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Divorce Library – Asset/Debt Division Faqs

  What is community property?
 

Absent a valid agreement between spouses, community property is generally all property (i.e. income, retirement benefits, stock, stock options, real property, business interests and/or personal property) acquired by spouses from the date of marriage to the date of separation.

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  What is separate property?
 

Absent a valid agreement between the spouses, generally, (1) property owned prior to marriage, (2) rents, issues and profits from property owned prior to marriage; (3) property acquired during the marriage via valid gift or inheritance are separate property; (4) certain personal injury damages; and (5) post-separation earnings and accumulations. However, beware, because actions taken during the marriage (such as commingling bank accounts or joint titling property) may change the nature of separate property making it community property at the time of dissolution. Please contact our office or seek advise of an attorney if you need to discuss tracing the origins of separate property in your case.

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  How is property divided?
 

Generally, separate property is awarded to the party who owns the separate property and community property is divided equally between the parties (as close to 50/50 as possible).

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  Do I have an interest in my spouse’s retirement benefits?
 

If some or all of the retirement benefits accrued during the marriage and there is no valid agreement such as a prenuptial to the contrary, then the non-earning spouse accrues a 50% interest in the retirement benefits earned from the date of marriage to the date of separation.

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  When is the date of separation?
 

Usually, the date of separation occurs when one files a petition for dissolution of marriage. However, the date of separation can be factually argued in court. The date of separation occurs legally when the parties have come to a parting of the ways with no present intent to resume their marriage, and their conduct evidences a complete a final break in the marital relationship. As the date of separation can strongly impact the division and taxation of complex community and separate estates, please contact our office or seek advice of counsel as to how the date of separation affects the division of property in your specific matter.

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  What debts are community property?

 

Absent a valid agreement to the contrary, generally unsecured debts accrued during the marriage are community and will be divided equally at the time of dissolution. Debts secured by community property are generally community debts and also will be divided equally, or assigned to the person taking the asset at the time of dissolution. A debt secured by separate property in certain circumstances may be deemed the separate debt of the party incurring it. Please contact our office or seek advise of counsel should this pertain to you. Other debts, such as student loans are deemed to be the separate debt of the party incurring it but argument does exist to have the community liable for some of a student loan debt if the loans were used to support the community.

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  The marital residence

 

The issue of the marital residence and the many possible outcomes extend beyond the scope of this website. However, generally if the real property was purchased during the marriage with funds earned during the marriage then each party owns one half of the equity at the time of dissolution. If one party cannot afford to buy-out the other parties’ equity (with money or other assets in the estate), then it may be necessary to sell the residence in order to split the proceeds.

If one party used separate funds to purchase the residence during the marriage, but community property income paid down the mortgage during the marriage, then the party who contributed separate funds to the purchase price is entitled to be reimbursed that investment. The remaining equity would then be split between the parties.

If a residence was purchased prior to marriage by one party, but community funds were used to pay down the mortgage during the marriage, the community still has an interest in the home and equity that is subject to division by a court at the time of dissolution. However, the how much the community will be entitled to varies based on the specifics of each situation. As such, please contact us or seek advice of counsel to determine the specifics of your situation.

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  Division of a business entity or complex estates.

 

If you possess a complex estate with real property, personal property, investment accounts, stock options, business interests and/or other assets you should seek advice of counsel on the division of property. This website is not designed or intended to address the more complex issues of asset/debt distribution. Please feel free to contact us directly to discuss these issues.

Generally, however, if a business began during the marriage with funds earned by either party during the marriage then the business is a community asset equally owed by the parties, no matter whose name in on the stock or in whose name the business is owned. In this instance, it may be necessary to determine the value of the business so as to divide this community asset. Businesses owned by one party prior to the marriage are outside the scope of this website. Please contact us directly regarding that issue.

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