Community Property Law California

From LoveToKnow Divorce

Residents of the state who are or who are planning to marry should understand community property law in California.

Community Property Law in California Overview

In California, all property owned by a married couple is either community property or separate property. Community property is defined under state law as being "any asset acquired or income earned by a married person while living with his or her spouse." Separate property includes assets that the person owned before marriage or assets that he or she received as a gift or inheritance. When the marriage ends due to separation or divorce, community property is divided equally between the spouses unless they signed an agreement to the contrary.

How Community Property is Calculated

The concept of community property in California is not as simple as dividing all the couple's assets down the middle and each person gets half. On legal separation or divorce, the fair market value of the couple's assets is calculated and their joint obligations (debts) are subtracted from that figure. The amount remaining is the couple's community property, and it is this figure that is used to determine the property settlement.

The law doesn't specifically state that the couple's community property is to be sold and that each person gets a cash payout for half of the amount. Instead, each person can receive their portion of the community property "in kind." This means as long as the value of the assets given to each spouse are equal, they can divide their property in a way that makes sense to them. This may mean that one person retains title to the matrimonial home, while the other person gets to keep a vacation property and the couple's investments or a business.

Community Property and Pension Plans

Under community property law in California, pension plans are subject to division when a couple splits up. This issue can be handled in one of two ways:

  • Cash Out
  • Reservation of Jurisdiction

Cashing Out a Pension Plan

With this method of determining the value of a pension plan, an actuary is brought in to calculate its present value. The actuary examines the pension plan description, along with how much the value of the pension plan has changed since the contributing spouse started the plan. The contributing spouse is credited with the value of the pension plan when community property is calculated.

Reservation of Jurisdiction

This method of dividing a pension plan works a little differently from the cash out method. With a reservation of jurisdiction, the non-contributing spouse is entitled to a monthly payment from the pension plan when his or her former spouse retires. The amount of the payment from the pension plan would depend on how long the couple were married, as well as how long the contributing spouse was putting money into the pension plan.

The formula for calculating the way that a pension plan would be divided under community property laws in California is as follows:

(Number of years the contributing spouse participated in the pension plan) divided by (Number of years the couple were married)

If you take the example of a person who contributed to a pension plan for 20 years and who was married for half of that time, the calculation would work out this way:

20 years of contributions divided by the 10 years of marriage = 10. The community property component of the pension plan is one-half of the value of the plan. Since all community property is divided in half, the non-contributing spouse would be entitled to a monthly payment equal to 25 percent of the spouse's pension benefit when he or she retires.

Family Residence and Community Property

Even though the matrimonial home is subject to division under California's community property law, most judges will allow the custodial parent and any minor children of the marriage to remain in the home for a time after the divorce is granted. The custodial parent is responsible for paying the mortgage, property taxes, and homeowners insurance for the property. The property may be sold:

  • when all the children have moved out of the family home
  • once the youngest child has reached the age of majority
  • on an agreed-upon date
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