“Property owned before marriage or acquired during marriage by gift, will, or inheritance is separate property,” according to Section 21 of Article I [Declaration of Rights] of the California Constitution. Moreover, Section 753 of the California Family Code guarantees that, “except as otherwise provided by statute, neither husband nor wife has any interest in the separate property of the other.” Thus, even if California is a community property state, the separate property of either spouse is not covered by the “50/50 split” rule that is generally applied by the courts following completion of a divorce proceeding.

Division of property between spouses after dissolution of a marriage can however be rendered more complicated when there is commingling of separate property and community property. As is likely to happen during a marriage, spouses typically tend to deposit both community earnings and income or sales proceeds from their separate property into their joint accounts. Or, they make certain asset acquisitions during the marriage, like the family residence or their pension plans, using a mix of both community property and separate property earnings and/or sales proceeds. Tracing the portion of community property bought from mixed sources back to the original separate property sources can be very difficult especially if the marriage lasted for several years.

In addition to the commingling of separate with community property, another major cause of complication in the apportionment of assets after a divorce is “transmutation.” During the marriage, separate property of one spouse can be transmuted into community property or into separate property of the other spouse through a written agreement.

After segregating all separate property, what remains is community property, the market value of which should generally be divided equally between the divorcing spouses. As far as the law is concerned, the two parties should be given a clean break from the marriage so that each can move on independently from the other. Courts will usually not encourage the spouses to still co-own any asset together once the divorce order is finalized.

Spouses who are divorcing or legally separating on good terms can initiate their own property settlement agreement. Here they do not have to split hairs determining which items are community property and which are separate property. They also do not have to worry too much about how to exactly divide the community property equally between themselves. In fact, they can agree to apportion their marital assets any way they choose. Once they have ironed out the details between themselves, they can submit the final property settlement agreement to a judge for signature.

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