Community Property
One of the primary issues in a divorce is how to split up community property assets. Community property is everything that a husband and wife own together. California, for example, is a community property state. This means both the husband and wife equally own all money earned by either one of them from the beginning of the marriage until the date of separation. In addition, all property acquired during the marriage with “community” money is owned equally by both the wife and husband, regardless of who purchased it.
Like community assets, all debts contracted from the beginning of the marriage until the date of separation are community debts. Therefore, each spouse is equally liable for debts. In most cases, this includes unpaid balances on credit cards, home mortgages and car loan balances. It is important to close out all credit cards, bank accounts, and “joint” accounts as soon as possible after a divorce has been decided. It is not enough to remove names from the account.
Separate Property
Separate property, on the other hand, is everything a husband and wife own separately. Separate property does not need to be divided between the spouses. In most cases, separate property includes:
- Anything owned prior to marriage
- Anything inherited or received as a gift during the marriage
- Anything either spouse earned after the date of separation
Separate property can also include anything that one spouse gives up to the other spouse in writing. In certain cases, separate property can become mixed with community property. When this occurs, it is important be able to trace the payments and show where the separate and community money came from. For example, a husband may have contributed the down payment for a house, got married, and then paid off the mortgage with community property. In this case, the husband would be reimbursed for the down payment if he could prove his separate funds were used to pay it.
Similar to separate property, separate debts belong to one spouse. All debts incurred before marriage are separate debts. For example, educational loans or job training loans incurred before marriage would be separate debts.
Date of Separation
In some states, the date of “separation” is the date when both husband and wife decide to terminate the marriage. In others, it’s considered the date when one of the spouses moves out of the marital home. This is a very important date because it marks the end of when property is characterized as community property. Unfortunately, the date of separation is subjective and often open to debate. The courts will look for physical evidence of a final breakdown, such as moving out of the house.
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