If you and your spouse are considering divorce, understanding the basics about debt, marital and separate property can help you during your negotiations. California laws have specific rules about each, requiring you to abide by them so that you can divide your property.
What is property?
Essentially, property can be anything you can buy or sell, like vehicles, residences, furniture, etc. Property also encompasses assets you own such as IRAs and other retirement accounts, stocks and bonds, life insurance, patents, business and similar intangible items. The spouses in a marriage will have community property and separate property. Knowing the difference will help you divide your assets in divorce negotiations.
California is a community property state, meaning that all property acquired during the marriage belongs to both spouses. It includes all earnings of both spouses during the marriage as well as all of the debts. A middle category is quasi-community property, which one of the spouses bought in another state during the marriage. Real estate or cars bought elsewhere fall into this category but are still considered community property in a divorce.
Separate property is what each spouse owned before the marriage occurred. This category also includes anything you may have bought with separate property after the marriage occurred.
How does property division work?
When tallying your assets, only those considered community property are subject to property division in your divorce. Anything you owned before you got married will remain yours and not become subject to negotiations.
Nevertheless, some communal assets, especially retirement accounts, can be challenging to divide. Beyond California law, financial institutions may have their own rules about how to divide accounts you own, making the process difficult. It’s important to take time to understand all rules regarding property division instead of making rash, headlong decisions.