What is all this about Community and Separate Property?
October 14, 2014

One of the tasks that must be solved by couples going through a divorce is how to divide their assets and debts. A marriage is viewed as a partnership where whatever either spouse earns or creates during the marriage belongs to both. Income, including bonuses, stock, and retirement contributions, and assets, real property, savings and investments, as well as financial obligations, that are acquired during the marriage as a result of either spouse’s labor, skill and efforts, ie employment or self-employment, are called community property, equally owned by both spouses. Assets or debts owned prior to marriage, or received during marriage as gifts or from an inheritance, are called separate property. If assets were purchased during marriage using community and separate funds, there would be a community and separate component interest in the asset. How title, if any, is held could affect the percentage. Should a spouse work during marriage to increase the value of separate property, a portion of the increased value might be viewed to be community property to compensate the marital partnership for that spouse’s time. After separation, income becomes separate property but is available for child and spousal support payments.

For couples who choose to use a litigation process to divide their assets and debts, their community property will be divided equally and separate property will be fully retained be the owning spouse. A court does not have the ability to take into consideration the interests and needs of the family or their specific financial circumstances which might warrant a different division. The advantages of using a consensual dispute resolution process, such as Collaborative Practice, is that a divorcing couple is not bound by this narrow formula. Instead, spouses work together to consider multiple possibilities for the division of their community and separate assets and debts. With the assistance of a neutral financial professional, the various options are tested for viability and determined if realistic. They then have the opportunity to select a settlement package that provides benefits for each spouse and their children. The goal would be to achieve a mutually acceptable durable solution.

Susan Stephens Coats is a collaborative family law attorney in Marin and San Francisco

photo credit: Ann Buscho, Ph.D.