Divorce is challenging for many reasons. The process is fraught with emotional pain. Splitting with your spouse can cause financial pain, too, and you may worry about parting with significant assets that you would like to keep. If you have concerns about asset division, keep these three tips in mind.
California is a community property state
California law upholds a community property system for asset distribution. This system works out a 50-50 split of all assets and debts shared by you and your spouse. You will not physically divide your property straight down the middle. Rather, you two will work toward receiving the same value of your joint assets. You will take on an even amount of debt, too, though it is important to make sure the payor’s name is on the account. If your spouse agrees to take on a debt you hold, the creditor could still pursue you if you remain the account holder.
Separate property is not community property
Community property laws do not apply to any separate property you own. These assets most often qualify as anything you held before marriage, so long as your spouse did not retain ownership during your union. Separate property also protects any inheritance or gifts you received before or during your marriage. And it can also include purchases and financial gains made during your separation. If you try to designate property acquired during your marriage as separate, you can only do so through a written agreement.
Remember your retirement plan
Any retirement or pension plan you hold counts as community property in California. As you divorce, you will need to fill out a Qualified Domestic Relations Order (QDRO) to split it. This document sets forth the transfer of half your plan’s funds to your spouse. These will help fulfill asset division, spousal support or child support obligations. Yet, you may want to protect your retirement plan from losing value. In this case, you or your spouse can motion to trade it for another asset of equal worth. So long as they agree, you may no longer need a QDRO.
Asset division is complex, and it’s important you understand California’s laws regarding it. By learning their specifics, you can work to protect yourself and achieve a fair settlement.