In order to assist our clients who are considering a dissolution of their marriage, or divorce as it is commonly known, this article explains basic California community property laws.
California is what is known as a community property state. The theory behind the community property system is that marriage is a partnership, and that property acquired during the marriage by the labor or skill of either party belongs to both in equal shares, and may be divided between the parties by a court in the event of death or the legal dissolution of marriage.
The basic rule is that the court must divide the community property assets and debts equally so that “net” values (i.e. assets less liabilities) received by the respective parties are equal. On the other hand, the parties to a marital action may divide their community estate by agreement, in which event they are not limited by the equal division requirement.
Generally, the earnings, income, and benefits resulting from the services and efforts of either party during marriage are community property. Separate property, defined as all property which is not community property, includes all property 1) owned by a spouse before marriage, 2) acquired during marriage by gift or inheritance, 3) produced by separate property, or 4) acquired after the date of separation. A court generally has no authority to dispose of either spouse’s separate property during a legal proceeding for dissolution.
Spouses may by written agreement change the character of their property from community to separate or vice-versa. They usually do this with a pre-marital agreement which is a formal written contract executed by the parties before marriage.
Normally, no agreement is necessary to preserve the separate character of a spouse’s property owned before marriage, together with the income and appreciation derived from that property during marriage.
Because income arising from a spouse’s skill and effort during marriage is community property, the law provides that the other spouse is entitled to a fair share of the economic benefit derived from a spouse’s significant effort to improve his or her own separate property. The same rule applies when one spouse devotes time and effort to improving the other spouse’s separate property. As result, the management by one spouse of either spouse’s separate property may sometime result in a community component to the separate property asset.
Divorced spouses lose inheritance rights in the other’s property. These rights include the right, as a surviving spouse, to inherit the other spouse’s half of the community property, and the right to inherit at least one-half the value of the other spouse’s separate property if that spouse dies intestate, that is, without having made a valid will. We recommend that as part of a comprehensive plan of marital and estate planning our clients execute a new will or trust which refers to the former spouse and states the marriage was dissolved by a court.
In marital dissolutions, the court may order either spouse to pay a sum necessary for the support of the other spouse (formerly known as “alimony”). There are two types of spousal support: temporary and permanent. Temporary spousal support is generally payable pending final judgment of dissolution of the marriage. Courts employ a software program that uses a set formula for calculating temporary spousal support payments based on the respective incomes of the parties, less certain deductions. This is what is commonly known as “guideline” support. The court has little or no discretion to deviate from guideline spousal support.
Before or after the court enters a judgment of marital dissolution, the court may order permanent or long-term spousal support which is payable in any amount and for any period of time that the court deems just and reasonable. However, the court will base its decision upon consideration of the parties’ standard of living established during the marriage and a detailed set of other statutory factors.
It is the goal of the courts that the supported party be self-supporting within a reasonable time. In short term marriages (generally accepted as those of 10 years or less), the rule of thumb for duration of support is about half the length of the marriage, and frequently less if the party asking to be supported is young, educated and has marketable skills. The longer the marriage, the more likely it is that a court will set no date for termination of support. In other words, a party to a long term marriage, say more than 15 years, could be supported for the rest of his or her life, especially if the supported party forgoes an education, career, or profession in order keep the family home and/or raise the children of the earning party. If there is a change in circumstances, either spouse can come back to court and ask for a change in the support obligation.
Waivers of spousal support by either spouse are permitted, so long as the waiver is reasonable and the parties understand the consequences. The parties can either waive forever their rights to spousal support, or instead, waive their rights for the time being with the court “reserving jurisdiction” on the issue of spousal support.
The court may order either spouse to pay a sum necessary for the support of the parties’ children. The ability to ask a court for child support may never be waived. Courts employ the same software program used to calculate temporary spousal support to calculate child support payments.
Now that you are armed with a basic knowledge of the law, you are in a position to consider what shape your marital dissolution agreement will take, taking into account economic realities. We look forward to your input and hope this memorandum helps serve your goals.
If you have any questions, please do not hesitate to call.