Community Property Basics
In my San Francisco family law office, when I’m working with a client to divide his or her marital estate, the first step is to figure out the precise extent of that estate. In other words, I work with my clients to characterize what portion of their property is community and what portion is separate. During a divorce, if spouses can’t agree on a division of property on their own, the Court has the power to divide the community estate equally and grant separate property to its owner. Our threshold question is characterization: what is community and what is separate?
Community property is any property acquired during marriage with one spouse’s time, effort or skill. The prime example are wages or other earnings during the course of employment: if you put your blood, sweat and tears into something during marriage, its fruits are community property because your blood, sweat and tears belong to the marriage in California. This system was designed to effectuate an equal division of a separating couple’s estate when one spouse worked outside of the home and earned income and the other spouse attended to domestic duties. This system applies to all Californians upon divorce, regardless of the division of labor between them during the marriage.
Anything not earned during marriage with a married person's time, effort, skill or labor is a spouse’s separate property. This can be an inheritance or gift, regardless of whether that inheritance or gift was earned before, during or after marriage. Any of the earnings and accumulations on separate property is also separate. For example, let’s say that you inherited a rental property before marriage. That property is your separate property. What about your profits from managing the rental? The character of the profits depend on whether or not you put your time, labor, skills and effort into managing the property. If you did, then the community is entitled to reimbursement for its (i.e. your) contribution. If a family member took care of the property, and you only received passive income without lifting a finger, then the community is not entitled to reimbursement. Most scenarios are not so clear cut. Let’s say you hired a property management company that did all the heavy lifting but that you had to interface with them to give them direction on repairs, maintenance or delinquent tenants, then the community is likely entitled to some reimbursement for the time and energy you put into managing the management company during the marriage.
As you can probably guess, whether a spouse contributed his or her time, effort, skill or labor into the management of his or her separate property during the marriage can become a subject of dispute if spouses end up separating. Moreover, the apportionment of the community’s share of the property can easily become a subject of protracted dispute if the property went up in value during the course of the marriage. I work with all my clients who have separate property interests to avoid this protracted dispute, regardless of whether it comes up before, during and after marriage. For example, if you are someone seeking advice on how to protect your separate property before you marry, I will work with you to figure out whether it makes sense to get a premarital agreement. If you’re someone seeking to protect your separate property during marriage, I would help you determine what your options are in protecting that property.
Regardless of whether you want to protect your property before or during marriage, or during a divorce, call my office to schedule an appointment today.