Property Division
Homes, QDROs, stocks, cars, businesses, debt… There can be a lot to divvy up in a divorce as you go your separate ways. Freedom Law 805 will guide you through this complex process and fight for what is yours. We partner with industry experts in QDROs, real estate, and accounting to ensure you get the best outcome possible when dividing your assets in a divorce case.
The Big Picture
Most California family law property division issues boil down to one question: is this community property or separate property? Answering this question can become extremely complex, however. Below are some definitions and examples to help you understand what belongs only to you and what is shared.
Community Property
In a nutshell, everything you earn or buy with the money you earned during marriage is community property. This means all income from your job, all contributions to your retirement plans, all property such as homes and cars you purchased with income earned during marriage, and all payments you made toward these assets with income earned during marriage. The same goes for your former spouse’s earnings. Even if you never had a job, half of the money your spouse earned during marriage belongs to you. Similarly, all debt acquired by either of you during marriage is community debt. It makes no difference whether you and your spouse held joint or separate bank accounts during marriage. Income earned during marriage is community property, aside from the exceptions listed below.
Separate Property
Everything you earned before your wedding day and after the day you and your spouse separated (not the day your divorce became final) is your separate property. Separate property also includes gifts or inheritances you received during marriage, as well as income your separate property generates during marriage. For example, if you owned a rental property when you got married, the rental income you earn from that property during marriage is your separate property. The same goes for other assets you owned before marriage. If they generate income during marriage, or increase in value, 100% of that income and increase in value is yours. Your spouse has no claim to your separate property.
Date of Separation
The date of separation can become a point of contention in divorces. It can affect whether an asset is community or separate property. The Family Code defines date of separation as the date that one spouse expressed an intent to end the marriage, if his or her conduct was consistent with this. To illustrate, suppose a wife moves out with plans to reunite with her husband after he addresses his issues, but she files for divorce six months later. The husband may argue her move-out day was the date of separation if his employer stock options vested shortly after she moved out. The wife may show her attempts to salvage the marriage during this period to set the date of separation as the day she filed for divorce, which affects her community property interest in the stocks. You must determine the date of separation before you can resolve most asset division issues.
Mixed property
Few couples foresee divorce at the time they get married. So, they share things. Spouses use their separate savings from before marriage to buy a home together. They continue contributing during marriage to 401k’s they had before marriage. They pay off student loans with income earned during marriage. They pay off mortgages during marriage on rental properties they inherited. This makes things complicated when the couple decides to divorce. A reputable family attorney will partner with a CPA trained in the process of “tracing” separate and community funds in commingled accounts. The CPA will provide you with a clear calculation of what funds are separate versus community property. Sometimes couples each hire their own expert to convince the judge what funds are community versus separate property.
Common Exceptions to the Rules
Prenuptial Agreements
Prenuptial agreements ("prenups") allow couples to decide in advance how assets, income, and debts will be handled during the marriage and in the event of divorce.
A properly drafted prenup can designate property and income as separate property that would otherwise be treated as community property under California law.
Prenuptial agreements may also address:
- Spousal support
- Inheritance rights
- Retirement accounts
- Business interests
- Responsibility for debts
- Division of future assets
Prenups are generally easiest to enforce when each spouse keeps their finances separate throughout the marriage. If marital and separate funds become commingled, the agreement may still be enforceable, but a forensic accountant may be needed to determine which assets and debts belong to each spouse.
Claims of Waste
California law requires spouses to manage community assets responsibly and to deal fairly with one another throughout the marriage.
If one spouse recklessly spends, hides, destroys, or improperly uses community property, the other spouse may have a claim for reimbursement based on the waste or dissipation of marital assets.
Examples may include:
- Excessive gambling.
- Spending marital funds on an affair.
- Selling or giving away community property without permission.
- Making reckless financial investments using community assets.
An experienced family law attorney can evaluate whether a reimbursement claim is available and determine the amount that may be recoverable.
Student Loans
California has unique rules regarding student loan debt acquired during marriage.
Generally, the law recognizes that an educational degree primarily benefits the spouse who earned it. As a result, student loan debt is often treated differently than other marital obligations.
Family Code section 2641 creates a framework for determining whether the community should be reimbursed for educational expenses or whether some portion of the debt should be shared.
If the marriage continued for many years after the degree was earned—often ten years or more—the court may determine that both spouses substantially benefited from the education and allocate the debt accordingly.
Each situation is unique, and the court has discretion when determining whether student loan obligations should be characterized as separate or community debt.
Employer Stock Options & RSUs
Dividing stock options and Restricted Stock Units (RSUs) can be one of the most complicated aspects of a California divorce.
Courts generally rely on one of two legal formulas to determine what portion of stock options belongs to the community versus the employee spouse:
- Hug Formula – Typically used when stock options primarily reward past job performance or a combination of past performance and employee retention.
- Nelson Formula – Generally applied when stock grants are intended primarily to reward future performance.
The Hug formula usually results in a larger community property interest, while the Nelson formula generally allocates a greater portion of the stock to the employee spouse as separate property.
Because these calculations are highly technical, Freedom Law 805 works closely with experienced forensic accountants to accurately value and divide stock options, RSUs, and other complex compensation packages.
Out-of-State Marriages & Property
California is a community property state, but many couples own property or accumulated assets while living elsewhere.
Property acquired during marriage while living in another state is often considered quasi-community property. In most California divorce cases, quasi-community property is treated similarly to community property for purposes of division.
Although special rules and exceptions may apply depending on the circumstances, California courts generally apply California community property principles to assets acquired during the marriage regardless of where the couple lived at the time.
An attorney can evaluate your specific circumstances and explain how out-of-state assets, retirement accounts, businesses, or real estate may be divided during your divorce.
QDROs
Spouses can agree to any terms they want regarding their assets, including keeping their own retirement accounts without getting QDROs. This can result in a major loss of community funds, however, for the spouse forgoing his or her interest in a retirement account. Qualified Domestic Relations Orders (QDROs) direct retirement plan administrators to pay out funds from a retirement account to each spouse as the account matures. This is referred to as an “in-kind” QDRO division. Couples can also decide to opt for a retirement account “cash out” rather than an ongoing QDRO. With a “cash out” option, a QDRO expert will assess the current value of the non-earning spouse’s community property interest in the account. The earning spouse will then pay the other spouse that amount in cash and keep the entire retirement account for himself or herself. You can read about QDRO tax considerations here.
Whether you and your former spouse go with a QDRO cash-out or in-kind division, you will need expert assistance. Freedom Law 805 partners with a QDRO expert who preps divides retirement accounts for very reasonable flat fees.
Who Gets the House?
The simplest way to answer this question is for you and your spouse to reach an informal agreement. Once you decide who gets the house, you will determine how much the spouse who is keeping the house will pay the leaving spouse. This is called a home “buyout.”
If you agree on which spouse will keep the home, but can’t agree on the buyout amount, the house may be placed on the market and the spouse asking to stay in the home will have the “right of first refusal.” This means that the purchasing spouse will have the right to buy the home at a price that another genuine buyer is willing to pay for the home. The benefit for both spouses of a right of first refusal is avoiding real estate agent commissions and other costs involved in a standard real estate sale. Both spouses keep more money, or equity, with an informal transfer.
When spouses cannot agree at all, the court may order the house to be placed for sale on the market and the proceeds be divided according to each spouse’s community and separate property interests in the home.
You may also be able to obtain a “move-out” order if you have been the victim of domestic violence. If you obtain a domestic violence restraining order (DVRO), a term of your DVRO can be an order that the abusing spouse move out immediately. You can learn more about DVRO’s here.
Her skills in depositions, trial work, and cross-examination are outstanding and she knows exactly how to elicit the right testimony. She fought for me during an especially difficult situation, where my ex was involved with his attorney — something that complicated the dynamics significantly.
Her balanced approach between litigation and settlement is rare and invaluable. Since my case was transferred to her, not only did I feel more protected legally, but my mental health significantly improved as well.
If you are looking for someone who will truly stand by you, advocate for truth, and handle even the most complex situations with skill and compassion, I can’t recommend Hali enough.
Property division can be complicated and difficult to navigate on your own. If you have questions, give us a call for a free consultation.
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About Property Division in Ventura County
California is a community property state. Family Code Section 760 defines community property as all property acquired by a spouse during marriage while domiciled in California, other than by gift or inheritance. Section 770 defines separate property (owned before marriage, acquired by gift/inheritance, or acquired after date of separation). Section 2550 requires an equal division of the community estate at dissolution, absent a written agreement or oral stipulation in open court. Section 2581 establishes a presumption that property acquired during marriage in joint form is community property, rebuttable only by a clear written statement or writing evidencing tracing.
Common complications in Ventura County family cases include tracing separate property contributions to community assets (Family Code Section 2640 reimbursement claims), characterizing businesses started before marriage (Pereira and Van Camp apportionment methods), valuing retirement accounts (community share requires a Qualified Domestic Relations Order for ERISA plans), and dividing real estate where refinancing is impractical. Debts follow similar rules — community debts incurred during marriage are divided equally, subject to certain exceptions in Sections 2620-2627.
Hali Ford handles property division from initial disclosures (Preliminary and Final Declarations of Disclosure under Sections 2104 and 2105) through valuation, tracing, and judgment. Complex asset cases benefit from early forensic accounting. Related: family law, divorce, support. Self-help: CA Courts property & debts. Statute: Family Code Section 760 on Justia.
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