California utilizes the community property method of property distribution. Community property refers to any assets or property that a couple acquires during their marriage. It is considered jointly owned. There are only a few community property states that follow this law.
Under California community property law, in the event of a divorce or legal separation, the court will review a couple’s assets. Any property that is considered community property will be split evenly between the parties, also known as equitable division of assets. Any asset that belonged to one of the spouses prior to marriage or was gifted specifically to that spouse during the marriage will remain in the possession of that spouse.
There are some instances where the court may determine that a particular asset or piece of property has been altered in such a way that it has become community property. For example, if a spouse adds their new spouse to the deed on their home, the court may consider the home to be shared property.
The parties may also specifically contract or agree to consider some assets or property as community property or separate property and the court will generally follow those guidelines. This may occur in cases where there is a prenuptial agreement, postnuptial agreement, or a divorce agreement.
What Types of Property May be Considered Community Property?
There are many different types of property that may be considered community property in the event of a divorce. These may include:
- The marital home;
- Real property;
- Joint bank account funds;
- Gifts given to the couple;
- Property including both spouses names on the title, such as vehicle; and
- Assets in which both spouses share an interest, such as retirement plans and work benefits.
As a general rule, property acquired during the marriage will usually be considered community property. The exception to this rule is where a gift is given specifically to one spouse. The reasoning behind community property is that each spouse is entitled to an equal share of the marital assets.
Is A House Bought Before Marriage Marital Property?
Generally, if a house was bought by one spouse before marriage, it will remain separate property and be awarded to that spouse. There may be facts of the case that change the status of the house. For example, if the spouse was added to the deed, provided money for the down payment or provided funding for substantial improvements.
Prenuptial and postnuptial agreements can change the characterization of a house bought prior to marriage. Equitable division of property including a family house may be complex during divorce or separation proceedings.
Do I Have to Let My Spouse Manage Our Community Property?
No, an individual does not have to let their spouse manage the community property. In California, and in other community property states, both husband and wife have equal control over community property. Each spouse is charged with protecting the other spouse’s interest in the property.
One difference may be if one spouse is the primary operator of a business and the other spouse is not actively involved in the business. The rights of the non-operating spouse are limited. The operating spouse will likely retain the responsibility of running the business during the divorce.
However, the non-operating spouse is still entitled to income from the business and the spouse running the business cannot recklessly waste business assets. Additionally, the operating spouse must provide prior written notice to the non-operating spouse if they sell, lease, or borrow against the business’ property. The non-operating spouse must consent prior to the business being allowed to give away any community property or sell it below market value.
Can I Sue my Spouse for Not Managing Our Community Property Well?
It may be possible to sue a spouse for a violation of community property rights. If a spouse manages community property with good intentions, but the results are negative, a successful lawsuit is unlikely.
A spouse may request an accounting of how the community assets have been managed. If necessary, a court order may be required to do so. However, if a spouse was reasonably cautious managing the property and the investments or expenses were made or paid with permission, then a lawsuit is not possible.
On the other hand, if a spouse is reckless with community property and/or made investments or paid expenses without consent of the other spouse, then they can be sued for improper management of community property. The non-investing spouse is entitled to 50% of the profits made by investing community property, whether or not consent was provided.
All community property must be responsibly managed, including property in a community property agreement. A community property agreement can include prenuptial agreements and postnuptial agreements.These agreements allow spouses to change the status of ownership of their separate and community properties. This is often done for convenience or beneficial tax purposes.
Prenuptial and postnuptial agreements are contracts between spouses entered into before or after marriage. These agreements define how property, debts, income, and expenses will be divided and how property is treated. These agreements are mostly associated with property division during divorce or when a spouse passes away. However, these agreements may also be used to classify property during the marriage.
Property can also be changed from separate to community or community to separate by a legal process called transmutation. A transmutation agreement allows spouses to change the character of their property by:
- An agreement;
- Titling the property jointly; and/or
- Commingling separate and community assets.
Who Can Sue?
The only individuals who can sue are the affected spouse or the heirs of a deceased spouse. Other relatives such as in-law cannot sue on behalf of their child while their child is still alive. However, the intentional destruction of community property or fraud can cause the offending spouse to be subject to criminal charges as well as the spouse’s civil lawsuit.
Can I Sue Even If We Are Still Married and Not Planning to Divorce?
Yes, a spouse can sue even if they are married and not planning to divorce. There may be cases where marital assets need to be protected from waste. These may include keeping a spouse from draining a joint bank account for gambling. It may be necessary to obtain a temporary court order if a spouse is reckless with community property.
What Will Happen If I Win the Lawsuit?
There may be several different outcomes if a spouse wins the lawsuit, each dependent on the facts of their case. Examples include a spouse acting maliciously, fraudulently, or recklessly.
If a spouse acts maliciously or fraudulently, the other spouse is entitled to 100% of the value of the property. In other words, the offending spouse must forfeit their share of the property as penalty for the behavior.
If a spouse is reckless, the other spouse is entitled to 50% of the value of the property that was taken and attorney’s fees. Reckless means the spouse failed to use reasonable caution to manage the community property.
There may be cases where a community property item, such as a vehicle, is titled to one spouse when it is actually community property. In those cases, the court may order the title be changed to include both spouses. This prevents one spouse from selling the vehicle without consent. If a spouse has already sold such an asset, it may be possible to cancel the sale if it can be proven that the purchaser knew the asset belonged to both spouses.
There may also be cases where the court will unequally divide the community property to offset one spouse’s waste. This would occur in cases of divorce or legal separation.
Should I Contact a Family Lawyer?
A California family law attorney can help you safeguard your rights during a divorce or legal separation. A family law attorney can help you with all aspects of your case, including filing for divorce or legal separation, property inventory and state and local divorce laws. A family law attorney can also represent you during any court proceedings. If large amounts of property or assets are involved, it is important to seek the advice and counsel of a family law attorney to ensure a fair distribution of those assets.
Even if you are not seeking a divorce or legal separation, a family law attorney can help you protect your assets. A family law attorney can help draft a prenuptial agreement, which may protect assets you owned prior to marriage from becoming community property if you do not desire for them to be considered as such.