There are two ways that assets and debts are divided in the US. Forty-one states use equitable distribution and the remaining nine states use community property.
Is California A Community Property State?
California is a community property state and understanding how that will affect the division of debts and assets in your divorce is important. Many people interpret community property to mean there is an automatic 50/50 split of stuff, no matter what.
Community property states view all marital assets as joint property regardless of title. This means that if while you are married you purchase a house (or car, or boat, etc.) and only your name is on the title, your spouse can claim 50 percent of that asset.
How Is Equitable Distribution Different?
If the same scenario occurred in an equitable distribution state(like Oregon), your spouse would still be entitled to part of that asset. The difference would be how the asset is divided.
Equitable distribution gives judges more discretion in allocating assets (and debts) based on the financial circumstances of both parties.
What Does That Mean For You?
It is true that if an item is acquired during the marriage, both parties own the item equally. But that doesn’t mean that each party will be awarded exactly half of every asset.
In some instances it makes sense for one spouse to take an unequal division of assets in exchange for a lower support payment. This type of arrangement can be more financially advantageous in the long run.
For assets to be excluded as marital property, the item must be purchased solely in one spouse’s name and maintained using money that is separate from marital funds.
To illustrate this:
Imagine you would like to purchase a Triumph motorcycle and you would like it to be excluded from being considered community property.
The motorcycle would need to be titled to only one spouse and the money used to purchase the bike would have to come from a separate account that is never used to pay for marital expenses.
Furthermore all maintenance and insurance of the bike would have to be paid for from that separate account. If any marital funds are used for the bike, it could become community property.
Regardless if you live in a community property state or an equitable distribution state, the division of property and debts should be carefully considered. Thoughtful planning and an effective strategy can prove very effective in protecting your interests through the divorce process.
Related Reading: Bankruptcy Or Divorce: Which One Do You File First?
Related Reading: How Is Child Support Decided in California?