Property Division in Divorce: How Courts Decide What is Separate vs. Marital

One of the biggest issues in divorce is deciding who keeps what. Courts must determine whether property is considered marital property or separate property before dividing assets and debts between spouses. The distinction can have a major impact on finances, especially when homes, retirement accounts, businesses, or investments are involved. 

When it comes to property division, states generally follow one of two systems: equitable distribution or community property. Most states use equitable distribution. Under this system, courts divide marital property fairly, though not always equally.

However, California is one of nine states that follow community property laws. In these states, marital property is generally divided equally between spouses. 

California divides property into two categories: community property and separate property.  This means that you will likely keep your separate property and split your community property. 

So you may wonder: What does this mean? What is considered marital property, and what is separate?

One of the most important parts of a divorce in California is figuring out whether property is considered community property or separate property. To make that determination, courts usually look at when the property was acquired and how it was treated during the marriage. 

They start with the date of marriage and the date of separation. The date you got married is usually straightforward. The date of separation, however, can be more difficult to determine.

In California, the date of separation is generally the day one spouse communicated, through words or actions, that they wanted to end the marriage, and after that point, their behavior was consistent with ending the marriage

For example, the separation date might be the day one spouse moved out of the home or the day both spouses agreed the marriage was over and began planning for divorce. The date of separation matters because it often determines whether property and debts are considered community or separate.

What is Community Property?

In California, community property generally includes anything either spouse earned or acquired during the marriage and before the date of separation.

The law views the marital community as a partnership, meaning both spouses usually have equal ownership interests.

Community property often includes:

• Income earned during the marriage

• Homes, cars, or other purchases made with marital income

• Retirement or pension benefits earned during the marriage

• Debts incurred while married

Even if an account, loan, or asset is only in one spouse’s name, it may still qualify as community property.

Many people overlook retirement benefits during divorce. If one spouse earned retirement benefits while married, the other spouse may have a legal right to part of those benefits.

This can include:

• 401(k) plans

• Pensions

• IRAs

• Public employee retirement accounts

The portion earned during the marriage is typically considered community property.

Community property laws also apply to debts. A spouse may discover credit card balances, loans, or other financial obligations that exist only in the other spouse’s name. In many situations, debts taken on during the marriage are still considered shared obligations.

Student loans may follow different rules depending on when the debt was incurred and how the education benefited the marriage.

What is Separate Property?

Separate property generally belongs to only one spouse.

Separate property usually includes:

• Property owned before marriage

• Property acquired after the date of separation

• Gifts given specifically to one spouse

• Inheritances received by one spouse

• Income or assets generated from separate property

For example, if one spouse owned a savings account before marriage and kept it separate throughout the marriage, it may remain separate property after divorce.

To maintain separate property status, the asset must generally remain separate and not be mixed with marital assets.

When Property Becomes Mixed Together

Sometimes, property is partly community and partly separate. This is known as commingling.

Commingling happens when separate and community property become mixed together, making ownership more difficult to trace.

Common examples include:

• Depositing inheritance money into a joint account

• Using marital income to pay a mortgage on separately owned property

• Mixing premarital savings with shared household funds

• Contributing marital earnings to retirement accounts started before marriage

Commingling often occurs with the following:

• Bank accounts

• Real estate

• Retirement plans

• Investment accounts

• Large purchases

When this happens, courts may need detailed financial records to determine which portion remains separate and which portion became community property.

Who Gets the Marital Home?

The marital home is often the most valuable asset in a divorce. Courts may:

• Order the home sold and divide the proceeds.

• Award the home to one spouse.

• Allow one spouse to remain temporarily, especially if children are involved.

Judges also examine whether the home was purchased before or during the marriage and whether marital funds were used to pay the mortgage or improve the property.

What About Businesses?

Businesses can become major points of conflict in California divorces, especially if one spouse owns a company, medical practice, or professional firm.

Courts often look at:

• Whether the business existed before marriage.

• How much the business increased in value during marriage.

• Whether community funds or labor contributed to growth.

• Each spouse’s involvement in the company.

Even if the business started before marriage, any increase in value tied to marital efforts may be partly community property.

Deciding on Property Division

Decisions about property division do not need to be made by a judge. Many divorcing couples negotiate a property settlement agreement on their own. Mediation and collaborative divorce can help spouses reach agreements on:

• Asset division

• Debt allocation

• Real estate

• Retirement accounts

• Personal belongings

Courts will usually approve agreements that are fair and comply with state law.

Contact Us Today

California follows community property laws in marriage and divorce, which can be tricky. Knowing what is separate and what is marital property is not always an easy task.

Property division can be an emotional process, but it is important not to let emotions get the best of you during this time. Get the help you need from Arcadia property division attorney Ashley A. Andrews, APC. We will help you work toward a fair division of assets in a divorce. Schedule a consultation with our office today by calling (626) 346-0114 or filling out the online form.

This material is provided for educational purposes only. Providing this information does not establish an attorney/client relationship. None of the information contained in this post should be acted upon without first consulting with an experienced family law mediator and attorney. Should you have questions about the content of this post, please arrange to discuss via a consultation.