The laws in the State of California express that any real or personal property acquired during a valid marriage, except for an inheritance or gift, should be considered community property.
This is according to California Family Code §760 which explains the laws referring to community property and §771, which refers to separate property. In the case of a divorce, judges in California must divide community property equally between spouses. However, California community property law only applies if the couple divorces in the state, unless a couple signs a prenuptial agreement to the contrary.
In California, both parties to the marriage have equal rights to the control and management of community property –
Even property held in one person’s name – if it is acquired during the marriage. As a matter of fact, it is a breach of a spouse’s fiduciary duty to the other spouse to withhold any property from the other spouse, or bar the other spouse from any assets of the marriage.
Once a divorce has been filed, spouses require the other spouse’s consent or a court order to sell, transfer, encumber or give away any property, whether acquired during marriage or separate.
Any leasing, sale or encumbrance of community real property must be jointly consented to, and participated in, by both spouses. The laws also establish that absent a will stating otherwise, community property will automatically pass to the surviving spouse when the other spouse dies.
It is important to note that it in the matter of real property, even if a quitclaim deed is signed, all property could still be deemed community property.
There is a presumption that assets acquired during marriage are community property regardless of how title is held. In order to convert community real property into separate property, one would have to sign a writing making it clear that they intended to change the character of the property from community to the separate property of the recipient spouse.
For example, if the parties wanted to make a piece of real estate acquired during the marriage into one party’s separate property, they would have to enter into an agreement in writing stating the intent of the agreement –to make the property the separate property of the other- with a clear statement that they intended the transfer of the property to the recipient spouse as separate property and their understanding that they give up any interest in the property as a community asset. (Family Code §852) A statement that the transferring spouse understands the effect of the transfer will be to give up any right to the property is essential.
As long as there is an agreement in written form- that contains all of California’s required legal elements, a married couple may agree to transmute or change community property into separate property as much as they deem necessary. See 116 P.3d 1152, (2005) In re Marriage of Benson (giving up rights in writing). See also Family Code §850 et. seq
In addition, a prenuptial or postnuptial agreement – may be drafted to define property rights outside of the state laws denoting community property.
Though it should be noted, even with a prenuptial or postnuptial agreement, there still may be a fight over assets in the event of divorce. However, most courts will acknowledge a properly negotiated and drafted prenuptial/postnuptial agreement when presented as evidence.
Unless certain things are done to change community property into separate property, as delineated above, the way title is held, may make little difference in a divorce action.
If the couple holds the title on a piece of real estate jointly, it is presumed to be community property. See Family Code §2581. However, in certain circumstances, the parties may take title in joint form and still make it one party’s separate property. For example, if they take the title to the property in joint name, but the grant deed clearly states it is the separate property of the other party, it will be considered separate property even though it is held in joint name.
In short, California law regarding separate property differentiates it from community property as follows:
- Any property owned before a couple was married or acquired during the marriage with separate property,
- Any property inherited or received as a gift from a third party during the marriage,
- Proceeds from the rent or sale of separate property and any subsequent assets purchased with the proceeds,
- Items and money earned while legally or physically separated from the spouse and
- Any items conveyed from one spouse to the other with the intention of designating it as separate property as long as the requirements of Family Code §852 are met.
- Everything else accumulated during the marriage outside of these parameters is considered community property according to law.
- For all these reasons, it is crucial to seek legal advice from a competent, Certified Family Law Specialist in family law before contemplating any property transactions with your spouse. It may eliminate any surprises down the road in the event of a separation or divorce.