Protect What’s Yours: Separate Property Claims in a California Divorce
Proving that an asset is separate property can become complicated during a California divorce. Spouses who owned property before marriage, received an inheritance, or kept separate financial accounts may need documentation to establish individual ownership and avoid preventable stress.
What Is Separate Property in California?
California, a community property state, generally considers any assets either spouse acquires during the marriage as jointly owned unless a spouse has documentary proof of separate property claims. Family law courts typically divide community property equally upon divorce unless one spouse can prove separate property claims.
However, separate property could include the following under California family law:
- Assets owned before marriage.
- Gifts intended for one individual, not the couple.
- Inheritance a spouse receives.
- Assets spouses identify as separate property in a prenuptial or postnuptial agreement.
- Some income earned from assets owned before marriage.
- Assets acquired after the date of separation.
Separate property typically remains with the original owner in a divorce. However, if one spouse disputes a separate property claim, the person claiming individual ownership has the burden of proving that specific asset is their separate property.
Why Is It Difficult to Prove Separate Property in a California Divorce?
The court determining that one party clearly owns a specific asset is not as straightforward as it seems. Some of the most common challenges divorcing spouses encounter in a separate property claim include:
Commingled Assets
Commingling occurs when separate and community property become so intertwined that tracing their origin is difficult or even impossible, which could lead the court to consider the entire asset community property.
For example, California law generally considers a spouse’s contribution to a retirement account before marriage as the contributing spouse’s separate property. However, contributions made during the marriage may create community property interest in the account, making it a commingled asset.
If possible, an expert will trace the funds to determine which portion remains separate property and which portion is community property. However, this is costly and time-consuming without records from the acquisition of the asset. It is best to keep separate property isolated from marital assets.
Changes in Form
The physical characteristics of separate property can change over the course of a marriage. If one spouse sells property they owned before the marriage, and uses the profit to buy something else, they will need to show the transaction chain so the court can trace the newer asset back to its separate property origins.
Title Changes
If one spouse changes the title or ownership of a separate property asset, like adding their spouse’s name to a deed, it may create significant questions about whether the property remains separate, and a spouse needs to prove reimbursement claims if the asset was separate property before the transfer.
Why Is Documentation Important in a California Divorce?
Divorcing parties can prove their separate property claims with documentation that traces funds and that shows the source of funds used to acquire property. Separating couples should keep financial, real estate, support, and retirement documents so they can adequately prepare for divorce.
Financial institutions do not retain historical financial records indefinitely. If spouses divorce after 10 years of marriage, the spouse asserting a separate property claim may face difficulty finding the records necessary to trace the separate property. Couples should carefully preserve their documents throughout their marriage.
Additionally, while a prenuptial agreement may identify specific assets as separate property, a spouse may still assert separate property interests or reimbursement claims under California law. Documentation may be important in establishing, tracing, or challenging a separate property claim.
If a divorcing spouse fails to preserve physical or digital records, their separate property claims will likely fail. Inadequate documentation can lead to:
- A loss of individual assets – Courts will likely treat assets as community property if they cannot trace them back to a separate property source.
- Increased cost – A lack of documentation may require additional discovery, subpoenas, financial analysis, forensic accounting, and extended litigation to trace and establish separate property.
- Lack of leverage – Strong documentation provides credibility and bargaining power when determining whether property is separate or community. You can waive separate property claims as part of a negotiation, but it gives leverage if you can prove them.
Spouses with a shortage of records may face unnecessary financial uncertainty. Proper documentation reveals to each spouse what is rightfully theirs and eases a potentially complicated process.
When Should Couples Start Protecting Themselves?
Whether freshly married, considering divorce, or already in the process, it is never too early or late for a spouse to start organizing their records. A spouse may not need every record, but taking small steps to preserve critical documents can make all the difference in a California divorce.
Maintaining physical copies and secure online backups of records can preserve essential evidence to support separate property claims. Financial institutions limit how long they retain historical records, especially when there has been a merger or acquisition of institutions. It is your burden to keep your records.
If you are concerned about protecting your separate property in a California divorce, an experienced family law attorney can help you understand how California community property laws apply to your situation, evaluate which assets may qualify as separate property, and develop a strategy to protect your property interests.
Vanessa Soto Nellis is a Certified Family Law Specialist at Lewitt Hackman.