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By Irving H. Zaroff, JD LMFT and Dana Schutz, MA LMFT
What is Community Property anyway?
California is one of nine states to practice the theory of community property in a marriage. The idea is that a marriage is like a partnership. The partners, although they may have different roles, are equal contributors to the marital community. Simply stated, community property is all property acquired during a marriage except for gifts, inheritances and income from separate property. Community debts are subtracted from the total of the community property to determine the net community property. Each spouse is entitled to fifty percent of the net community property. This means each spouse is entitled to fifty percent of the value of the net property. For instance, one spouse may be awarded the home and the other spouse cash and other property equal in value to the home.
The three most difficult tasks in determining the net community property are (1) determining what is community property; (2) it’s value and (3) how to divide it. Examples of identification problems include a home purchased during marriage, but part of the purchase price is paid with separate property. Or a house that is separate property from before the marriage, but mortgage payments and maintenance costs are paid for with community funds. Or a business started before marriage that grows very successfully during marriage. What part is community and what part is separate?
Another common allocation issue is the division of a retirement plan from employment that started before the marriage and continued during the marriage. Complex federal law in this area encourages the services of an expert in preparing appropriate documents for a court order dividing the retirement accounts.
Some often overlooked community interests are tax refunds, frequent flyer miles, season tickets to events, prepaid insurance, vacation pay, club memberships, etc.
The identification and valuation of community property runs the gamut from easy to highly complex. Often couples can easily identify the assets and debts of the marriage, agree on valuation and decide how the specific properties and debts are to be distributed. In some cases, however, each step may involve complex issues, gray areas, and require the assistance of specialists (i.e., professional appraisers, forensic accountants, tax specialists, etc.). But even in complex cases, the couple can work together in utilizing the experts to inform them rather than being used to advocate each spouse’s position. This minimizes the cost and hostility found in litigation with dueling experts.
California law provides guidelines in many of these areas. Goodwill and common sense can fill in the rest.