Property Division in Los Angeles Divorce Cases
In Los Angeles, all dissolution of marriage (divorce) cases involving the division of property are handled in the Family Court. The judge is required to divide all community property and debts owned by the parties equally (Family Code 2550), and award all separate property to the spouse that owns that separate property.
Community Property / Separate Property
Community property is defined as all property acquired during the marriage which is not separate property. Separate property is property acquired before marriage, after separation or by gift, bequest, inheritance or devise. Separate property also includes all the rents, income and profit derived from separate property. In simple terms, this means that it is presumed that property acquired during the course of marriage from the employment and efforts of either party will be the joint, community property of both parties.
Property may be a mix of community and separate property. For example, if a party brings property into marriage (separate property), but then over time the community gains an interest in the property (think of a residence brought into the marriage by one party where the mortgage is paid down with community earnings, for example), the property will be a mix of community and separate property. However, property can also lose its character by becoming commingled with property of another character. For example, if a spouse brings a bank account into marriage and then over time uses the account by depositing community earnings, making withdrawals from the account, and otherwise using the account, it is likely that the account will lose its separate character and will become community property. This is called “commingling” of assets.
Valuation of Assets
Unless otherwise ordered, community assets to be divided by the Los Angeles divorce court are valued as of the date of trial. This means that if you have an appraisal for a parcel of real property that was obtained a year or more ago, the judge may not accept the valuation because it may be stale.
There are reasons that the Los Angeles family court judge may order an “alternate valuation date” for certain assets, rather than as of the date of trial. For example, if one spouse runs and operates a community business and that spouse has intentionally acted to reduce the value of the business over the course of the pending litigation, the court may use a valuation date as of the start of the case.
There are different ways to value assets. First, parties are free to agree on the value of their assets. As long as the value is reasonable, the court will not overturn the parties’ agreed-upon value. Second, the court may determine a value based on the “evidence” provided at trial. This evidence may be obtained by either party retaining an expert to testify about the value of a business, real estate, retirement assets, or personal property. Or, the court may appoint an expert to value certain assets. Often these experts are called “masters”.
When certain retirement assets need to be divided in a Los Angeles divorce, the parties will either agree on a division (often requiring the use of a “Qualified Domestic Relations Order”, or QDRO, which is a separate order created to divide certain retirement assets), or the parties can obtain an “actuarial” valuation for certain retirement assets, which uses certain metrics (such as the age of the participant spouse and tax obligations) to determine the present value of the asset.
Assets Not Divided (Omitted Assets)
Family Code 2550 governs how assets are divided after a divorce (dissolution of marriage) judgment is entered in Los Angeles County. The general rule is that upon motion of either party following a divorce judgment, a court may award and divide community property between the parties. It does not matter how long after the judgment is entered that the court may divide an omitted asset, as there is no statute of limitations on dividing community property that is not divided in an initial dissolution judgment.
Community property that is intentionally not disclosed by a party to a Los Angeles divorce might be awarded 100% to the other party.
How a Pre-Marital Agreement May Affect Property Division
If parties enter into a premarital agreement (or post-marital agreement), the terms of the agreement may determine how property is divided in a divorce case in Los Angeles, California. If done properly, the pre-marital agreement may establish specifically how separate property and community property is awarded to each spouse.
Presumption of Property Held in Joint Form
In California, property held by spouses in joint title (for example, on a family residence if the title says, “John Doe and Jane Doe”), there is a presumption of joint ownership. This presumption can only be overcome by “clear and convincing evidence”, which is a higher standard of proof within the law (as opposed to “preponderance of the evidence”, which just means more likely than not).
This presumption can be important under many different scenarios. For example, imagine a couple is married and own a beautiful home in Santa Monica. Before marriage, the wife owned the home in her name alone. After a long marriage, the parties decided to pull some money out of the equity of the home and buy a second home. At the time they took cash out of the equity, they changed title to the family home as “Husband and Wife as Community Property” and also took title to their new vacation home in the same way. This scenario presents a puzzling, yet somewhat common situation. Would it be fair that the Wife, who brought the valuable home into the marriage, would lose the separate property character of the home when the parties took cash out to buy the second home? And is the second home actually community property in nature even though the money used to buy the home might have come exclusively from the separate property of the Wife? The answer to this dilemma lies in the specifics about what occurred during the parties’ marriage, what documents might exist that would help explain the ownership, and so forth.
Family Code 2640 Reimbursements
In Los Angeles, divorce matters sometimes deal with the issue of whether one spouse is entitled to a reimbursement for using his or her separate assets to acquire community property. In these situations, the spouse that contributed his or her separate property to acquire a joint or community asset is entitled to a dollar-for-dollar reimbursement, without interest or appreciation, of the contribution.
Here is an example: Suppose Husband has a separate bank account with $100,000, which he brought into the marriage or acquired via inheritance. Then one year into the marriage, the parties bought a family residence using that separate property money, and they take title in joint form. Assuming that Husband can prove that his separate property money was used to make the down payment on the family residence, he will be entitled to a reimbursement, even if the parties sold the family residence and purchased a new residence at some point during marriage.
This rule also applies to certain improvements made to community property using separate property assets.
The general rule in Los Angeles California divorce cases is that liabilities and obligations incurred by the parties during marriage is the joint, community obligation of both parties. The court is required to divide those liabilities equally upon legal separation or divorce. Liabilities that a spouse owes prior to marriage are the separate property of that spouse.
Liabilities that are incurred after the date of separation by a party will be assigned to the party that incurred those obligations, unless the party incurred those liabilities for the necessities of life (food, shelter, clothing) for that party or for the party’s children.
Student loans are assigned to the spouse that benefited from the education. The law requires this assignment “without offset”, which means that the spouse that will take on that debt doesn’t get something else in return for assuming that debt.
Property Located in Another State or Country
Property located in another state is treated the same as property located within California when the family court judge in Los Angeles divorce matters divides property among spouses. Property located outside California acquired by one spouse before marriage or after separation, or by gift, bequest, devise or inheritance is the separate property of that spouse. Property located in another state that is acquired during marriage is called “quasi-community property” and it is divided just like community property. Although the court does not have the jurisdiction over the actual parcel of property located in another state, it does have the power over the parties in the dissolution of marriage case in Los Angeles to enforce this rule.
If you have questions about divorce or property division, contact our Los Angeles Divorce Lawyers today for a free, private consultation. We will be happy to provide you with some general information and options that may assist in your understanding of this complex issue of family law.