Property division during divorce can be nerve-wracking. Assets often have sentimental value in addition to financial worth, making the process complex and contentious.
A key factor in deciding what each party keeps and what the court equitably divides depends on whether the item is community or separate property.
Defining separate and community property
Separate property is something a spouse acquired either before the marriage or as an inheritance. Also, any revenue that a person generates from separate property could also be separate property itself, such as rental income. These assets are exempt from division.
Community property refers to all other items or assets that either spouse obtained during the marriage. California’s courts seek to divide this property fairly between the two.
The court typically starts with the assumption that all property is community property. Therefore, the party asserting that an asset is separate property needs evidence to establish that claim.
The inception of title theory
The primary way of proving that property is separate is by demonstrating that an individual obtained it before the marriage began. This principle is the “inception of title” theory.
Receipts, invoices and deeds can establish when the owner acquired the property. A person might be able to prove sole ownership with other types of evidence, such as video, photos or witness testimony, but this can be challenging.
In the case of an inheritance, the spouse can produce documents to show that the property came from a family member’s will or trust. Likewise, a prenuptial agreement can specifically identify which items are separate property and to which spouse they belong.
Changing property ownership
Spouses can also agree to convert community property into separate property with a written agreement. Usually, this takes the form of a postnuptial agreement, but the couple must handle the process correctly to ensure the court accepts the contract.
Likewise, separate property could become community property. For example, if one spouse owned a home or vehicle before marriage but both contribute to its upkeep or payments, the item can become community property or at least partially community property.
Distinguishing separate from community property is no easy task. Therefore, close attention to recordkeeping with business matters and assets plays a significant role when divorce appears to be on the horizon.