Solving Complex Family Law Issues with Creative Strategies

How Wealth is Divided in Divorce

California is a community property state. Therefore, a couple who amasses their wealth within their marriage is subject to share the assets composing their marital estate equally. These less complicated divisions of wealth are becoming less common, with more couples entering subsequent marriages and marrying later in life.

What is a High-Net-Worth Divorce?

Any divorce involving more than one million dollars in assets is considered a high-net-worth divorce and can encounter many complications not prominent in other divorces. These arise when calculating appropriate spousal support and child support payments, deciding whether and how to divide retirement funds, and identifying spouses’ separate property.

What is Separate Property?

While marital property or community property in California is any property accumulated during the course of a marriage, separate property belongs to one spouse alone. It remains the sole property of the owner spouse unless and until its status changes or is transmuted by some action.

Separate property includes:

  • Property acquired by one spouse before marriage;
  • Property inherited or gifted to one spouse alone;
  • Property defined explicitly by a pre or postmarital agreement as separate property; and
  • The rents, profits, or proceeds from separate property.

There can also be a marital claim on separate property if it becomes commingled or mixed with marital property or the nonowner spouse contributes to its appreciation in value over the marriage.

What is Transmutation?

When the spouse who owns separate property jointly titles a separate asset with the nonowner spouse, that property becomes marital property. This is called transmutation or the transmuting of a separate asset into a marital asset.

Once a title is shared, separate property is community property for the purposes of a California divorce and subject to division as such.

What is Commingled or Mixed Property?

Commingled or mixed property or assets are any assets so entangled with marital assets that they are difficult or even impossible to trace to their separate source. This generally occurs when marital funds pay off separate property or vice versa.

Appreciation in Value

When separate property increases in value or appreciates due to the efforts or participation of the nonowner spouse, some or all of the appreciation is marital property. However, not all appreciation is marital property and divisible in divorce.

Appreciation may be active or passive. Active appreciation requires contribution on behalf of either spouse. Passive appreciation would occur without any action by either spouse.

For example, an increase in separate investment accounts due to a market fluctuation is passive appreciation. In comparison, a nonowner spouse who fixes up an owner spouse’s separate home for sale is active appreciation.

Contact an Experienced California High-Net-Worth Divorce Attorney Today

If you are considering divorce and have concerns about the division of marital wealth or separate wealth, seek professional advice today. At Moradi Saslaw, our high-net-worth divorce attorneys can give you proactive, practical advice regardless of where you are in the legal process.

Moradi Saslaw also offers pre and post-marriage legal advice and services to keep your assets intact. Discuss a premarital or postmarital agreement with one of our Newport Beach divorce attorneys or legal separation agreement in lieu of divorce.