If you are or soon will be in the midst of a divorce process in California, and if you own substantial properties, equitable, legal division of that property is a major concern. And if you have one or more investment account or investments in real estate and other high-priced items, division of that property too can be difficult to agree upon with your spouse.
Whether house, car, expensive furniture, clothing, or jewelry, bank accounts, pensions, 401Ks, stocks and bonds, whole life insurance policies, business assets, or something else, you want to protect your investments as much as possible during a divorce.
At San Diego Divorce Attorney, we have deep experience and minute knowledge of the law when it comes to protecting investment property during a divorce. Contact us today by calling 858-529-5150, and we can give you a free consultation and assist you in navigating the financial complexities of a California divorce settlement.
Property Division in High-asset Divorce
At San Diego Divorce Attorney, we understand that investments you have made in the past are often among your most valuable property, and that you are counting on these to live comfortably in the future, including in your retirement years.
But the truth is, high-asset divorces often involve so many different kinds of property (and of complex nature and high cash value), that it is difficult to untangle them all and find the best way to divide the property equitably and in accordance with California law.
At San Diego Divorce Attorney, we know how to properly valuate your investments and those of your spouse and how to protect separate and semi-community property from being simply lumped in with community property. We can access the best of forensic accountants to assist and ensure all tax liability, capital gains, and future growth potential issues of investments are thoroughly examined before you make the relevant decisions.
Be it the cash value accumulated in a whole life policy, an IRA or 401K, the equity in the family home, or anything else you have invested in substantially or have a sentimental attachment to, we can help you protect it during the divorce process.
Retirement Funds
One area that deserves special mention is retirement funds. When a divorce necessitates the divvying up of marital property, pensions and any other funds or investments you/your spouse will count on for support in retirement become relevant.
How much, if any, of your retirement funds go to your spouse will depend on how long you've had them, how much of the money put into them was invested during the marriage, and other factors.
It may not be wise to divide a 401K, IRA, or other fund immediately, given tax issues, but the divorce order can specify a date on which the division is to take place. OR, it could be a matter of a part of the monthly benefits going to the other spouse after retirement.
California is one of nine states that generally stick to a 50-50 split deal on all forms of marital property, including retirement funds. But the way in which these are split, if necessary, is very important. Obviously, it's much easier to divide a bank account than an investment fund.
For starters, we'll need to gather summary plan descriptions of any employer based plans, find the balances and history of all accounts, examine the equity in real estate, and then add this to the value of all other marital property. The division is supposed to be as close to 50-50 as possible overall, but that doesn't mean every account has to be split up or split on the 50-50 basis. And it's not always best to do so.
And also realize that the current cash value of an account is not the only important factor. IRAs, for example, have taxes pre-paid upon deposit, while 401Ks are taxed upon withdrawal - and a 10% early withdrawal fee can apply. That makes a big difference in the "real" ultimate cash value of the accounts.
Social Security Benefits
And besides other investment accounts, don't forget about Social Security. If the marriage lasted 10 years or more, you can still get SS benefits from your ex-spouse's SS payments (even if he/she remarries). However, if you remarry, you may not be able to collect here.
An ex-spouse who qualifies can start taking his/her share of the other ex-spouse's SS benefits at age 62 or later. He/she does not have to wait for the other ex-spouse to retire. And upon the death of an ex-spouse, one can sometimes receive all of his/her SS benefits, even when he/she left a widow/widower from a later marriage.
Often, an ex-spouse can get 50% or even more of the other ex-spouse's SS benefits. It depends on incomes and other factors, but that's not an uncommon scenario.
Your Ex-spouse's Will
You will want to arrange a new will for yourself as soon as possible during/after a divorce. Wills will be totally separate. That is, you will be excluded 100% from receiving anything in an ex-spouse's will.
In fact, an ex spouse cannot serve as a trustee or estate administrator on his/her ex's will. Nor can he/she receive anything even if in the will - exclusion is automatic based on state law.
The Costs of Divorce
Another expense to take into account when dividing marital property and debts is the expense of processing the divorce.
This averages around $15,000, though the amount varies greatly based on the net worth of the persons involved, whether the divorce was contested or not, and other factors.
Don't use up your savings or retirement account to pay for the divorce. And, if possible, prevent your spouse from using up the community property savings to pay for his/her end of the divorce costs.
The costs of the divorce can also be split 50-50, and this expense can be included in the final property/debt division settlement, and thus, it will impact how other property is divided - including investment accounts/property.
Protecting Specific Property During a Divorce
Many times, there are specific pieces of property - a car, home, vacation property, expensive stamp collection, or investment fund (or whatever it be) that one spouse is particularly concerned to retain.
At San Diego Divorce Attorney, we understand how to fight and secure your most important property during a divorce.
First, if the property in question is separate property, we can help you prove that fact. Realize that the status of property as separate or community is often in dispute during a divorce.
Second, we have well seasoned negotiation skills. We know how divorce law and divorce settlements work, and what is reasonable and what is not in one. We know how to help you make a "deal" that will likely be acceptable to your spouse or that the court will approve at least, that will secure your most important property if at all possible and to the greatest degree possible.
Third, if you have a pre/post nuptial agreement, we can examine it and press it as evidence in the negotiations. OR, if your spouse is citing elements of a pre/post nuptial that are against state law or not enforceable in court, we can bring that fact up as well.
Understanding the Three Types of Property in a California Divorce
The ultimate background that largely determines how all property is treated during a divorce (along with other factors), is the property's status as separate, community, or quasi-community.
Community Property
Almost anything acquired by either spouse, both cash and assets, during the marriage, will be classed as "community property" (also called "marital property.")
Gifts and inheritances, however, are excluded. And anything excluded by a pre or post nuptial agreement can also be excluded, if the agreement be established as legally valid.
Thus, all income (of both spouses) and everything bought with that income during the marriage is community property. And all debt acquired during the marriage are community as well. Even if only one spouse ran up a debt (say, on a credit card), it is still community in status.
Separate Property
Essentially, anything you or your spouse owned or earned before the marriage, remains the separate property of each of you. Any income you earn from your separate property (like rent or business profits) is also your separate property.
And if you bought an item with money that was separate property, the thing bought remains separate property too.
But gifts (including wedding gifts) and inheritances gained during the marriage are separate property as well, regardless of their not being owned before the marriage.
Also realize that debts can be separate property too. A good example of this is a spouse who leaves and then takes out a credit card and runs it up before the divorce. Since the card and debt was acquired after the "date of separation," it is likely separate property (debt).
Quasi-community Property
If either/both spouses acquired earnings or property in another state during the marriage that would have been community property, had it been acquired in California, California law will call it "quasi-community" property and treat it the same as community property.
Thus, the difference here is in name only, unless an attempt were made by either spouse to file the divorce in another state.
Mixed (Commingled) Property
There are cases where a particular investment account or item or other piece of property in a California divorce is not so easy to categorize as community or separate.
Sometimes, property may be partly community and partly separate. OR even partly the separate property of one spouse and part of the other (but not on a 50%-50% basis).
Commingled or "mixed" property is certainly more complicated to divide in a divorce. And it can be very complex and create tense disagreements just in determining the exact status of such property.
Let's say a house was owned by one spouse before the marriage, but then during the marriage, the house was sold. The proceeds were then used for a down-payment on the next house. Then, the mortgage on the new house was paid using 100% community property.
In this situation, the down payment is considered separate property but the payments community property. Thus, the total equity in the house is commingled. The debt is community, however. It takes some experience and skill to untangle this kind of situation and make it a part of an overall acceptable to all, property division settlement.
Another common scenario involves commingled pensions. A spouse may well have a pension plan before, during, and after the marriage up until retirement. Only the contributions made during the marriage are marital property - the rest are separate property.
If both spouses have a pension, it's probably easier to just let each spouse keep his/her own pension 100%. But in order to do that, the value of each pension in regard to community property has to be determined. If the two pensions are not of equal community property value, then more community property value from somewhere else has to come in to balance it out - in the overall settlement.
Regaining Your Financial Independence/Stability After a Divorce
A divorce will separate you financially from your spouse, aside from any ongoing alimony or child support or pension payments and the like in the future.
In general, you need to work quickly to reestablish financial independence and stability. Open up your own bank accounts, get your own credit cards, set up your own investment accounts.
You budget and finances will change drastically as you go back to single life. Alimony may help offset the difficulty of the transition, but it's best to take action to become self-sufficient as much as possible and as soon as possible.
A fair division of investment/community property and the proper preservation of separate property will help. But good advice is to work towards becoming financially independent.
Contact Us Today for Assistance
At San Diego Divorce Attorney, we have been successfully handling legal matters related to divorce and family law in San Diego and Southern California for our clients for many years. And we have well seasoned legal skills that include both knowledge of the details of California divorce statutes and of the practical, local courtroom processes involved.
If you have investments you want to protect as you go through a divorce, or if you have any other concerns on property division, child custody/visitation, spousal and child support, and other issues involved in a divorce, do not hesitate to contact us for help.
Contact San Diego Divorce Attorney anytime by calling 858-529-5150, and we will give you a free, no-obligation consultation and offer you immediate assistance with your case!
