Separate Property Helping Families Build a Fresh Start

What is Separate Property?

Characterization of property is an issue divorce attorneys are faced with in the majority of San Diego divorce cases. At the end of a case, the parties’ property must be divided by the Court or per agreement of the parties. Generally, there are only two ways property can be characterized: as community property or separate property.

What Happens to Separate Property?

Separate property is all property acquired by either party before marriage and after separation. All property acquired from the date of marriage to the date of separation is community property. Property acquired during marriage will usually only be characterized as separate property if it was obtained by a spouse through gift, bequest, or devise.

The characterization of property is an important issue in each divorce because it will determine whether the spouses are entitled to half of an asset, none of an asset, or an asset in its entirety.

Why is Property Distinction Important During a Divorce?

If a particular asset is confirmed to a spouse as his or her separate property, he or she will be entitled take that asset upon divorce. On the other hand, if that same asset were characterized as community property, both spouses would be entitled to one-half of its value. It is important to note that the rules stated above are simply the default provisions codified in the California Family Code. In every divorce case, the parties have the ability to alter their property rights by agreement. There are three time periods in which spouses may agree to alter their property rights: before marriage, during marriage, and after separation. Divorce attorneys will advise their clients that the time frame when a spouse attempts to contract out of the default provisions will determine which rules the court applies to assess the validity of the agreement.

How Do Premarital Agreements Affect Property Division?

Before marriage, spouses may enter into a premarital agreement (commonly referred to as a prenup or PMA) which outlines any agreements they have reached regarding the distribution of property and/or spousal support in the event of divorce. In order to be enforceable, premarital agreements must meet strict guidelines set out in the family code. If spouses have already married but desire certainty in the event of divorce, they have the ability to enter into a postnuptial agreement. Postnuptial agreements afford the parties the same opportunity to avoid default property laws as premarital agreements.

Securing a Marital Settlement Agreement

After separation, divorce lawyers in a family law case may help the parties enter into a marital settlement agreement (commonly abbreviated as MSA). Every divorce will conclude either by trial, where a family law judge will adjudicate all of the disputed issues, or by agreement of the parties. At trial, the judge must apply the default family law provisions to the parties’ case. However, if the parties reach an agreement outside of court, they have the ability to divide their assets in any way they see fit. Marital settlement agreements give divorce litigants the flexibility to create their own solutions which are mutually beneficial to both parties.

In order to ensure all agreements between spouses, future spouses, and former spouses are enforceable, it is important to consult with an experienced family law attorney.

Contact Andrew J. Botros, APC if you have a complex property situation and are considering divorce. Don’t settle for less when determining your rights. Call (858) 422-1377 for more information about the consultation process.

Can You Claim an Interest in Your Spouse’s Separate Property?

During marriage, all earnings and accumulations of the parties are considered community property and will be divided equally upon divorce. All property acquired prior to marriage, after separation, or during marriage by devise, bequest, or gift is separate property and will be confirmed as such.

However, there are two common ways to determine the community’s interest, if any, in a separate property business.

This issue arises if one spouse owns a business prior to marriage but continues to work in that business during marriage. As all earnings of a spouse are community property, the community would be jilted if it weren’t somehow compensated for an increase in value of the separate property business or the spouse’s services to the separate property business.

What happens if a spouse spends a significant amount of time cultivating a separate property asset, but that asset is not a business? Less often discussed and litigated is the issue of whether the community should be compensated if a spouse expends time and effort managing separate property assets. Two specific examples have been discussed by California courts: (1) separate property stock portfolios and (2) separate property investment properties.

Stock Portfolios

If a spouse owns a significant separate property stock portfolio it will generally be confirmed to him or her in full upon divorce. However, should the community be compensated in any way if the spouse spent a significant amount of time enhancing the value of the portfolio during marriage? In a 1963 California case, the court found that the community was not entitled to an interest in Husband’s separate property stock portfolio because it increased in accordance with the Dow Jones average. Further, the court relied on the fact that Wife did not show that Husband had any special ability or skill with regard to stock portfolios. This case seems to imply that if the stock portfolio had exceeded the average increase or that Husband was a professional trader, the community might have been entitled to an interest in the separate property asset.

Investment Properties

In a 1947 case, a California court heard Wife’s request for a community interest in Husband’s separate property real estate on the basis Husband fully and Wife partially employed themselves in maintenance of the property. The court denied her request because she did not introduce any evidence regarding what Husband could have earned doing the same job somewhere else. Further, Wife did not present any evidence that the amount of money Husband would have earned at that hypothetical position was not expended already for the support of the community. Presumably, as both parties were employed by Husband’s separate property, Husband paid community expenses throughout marriage with the income from his separate property.

Based on review of these lesser cited California cases, it appears that the community may be able to claim an interest in a spouse’s separate property. However, although courts are willing to entertain those claims, they are not easily granted.

Please contact us if you are considering divorce and are concerned about your estate. Don’t settle for less when determining your rights. Call (858) 422-1377 for more information about the consultation process.

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