in previous decades, but more older persons are unwilling to stay in them. 

The Quest for Personal Happiness and Self-Fulfillment

The late 1960s and 1970s ushered in focus on personal happiness and self-fulfillment. The Harvard Study of Adult Development is one of the world’s most extended studies of adult life, following the lives of two groups of men for more than 80 years. Psychiatrist George Vaillant, a former director of the study, said, “When the study began in 1938, nobody cared about empathy or attachment. But the key to healthy aging is relationships, relationships, relationships.”

The current director of the study Dr. Robert Waldinger says, “It wasn’t their middle-aged cholesterol levels that predicted how they were going to grow old. It was how satisfied they were in their relationships. The people who were the most satisfied in their relationships at age 50 were the healthiest at age 80.”

People ages 50 and older who initiate a divorce echo the findings of this Harvard study. They want something more and different. In the late 1960s through the early 1980s, when divorce became widespread, they came of age. Many of them grew up experiencing their parents’ and their friends’ parents’ divorces. They are more likely to have married as young adults, divorced, and later remarried. Some have little or no interaction with their spouses. Some have lived for decades in marriages with conflict. They ask, “Is this all there is?” and report feeling lonely and disconnected from their spouses. “Staying in this shell of a marriage is killing me” is a common refrain. They hope that pleasure, contentment, and joy await them as they move into the next stage of their lives (Hughes, Psychology Today, 2021).

Shifting Cultural Attitudes about Marriage and Divorce

Attitudes about marriage as a lifelong institution have shifted. Gallup Polls in 2006 and 2020 reflect this shift, finding in 2006 that 54 percent of Americans thought it was “very important” for couples who plan to spend the rest of their lives together to legally marry, while in 2020, only 38 percent thought so. And divorce has become more socially acceptable. Gallup Polls in 2001 and 2021 support this, indicating that in 2001, 59 percent of Americans considered divorce “morally acceptable,” while in 2021, 79 percent considered divorce so.

Longer Life Spans, Women in the Workforce, and Initiating Divorce

Americans are living healthier and longer lives, so they are less likely to stay in unhappy, unfulfilling marriages when they expect to have another 20 or more years of life ahead.

By 1970, 40 percent of married women participated in the workforce (Janet Yellen, Brookings Institute, 2020). Harvard University’s economist Claudia Goldin calls the timeframe from 1970 to the early 20th century “the quiet revolution,” noting that during this time frame, young women in their late teens changed their career expectations to include long, continuous careers that marriage and children would not cut short. Women began to see their professional selves as important as their families. These shifts allowed married women to be less financially dependent on their spouses.

Michael Rosenfeld, an associate professor of sociology and researcher at Stanford University, says, “Women seem to have a predominant role in initiating divorces in the U.S. as far back as there is data from a variety of sources, back to the 1940s.” He found that married American women reported lower levels of relationship quality than married men and initiated 69 percent of divorces. The UCLA Promotes Settlement

How Does Gray Divorce Affect the Adult Children?

As the divorce rate for adults over 50 soars, so does the number of adult children experiencing parental divorce. Their parent and family relationships are rupturing. Yet, they report that no one understands what they are experiencing nor acknowledges what they are feeling. They feel alone.

In their book Second Chances, Wallerstein and Blakeslee assert, “Divorce is deceptive. Legally it is a single event, but psychologically it is a chain — sometimes a never-ending chain — of events, relocations, and radically shifting relationships strung through time, a process that forever changes the lives of the people involved.”

Thirty years of research about families of later life indicates that parent-child relationships are essential to both parents and children throughout their lifespan. The quality of relationships between parents and their adult children is associated with the psychological functioning of both generations (Hughes, Psychology Today, 2021). Echoing the Harvard S of Adult Development findings, Dr. Daniel Siegel, Professor of Psychiatry at UCLA Medical School, writes, “Relationships are the most important part of our having well-being, in being human. It’s that simple. And that important…of all the factors in human life that predict the best positive outcomes, supportive relationships are number one. These research-proven findings include how long we live, the health of our bodies, the well-being of our minds, and the happiness we experience in life.”

As early as 1989, researcher Barbara S. Cain of the University of Michigan found that their parents’ divorce affected all aspects of the adult children’s lives, and they often felt responsible for the divorce and blamed themselves more than young children. In 1995, researcher Marjory Campbell said, “Divorce is a phenomenon that is forced upon adult children with an expectation to not only survive it without scarring but to heal the wounds of the parents, a task too great to be achieved.”

Most adult children are ill-prepared to cope with the changing family dynamics. Many older children never anticipate the divorce and become overwhelmed by what they are experiencing and feeling. Even if adult children thought their parents might eventually split, when their parents first tell them they are divorcing, adult children often report instantaneously feeling shock, disbelief, and sadness (Hughes, Psychology Today, 2021). They say that everything feels surreal, and it feels like the entire foundation of their lives is crumbling around them. If their parents are feuding, they may experience loyalty issues and feel guilty if a parent, sibling, or extended family member pulls them into an alliance against their other parent. They report worrying about and feeling responsible for the parent who didn’t want the divorce and may be struggling emotionally. They feel stressed, irritable, and have difficulty focusing and coping at work and in their relationships with friends and spouses. It isn’t easy to see their parents with new significant others and starting new families.

As the realities of their parents’ divorces unfold, adult children of gray divorce are grieving because they are experiencing significant, multiple losses immediately and over time. They lose what they have always known as permanent and constant: their home base; their intact family; their previous adult child-parent relationships; their own identity as it relates to family, friends, and community; their meaning of family; and their shared family time, activities, holidays, vacations, and other traditions. Questioning what they thought were constants from their previous lives, they begin to question what else might not be so constant, such as their own relationships. In addition to experiencing the deep pain ensuing from these losses, adult children feel additional pain that their friends, family members, and even their parents unknowingly thrust upon them. The pain arises from the lack of support and understanding and the expectation that they should be okay, shake it off and get over it. After all, they are adults.

How Can Divorce Professionals Help Gray Divorce Couples and their Families?

It benefits all relationships when divorcing parents, family members, and friends listen deeply to understand and acknowledge the feelings, experiences, and concerns of adult children of gray divorce. Since the inception of our interdisciplinary collaborative divorce practice group in 2003, many of our professionals embraced Adult Child Specialists helping divorcing parents and their adult children to ensure their significant family relationships endure and thrive. When we understand and educate our clients with the above information and assist them in respectful divorce processes, they can co-create solutions that will benefit themselves, their adult children, extended family, and community members.