Dividing assets in a California divorce can be quite confusing even though the state follows a community property approach. This is particularly true if you have high value, complex property and asset portfolios.
Often, this includes businesses, real estate, stock options and deferred compensation. These and similar assets can involve elements that make it difficult to know if and how to divide them. In this post, we address some examples of these complicating elements.
1. Commingled assets
You may have property that started as separate property but became community property through commingling. As this article describes, commingling essentially means mixing property together. An example could be if you received an inheritance, which is separate property, but you deposited it into your joint account holding community property, to purchase a marital home.
2. Appraisal disputes
Unlike bank accounts, cars and personal property, complex assets can be very difficult to appraise or assign value to. Valuations can vary widely when it comes to assets like a business because they can involve different standards of value, future income estimates and hypothetical situations.
3. Increases in separate property value
Specific property may not be eligible for division in a California divorce, but the increases in that property’s value may be. In cases where one or both parties make efforts that result in an increase in property value, some or all of that increase could be eligible for division. This could come in the form of equity or interest in a business.
4. Jurisdiction issues
Property acquired by the parties while living in another state that would have been community property had the parties been residing in California at the time of acquisition is quasi-community property and will be addressed in a California proceeding as if it is community property.
These elements can add a layer of confusion to an already tricky aspect of dividing property in a divorce. However, recognizing that such elements may be an issue is the first step in resolving them.
If both parties understand why it may be challenging to divide certain property, you can better prepare for the division process. You might agree to consult specific financial professionals, for example. Or, you might complete a prenuptial or postnuptial agreement in anticipation of these issues. Whatever you decide to do, understand that legal counsel will be crucial.