What Difficulties Can Arise During Division of Property in a Divorce?

California is a community property state. This means that, as a general rule, all assets and debts acquired by either spouse during the marriage are considered jointly owned and are to be split equally during a divorce. Nevertheless, arriving at a 50/50 split isn’t always straightforward. Exceptions and complications can make the division problematic.

Community property can include salaries, real estate, vehicles, jewelry, furniture and all forms of investments, wherever situated. In contrast, separate property is anything a spouse owned before getting married, as well as gifts or inheritances received individually during the marriage. 

The distinction between community and separate property is often a source of contention. For instance, if one spouse receives an inheritance during the marriage but deposits it into a joint account or uses it to buy family property, the asset may become commingled and difficult to separate. Another example is when pre-marriage savings are used to purchase or renovate the marital home. Resolving these issues requires clear documentation and sometimes complex financial tracing.

The division of debts is equally important. Debts incurred during the marriage (such as credit cards, mortgages, or business loans) are presumed to be community obligations, regardless of which spouse’s name is on the account. Disputes commonly arise about who should be responsible for repaying specific debts, especially if one spouse disputes how the loan proceeds were used.

Disputes can also arise over the following issues:

• Retirement accounts — Pensions, 401(k)s, IRAs and other accounts are community property to the extent they are funded during the marriage. However, dividing these funds may require early withdrawals, which can trigger tax penalties unless a Qualified Domestic Relations Order (QDRO) is issued. Also, it can be complex to put a present value on unvested pension benefits.
• Valuation disagreements — Assets like real estate and business ownership interests can be hard to evaluate, particularly if market conditions are unstable or if one spouse disagrees with an expert’s appraisal. Also, items such as the family home or artistic properties may have a perceived sentimental value beyond financial reality, making compromise difficult.
• Hidden or undisclosed assets — California law mandates full disclosure of all assets by both parties. However, either spouse might try to hide money or undervalue property to obtain a better share of the community property division. Uncovering concealed assets or assessing undervalued ones often necessitate investigation and forensic accounting.
• Prenuptial or postnuptial agreements — These agreements are meant to predetermine how assets will be divided, but their validity and interpretation may be contested during divorce proceedings, adding another layer of complexity.

If you are dealing with property division in a California divorce, it is wise to consult with an experienced family law attorney, who can help navigate these complex issues, advocate for your fair share in negotiations and if necessary represent you at trial.

The Gates Law Group, A Professional Corporation in Fresno offers legal representation in divorce matters to people throughout California’s Central Valley. Please call 559-432-9944 or contact us online to schedule a consultation.