Recently, a friend of mine, who is currently looking to purchase a home, wondered whether his house would automatically become community property if he were to marry. I was surprised at the question; however, I realized that this is something that might actually prevent an individual from purchasing property if he or she is not fully informed. There are so many misconceptions and misunderstandings about how the laws work here. I thought a little refresher on the basics of community property can be beneficial to all.
California is a community property state, where the division of assets may become a large part of divorce proceedings due to the complicated nature of characterizing the assets. Community property is defined as all property and debt that is acquired from the date of marriage until the marital cut-off date.
As I told my friend, property that is owned prior to marriage does not automatically convert from separate property to community property. In fact, assets that either spouse brings to the marriage are presumed to be separate property. Additionally, gifts and inheritances acquired during marriage are the separate property of the spouse who acquires them. The complications arise when property that was separate is combined with property acquired during the marriage or property is transferred between the spouses, changing the legal title in which it is held. If a married couple decides to separate, the law also provides that property the individual spouses acquire after separation, but before the divorce is final, is separate property.
There are many different factors that a court will look at when characterizing property at the time of dissolution. The presumption in California is that marital assets that the parties acquire during marriage are considered community property, and are to be divided 50-50 at the time of dissolution.
The community property scheme is the default arrangement; however, this can be overcome or changed. By entering into a prenuptial or postnuptial agreement, spouses can agree not to have community property, or agree that only certain property will be part of the community. Spouses can also agree to transform or convert (in legalese, “transmute”) the community property into separate property. The manner in which they take title to real estate is one way to evidence an agreement that the property is not community property.
Needless to say, the issues of community and separate property may be complicated, and it is always prudent to seek advice when questions arise whether it is prior to marriage, during marriage or pending dissolution.
– Sarah Rosenblatt