The Legal Process for the Division of Marital Property: Identification, Characterization, and Valuation

The division of property in a divorce case can be a very contentious issue—and for good reason. People feel pride and ownership in the things they have worked hard to attain over the course of a marriage. It’s only natural that most prefer to keep the assets they have earned, or at least take the time to decide how to divide them fairly.

However, it is important to recognize that California is a community property state, which means that all income earned, debt acquired, and assets purchased during the marriage are considered “community property” owned by the couple, not the individual. Because of this distinction, it is important for both spouses to understand the legal process of property division.

Step 1: Create a Comprehensive List of All Identified Property and Debts

The first step of the property division process involves creating a comprehensive list of all property and debts subject to division. The best way to do this fairly is by sitting down and working together to create a list. Because both parties have equal say, there should be no argument about the inclusion or elimination of items in the future. However, if the prospect of working together is too difficult or emotionally charged, working with an experienced California divorce attorney can help.

The list should include everything that can be considered property or debt of the marital estate, including:

Cash on hand for both parties.
Bank accounts, including checking, savings, and emergency funds.
Real estate, including the couple’s home, rental properties, vacation homes or condos, and any business properties.
Vehicles including cars, trucks, motorcycles, boats, and anything else with a title are all eligible for division. Other motorized equipment, like lawnmowers, golf carts, four-wheelers, and more, are also subject to property division.
Jewelry, art, and antiques, including family heirlooms. Since California community property law may define certain family heirlooms as marital property rather than separate property, it is critical that spouses discuss items that have sentimental or real value and come to an agreement before property division begins.
Household items, such as appliances and furniture. Tables, chairs, sofas, televisions, and all other household items are likely eligible for division.
Business interests like part-ownership in a company or shares of stock are subject to division in California.
Retirement accounts, including IRAs, 401ks, and pensions. California community property law considers retirement benefits that exist through an employer and other third-party retirement savings accounts as marital property that will be divided during divorce.
Outstanding debts. Debts incurred by either spouse during the marriage, including credit cards and personal loans, are considered a shared responsibility.
Loan guarantees such as life insurance policies that name the other spouse as beneficiary.

Step 2: Characterize the Items on List as Community or Separate Property

After creating a comprehensive list of assets, it’s time to decide which qualify as community property and which are separate property. Remember, separate property consists of assets that a spouse owned prior to the marriage, as well as gifts or inheritances received during the marriage. These items remain separate property during the marriage and upon divorce. Property bought with separate property or “sweat equity” may also qualify as separate property.

On the other hand, community property consists of all assets and debts incurred during the marriage by either spouse. By default, all property acquired during the marriage, with the exception of gifts or inheritances given to one spouse, are considered community property. During the characterization process, a spouse can claim an asset or debt as their separate property by filing a petition with the court and demonstrating to the judge that it is separate. All other assets are subject to division by a California family court.

Step 3: Valuation of Property and Debts

The best way to determine the value of each asset is with a thorough and accurate evaluation from an independent third party that has no stake in the divorce and no relationship to either party. In most cases, a real estate appraisal is used to determine how much a home is worth at the time of the divorce, as well as its gain in equity during the course of the marriage. For assets like cars, jewelry, art, and antiques, the value is determined by an appraisal from a certified dealer of that particular asset type.

The process can become even more complex when there are outstanding debts that need to be divided. If the couple has significant credit card debt or student loan payments, for example, they must determine who is responsible for paying these debts after the divorce is finalized. Each party will need to provide evidence of their monthly living expenses and income to determine the proper division of debt.

Valuing property and debts can be a complicated process. If the couple cannot agree on how much each asset is worth or how debt should be divided, it’s up to a judge and their assigned commissioner of accounts to make the final determination. The judge or commissioner of accounts will utilize the property division guidelines as they are outlined in California statutes to determine a 50/50 division of all community property and debt.

Alleviate The Process of Property Division with Bickford, Blado & Botros

The property division process can be burdensome for any couple, especially if they struggle to work together to determine a fair and equitable division. Alternatively, some spouses even work to conceal critical assets to prevent them from becoming subject to division. While solutions like divorce mediation can help you and your partner come to an agreement, it is important to note that hiding assets is illegal. California courts can assess financial penalties or legal ramifications for those who conceal assets from the court.

If you anticipate a contentious property division process or fear your spouse is hiding assets, contact the skilled divorce attorneys at Bickford, Blado & Botros right away. Our team will do everything in our power to make the division of property as smooth as possible, helping you move on to the next phase of your life with the assets you deserve. Contact our firm to learn more about property division or request a consultation.

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