Simplified Overview of How Property Rights Are Determined In Divorce | Dividing Community and Separate Property

Thurman's Best Attempt At a Simple Outline of the Divorce Process - Issues Involving Money

Many people bump into the Enlightened Divorce Blog™ while trying to figure out how to handle, possibly by themselves, their marital dissolution or non-marital family law issues. Google loves our website, because we love you and have written hundreds of carefully considered and researched how-to articles, but not just for self-represented parties; we have a wide readership of family law attorneys and even judges, particularly for our more complex articles. The professionals among us can skip this blog, as I want to just lay out an easy-to-comprehend summary of how divorces typically work for people struggling to understand it all, as my New Year's offering.

There are two major themes that need to be understood in divorce: Substantive issues and process issues. Substantive issues deal with what you are entitled to and must part with, and process issues deal with how family court works and what you need to do procedurally to complete a dissolution. This blog article is an overview of issues relating to money, including property division but not spousal support. I will write Part II about spousal support and then Part III about process, including deadlines and forms, next. I may write a Part IV about child related issues, though with a little effort you can find our writings about custody and visitation issues and child support. I have a stiff neck, and prefer to publish my articles according to my stamina - LOL.

If you find you appreciate our work, the support with social media would be a fair exchange, neh? I spent my entire 2016 Christmas vacation going through every one of 1,800 pages on this site - which I admit needed to be cleaned up, and a small thank you would be appreciated. It is what keeps my manic motor running, after all.

Rather than rewriting certain topics from scratch for you, which would be too long anyway, I am going to link to other articles about specific topics as we move through them and I urge you - if something resonates - to follow the thread. This outline will help you move quickly to what is relevant and important to you, and hopefully to find answers to the questions that you may be wondering about today, or should be!

Preparing for Divorce

This topic comes in two flavors, basically: Those who aren't married yet, and those who haven't filed for divorce or told their spouse yet. As to those who aren't married, I urge you to consider a premarital agreement especially if this is not your first go-around at tying the knot. Philosophically, I am more resistant to younger people in their first marriage entering in to a prenup but the cynical lawyer side of me would urge it in every case for the higher earner/higher asseted party, and oppose it in every case for the less empowered partner to be. But one thing is for sure - just by investigating a premarital agreement even if you forget to mention you did to your fiancé, you will receive critical insights about things to avoid, or at least what their consequences are, by reason of the legal education you will get.

Alternately, even if a premarital agreement is not for you, buying an hour of an expert matrimonial lawyer's time before you marry will pay dividends that you cannot now imagine or comprehend. It just amazes me that people are either too cheap or too naive to do a little due diligence about the legal consequences before buying a marriage - they are often the ones who wouldn't buy a $10,000 car without going to Car-Fax and grinding the salesman, but I promise you the car you won't get to ever possess for the monies it will cost you to hire a competent lawyer upon divorce but didn't both to do do a little research is - well, it may become someone in my professions' car instead. I'd rather you get it!

Then, there is pre-divorce planning, which is a separate topic.

Choosing Your Attorney If You Do Find Yourself in Divorce

Choosing your divorce or family law attorney is a topic I've written about extensively. This website is organized into blog categories, family law statutes and court rules, sample forms, our frequently asked questions' page, and the topical (i.e., keyword) tags that - if you can divine how to use the site with the search engine in the upper right of each page - will help you find what you are looking for. Please try the search engine before leaving if you have unanswered questions.

What is the Difference Between a Dissolution, a Legal Separation, and an Annulment?

Again, this is an overview. A legal separation does everything a divorce does, except that you remain legally married. It requires the consent of both parties - you cannot impose it on your spouse over their objection. You are entitled to all the same orders, including property division, custody, and support, as you are in a dissolution. There is no waiting period for a Decree of Legal Separation. It can always later be converted into a dissolution, without having to start over. You don't even have to be a resident of the State to file one.

An annulment, or in California statutory parlance a "nullity of marriage", can only be granted if you can show one of five legislatively approved grounds for it. It has the legal effect of undoing the marriage (the marriage is either void at inception, or voidable). Family court judges don't grant annulments if the statutory conditions have not been met. Generally speaking an annulment, as a void marriage, has the consequences that no rights to spousal support arise (assuming an annulment is granted) and community property cannot - by operation of law - be created. It is as though there was no marriage.

A dissolution is, duh, a divorce. A divorce, at its essence, terminates the marital legal status of persons who are spouses. While a case can be concluded the day after you file, you cannot become an unmarried person earlier than 6 months and a day after you or the other person were served with the Summons and Petition.

Today's blog is about divorce. I won't be covering legal separations or annulments any further here, but all you need to do is a little searching on this site and you'll find what you need to know.

What Are the Money ABC's of a Divorce Action?

Identifying and Dividing Community Property

A divorce action is initiated by filing a Petition for Dissolution of Marriage, Judicial Council Form FL-100. Upon the filing a Summons is issued, in Form FL-110. That summons contains automatic temporary restraining orders called ATROS. ATROS are as set forth in Family Code section 2040, but relate to assets, debts, and children. The moment your case is filed, you are deemed bound by the ATROS, and in fact the FL-100 says you've read them and agree to be bound. No one does, but good lawyers point them out to their clients. The other party is not bound by the ATROS until they are served with the Summons. There is an exception contained in the section 2040 ATROS that allows you to liquidate property or accounts to hire an attorney.

Fiduciary Duties

One of the most important attributes of the matrimonial relationship in California is that once you are married, you and your spouse owe each other fiduciary duties of the highest order, per Family Code section 721. We have written scores of articles about fiduciary duties. The rules regarding fiduciary duties mean that you cannot self-deal to the detriment of your spouse, during the marriage. These FD obligations continue until the marital relationship ends AND all community property is distributed as between the parties by agreement or court order. Family Code section 1100(e). Penalties for self-serving breach of FD behaviors can be severe - at a minimum they will be half of the value of a particular asset plus attorney fees, or where there was fraud, 100% of its value plus attorney fees. Family Code section 1101. There may be other, independent, grounds for sanctions - including attorney fees. Sanctions are the Holy Grail of out-spouses.

Time, Skill and Efforts

From a community property (CP) point of view, the essence of the marital relationship - absent a premarital agreement saying otherwise - is that all time, skill, and efforts of each spouse belongs equally to each as part of the community estate. Family Code section 760 creates a rebuttable presumption, which lawyers call the time of acquisition rule, that CP is created between DOM and DOS. This means that, subject to a number of qualifications, all the fruits of either spouse's efforts whether from employment or otherwise creates an as yet undivided pie in which each of you hold an undivided one-half interest. This presumption need only be rebutted by a preponderance of the evidence, the lowest burden standard of proof. Likewise, all debts incurred during marriage are joint, with limited exceptions like where someone gets the asset that the debt relates to. California family courts must divide that pie equally. The battle ground is about characterization, and arcane exceptions and qualifications.

Date of Separation

However, the window that courts are looking at is the period from the date of marriage (DOM) to the date of separation (DOS). Upon physical separation, your time, skill, and efforts become your own separate property. We've written extensively about DOS issues, as they are critical to defining what is and what is not community property, but DOS is also important for purposes of determining the length of the marriage for spousal support rights and obligations purposes.

Marriages of less than 10 years are considered short marriages under CA law, and marriages in excess of 10 years are long-term marriages per Family Code section 4336. Generally speaking, a supported spouse is expected to become self-supporting within a period equal to half the length of the marriage, except that as to long-term marriages they are expected to make reasonable efforts to become self-supporting at the half the length of marriage point, and may not be just cut-off. Again, we have many articles about these issues that are far more detailed. This illustrates reasons why DOS is so important. Often the proceedings need to be bifurcated to determine DOS, because years pass between one person's date and the other's.

Separate Property and Reimbursements

Special problems arise where people own assets prior to marriage, or acquire assets as gifts or inheritances during the marriage, because the law presumes those are the separate property (SP) of the receiver (called the separatizer). Often those monies are commingled with CP funds, or are used to improve CP assets like a family residence. Maybe they just evaporate for living expenses, or are used to pay debt. In some cases, most notably involving Family Code section 2640 which is a critically important exception to the general time of acquisition rules governing the characterization and the division of community property, the separatizer is entitled to get their money back, off the top, from any asset that the separatizer can trace their funds to. We have written a number of articles about tracings, which create their own special problems where they are necessary.

What happens to community property, like a residence, that one party wants or occupies after the other moves out - or is kicked out by reason of DV restraining orders? What happens to marital debts, like a home or joint or separately named credit card accounts, where there is a balance owing at DOS? Please see our blogs about Watts credits/charges, dealing with CP that one party exclusively enjoys, and Epstein credits, where one party paid joint debt.

Equal Division of Community Estate

Ultimately, the family court must divide the community estate, including its debts, equally per Family Code section 2550. Play around with marital balance sheets to evaluate your circumstance. Sometimes this means that property may have to be sold, but not always - particularly so long as the spouse who wishes to keep an asset can buy the other spouse out. Valuing property is itself a frequent point of friction that results in extra litigation involving expert witnesses, like forensic business accountants where businesses or professional practices are involved. Sometimes the court appoints its own expert, called an Evidence Code section 730 forensic, in order to undertake an evaluation and report back that expert's findings. Those findings are not binding upon the court, though they have a big influence on settlements and court rulings.

Enough for tonight. I'll be back!

Want to read about the divorce process? Here is Part 2!

Author: Thurman W. Arnold CFLS, AAML