family law, Legal

When Can Separate Property Become Community Property? Legal Reasons #51

There is a strong presumption under California law that assets and debts a couple accumulates during marriage are community property. Property one spouse owned alone before the marriage, or acquired by gift or inheritance during the marriage, is that spouse’s separate property. Separate property also generally includes items purchased with or exchanged for separate property, earnings on separate property, and any increase in value of separate property, as long as the property owner can prove the claim with financial records or other documents.

California law also provides that property spouses acquire before divorce but after the date of separation is separate property. The date of separation is not necessarily the date one spouse moves out of the marital home. Instead, it is the date that one spouse decides to end the marriage, and it requires some act of physical separation combined with other actions clearly demonstrating that the spouse has decided to end the marriage.

The date of separation can become a big issue if just before the divorce one spouse either earned an unusual amount of money—got a large bonus at work or won the lottery, for example—or spent a significant amount of money. If the couple can’t agree on a date, a court will decide after considering all of the evidence. Courts usually lean toward later rather than earlier dates when evidence conflicts, so that more property is included as community property, rather than less.

A couple can agree either before or during marriage to change an asset that was originally separate property into community property, or vice versa. Such agreements must be in writing and must clearly state the intentions of the parties; simply changing the title of the property is not enough.

Sometimes a spouse changes a separate asset into a community asset without meaning to by combining—or “commingling”—separate property with marital property. A premarital bank account belonging to one spouse can become marital property if the other spouse makes deposits to it; a house owned by one spouse alone can become marital property (either in whole or in part) if both spouses pay the mortgage and other expenses.

Many types of assets can be partially community and partially separate, including retirement accounts one spouse contributed to both before and after the marriage, or a business one spouse started before marriage and continued operating after marriage.

Distinguishing community property from separate property can become very complicated, especially if one spouse owns a business or other asset to which the other contributed labor or funds during the marriage. If you have a complex property situation, you may need to consult an attorney for advice. Spouses who can’t decide what belongs to whom will have to let a court decide whether commingled property was a gift to the marriage or whether the original owner should be reimbursed in whole or in part.

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