California’s Community Property Law in Divorce Mediation

Divorce is a notoriously arduous process for many reasons, one of the most commonly cited being property division. Unfortunately, California is one of the few states that upholds a community property statute, one that many people find to be too rigid and imbalanced when it comes to determining a fair distribution of marital property in a divorce. However, while the community property law of California may seem overbearing at first, it is actually more flexible than many people realize, and many California divorce agreements do not end with a completely equal division of marital assets and debts.

If you plan to end your marriage in California soon, it is essential to understand the state’s community property law and how it is likely to come into play in your divorce. This law essentially states that all assets and debts acquired during a marriage are the equal property of both spouses. However, the actual legal process of property division in California requires a close examination of various aspects of each asset and every debt involved in a divorce.

Defining Separate Property

The first phase of navigating California’s community property law is identifying, characterizing, and valuing every piece of property, every asset, and every debt involved in a divorce:

• Identification means carefully cataloging everything a divorcing couple owns. For example, each divorcing spouse must produce complete and accurate financial records and documentation to submit for the financial disclosure phase of divorce proceedings.
• Characterization refers to defining each item as separate property or community property. Some items may technically qualify as separate property but still be subject to division under California’s community property law for several reasons.
• Valuation entails a careful appraisal of every item to determine its actual value. This helps the couple have more confidence in the outcome of property division and the value of the property they each obtain.

“Separate” property is anything that a divorcing spouse owned before they married as well as gifts and inheritance given to them during their marriage. California’s community property law generally allows a divorcing spouse to keep their separate property in divorce, but in some cases, separate property can “transmute” into community property.

Transmutation of Property

If you and your spouse have been married for many years, transmutation is likely to come up during your property division negotiations in divorce. For example, suppose you own any separate property, and your spouse had any influence over the value of that property changing during your marriage. In that case, it may have transmuted to community property. For example, if you owned a home before you married and your spouse helped you renovate it, and the property value increased substantially, a judge would likely determine that the house is community property due to your spouse’s contributions.

Your California divorce attorney can help you determine whether a piece of separate property remains your sole property in a divorce or if it is likely to transmute to community property under the transmutation rule. For example, suppose you intend to claim any of your spouse’s separate property as community property. In that case, you must be prepared to offer unambiguous evidence that you assisted in appreciating the property’s value in question by a substantial margin.

It’s also important to remember that some community property may functionally transmute into separate property under certain conditions, but this typically only applies to debts. For example, if a couple has a jointly held credit card, but one spouse maxed out the credit limit spending money on an affair, gambling, or other items that they intended for their own use, a judge will likely consider that spouse responsible for repaying the credit card debt. This is just one example of how separate property determinations can be complicated in complex divorce cases.

Divorce Mediation and Property Division

Many divorcing couples throughout California choose divorce mediation instead of typical litigation to save time, money, and frustration regarding their divorce proceedings. However, alternative dispute resolution is always worth considering, even if a couple has limited assets and cannot agree on much of anything. In addition, the mediation process can potentially require just a fraction of the time and money that litigation usually demands.

Mediation allows divorcing spouses to privately negotiate their divorce terms instead of leaving these decisions solely in the hands of a judge. However, this causes some to mistakenly believe that community property rules do not necessarily apply, and divorcing spouses can simply “trade” assets and debt responsibilities until they reach a mutually agreeable outcome.

Divorcing spouses must still adhere to community property rules when they choose divorce mediation, but they have much more control over the outcome of their property division resolution. For example, while a judge may compel a couple to liquidate certain assets and divide the proceeds evenly, mediation is more flexible in terms of how a couple can arrange to divide their community property. The final result may not necessarily be exactly even, but if they can reach a mutually agreeable outcome and provide a sound explanation for why their mediated property division settlement is acceptable to both of them, most judges would likely approve their arrangement with minimal adjustments. Mediation also allows more flexibility when it comes to the identifying, characterizing, and valuing community property in a divorce.

Consult an Attorney About Your Property Division Concerns

Unfortunately, property division is often one of the most contentious aspects of a divorce case. It’s natural for any divorcing spouse to want to look after their own best interests, which inevitably causes some divorcing spouses to be intransigent when negotiating property division. In addition, some may have misconceptions about what property division actually entails. One of the best ways to overcome these issues is by consulting an experienced California divorce attorney as soon as possible once you have decided to end your marriage.

Bickford, Blado & Botros is a team of experienced and compassionate San Diego divorce attorneys who can help you approach your divorce with greater confidence. The outcome of your property division determination is likely to impact your life in several ways for many years to come, and having the right legal guidance as you approach this complex process is an invaluable asset. If you are preparing to divorce in the San Diego, CA, area and have questions about California’s community property laws, we can help. Contact Bickford, Blado & Botros today to schedule a consultation with our team.

 

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