Dividing assets and debts can be one of the more challenging parts of a divorce. This is especially true for couples with large or complex marital estates, which is the case for many couples who live in the Silicon Valley/Santa Clara County area. It is important for that you are represented by a legal team that has a complete understanding of California property law along with significant financial sophistication.
Kaspar & Lugay, LLP was founded by a CPA and has several attorneys on staff who has extensive financial litigation and family law experience. Our Mountain View office is equipped to resolve everything from the most complex high-asset divorces that require litigation to simpler divorces involving smaller estates. Whatever your particular situation, you can be confident that we will protect your property interests so you can enjoy a financially healthy post-divorce life.
The Basics: Community Property vs. Separate Property
California is one of nine “community property” states in the country. Under California community property law, the following general rules apply:
- Most property acquired and debt incurred by either spouse during marriage (except gifts or inheritances) is considered community property and is subject to division.
- Property that either spouse owned prior to the marriage or acquired after the date of separation belongs to the spouse who owned it and is generally not subject to division.
Separate Property Can Become Community Property
It is possible for one spouse’s separate property to become “commingled” with community property during the marriage. For example, if one spouse owned a house before marriage, but then during the marriage the mortgage payments were made with community money, the home can no longer be considered the separate property of the owner-spouse. Instead, the home is a commingled asset, so part of the home’s value will be considered community property and will need to be divided.
How Property Division Works
Property division can be thought of as happening in five steps. These steps sound simple, but they can quickly get complicated:
- Identifying all assets and debts: Each spouse is required to list all assets and debts they are aware of, along with all facts and information related to them. This step can be difficult when one spouse has hidden assets or debts from the other, has improperly funneled money through a business or taken various other questionable actions over the years.
- Characterizing all assets and debts as community or separate property: Every asset or debt must be characterized as either community or separate (or commingled). This can require deep financial analysis and a process called tracing. Tracing means examining how an asset was acquired – was it bought with community funds or separate funds? Firm co-founder Arvin Lugay’s CPA background is extremely helpful at this phase, because forensic accounting is often required.
- Valuing the community property: At this step, appraisers are often required. A neutral home appraiser will appraise the home(s). A neutral business appraiser will appraise any community business interests.
- Dividing the community property and debts: Per California Family Code section 2550, all community assets are divided 50/50 between the spouses. Debts, however, are divided “equitably,” which does not necessarily mean equally. One spouse may be assigned more debt than the other.
- Dividing the separate property and debts: Property and debt that is characterized as separate belongs solely to the spouse who owns it.
Prenuptial or Postnuptial Agreements
If a couple signed a prenuptial agreement prior to the marriage, it must be submitted to the court during divorce. The court will determine whether the prenup is valid. If it is valid, then property will be distributed according to the terms of the contract. The same is true for post-nups. But be aware, courts are much less likely to enforce a postnup than a prenup. If you have either a prenup or a postnup, please show it to our attorneys as early on as possible so we can begin the process of either getting it approved or challenging its validity.
Let Our Mountain View Attorneys Protect Your Property Interests
The Mountain View office of Kaspar & Lugay, LLP has all the resources necessary to resolve even the most complex marital property division issues. Our clients include Silicon Valley business owners, professionals, athletes, entertainers, and people from all walks of life. Please call 415-650-1322 or contact us online to schedule a consultation.