CALIFORNIA FAMILY LAW

California is a community property state, which means that generally, all property acquired during the marriage is subject to a 50-50 division upon dissolution of the marriage. Community property is defined as all real or personal property acquired during the marriage while domiciled in California. Separate property is any property acquired prior to marriage, after separation, or by gift, bequest or devise. Most disputes over property center around the characterization – whether an item is community or separate, and its value.

Business valuations are another contentious issue that often arise, especially if a business was begun prior to marriage and has grown in value during the marriage.

Retirement benefits are a form of employment compensation, thus, regardless of when the benefits are vested or matured, the benefits are community property, to the extent earned during marriage up to date of separation. For example, if the spouse earning the pension earns benefits under the plan for 240 months, and is married prior to separation during 120 of those months, one half of the benefits are community property. The other spouse therefore has a right to fifty percent of that half, or one quarter of the pension benefits. The plan may either be divided for future pay-out, or the employed spouse may seek to keep the entire pension, with an off-setting of other community property to the unemployed spouse.

If the employed spouse proposes to take all of the benefits of the pension, the first step is to determine its current value. For a defined contribution plan, e.g., an IRA or 401(k), the current value is easy to determine since it is reported to the account holder in monthly, quarterly, or annual statements. For a defined benefit plan, such as a corporate-sponsored pension, unless the Participant is already in pay status, the current value needs to be determined by an expert.
   
Anyone dealing with the evaluation and/or division of a pension or retirement plan should obtain a copy of the plan summary and other plan materials, as well as QDROs, The Division of Pensions through Qualified Domestic Relations Orders, published by the U.S. Department of Labor, available at http://www.dol.gov/ebsa/publications/qdros.html.

What is separate property?

Separate property is all property owned by a married person before the marriage or acquired by gift, bequest, devise, or descent. Normally, upon dissolution of the marriage the owner of the separate property retains the separate property without division. This is in contrast with property that is treated as community property.

In addition, it is possible for a spouse to acquire separate property during the marriage. If the property acquired is characterized by the court as separate property, even though acquired during the marriage, then that property is not subject to division. The significant battles in division of property usually occur over the characterization of the parties' property. Often times the characterization depends upon a close factual scrutiny of the source of funds used to acquire the property, the intent of the parties in its acquisition, the subsequent use of the property, in what manner title is held to the property, and whether the property has been commingled with the community (e.g., bank funds), as well as other considerations.

What is community property?

Community property is all real or personal property acquired during the marriage while domiciled in California. In general, all property acquired during the marriage is subject to a 50-50 division upon dissolution of the marriage. Usually disagreements in the dissolution process arise when one party claims particular pieces of property (whether real or personal, including bank deposits, stocks, etc.) is separate property rather than community. If the property is characterized as "separate" then normally the property is not subject to a 50-50 division but rather the owner of the separate property is entitled to it without division.

Is property located outside of California part of the dissolution proceedings if it was acquired when the husband and wife did not live in California?

If the property is considered to be separate property, then it will not be subject to division. However, it will be part of the community (that is, subject to a 50-50 division) IF it is considered to be "quasi-community property" ( and not separate property). "Quasi-community property" is all real or personal property, wherever situated, acquired by either spouse while domiciled elsewhere which would have been community property if the spouse who acquired the property had been domiciled in California at the time of its acquisition.

How are pensions and other retirement benefits treated in the divorce proceedings?

Pension and retirement benefits that are earned during the marriage are part of the community estate and hence subject to a 50-50 division. The pension or retirement benefits earned prior to the marriage or after the date of separation are not part of the community. Since only the amount of the pension or retirement benefit earned during the marriage is community property, when and how the pension or retirement benefit was earned, and how the pension or retirement benefit is to be paid, are all important issues that need to be addressed in the division of the benefits.

Since calculation of the value of a defined benefit plan (traditional pension) depends upon many factors, an attorney would typically retain the services of an actuary that would then put a dollar value on the pension using appropriate assumptions.

I never worked during our marriage. Am I entitled to my spouse’s retirement benefits?

Retirement benefits earned during a marriage are considered community property and thus subject to equal division upon divorce. The principle of equal division only applies to the portion of the retirement benefits earned during the marriage (between the date of marriage and date of separation).

My wife and I lived most of our lives in Iowa. We moved to California for our retirement years, and now she wants a divorce. Is all our property community property?

Any property acquired during your marriage while domiciled in California is considered community property. Property acquired during marriage while domiciled outside California is called quasi-community property. Quasi-community property is property that would be considered community property had it been acquired in California. Thus, most likely, most of your assets and debts will be subject to the principle of equal division under California law.

I have been married for 15 years. My great-aunt just died, and left $400,000.00 to me. Now my wife wants a divorce. Does she get half that money?

No, property acquired by gift, inheritance or devise is considered separate property under California law and is not subject to equal division. However, if the money is income-producing, the income may be used for purposes of calculating child and spousal support.