Division of Assets and Debts
Part of getting a divorce is working out a division of assets and debts from the marriage and communicating this to the court. Like the other main areas of required decision making in a divorce (spousal support, child support and a parenting plan), it’s almost always best to make these decisions yourself rather than have them made for you by a judge. You have almost complete discretion in coming up with a division that you can agree upon.
A common approach to support well-informed decision making is to:
1) list all the assets and debts;
2) characterize each of them (as marital property; separate property or a mixture of the two);
3) value them; and then
4) come up with an agreeable division.
Each of these steps is important. In fact, part of the legal process for getting a divorce in California is “financial disclosure” in which you must provide each other with information about your assets and debts which you affirm under oath to be complete.
As regards listing the assets and debts, it’s best to include everything of value, even if you think an item is one spouse’s separate property. A court form used in the financial disclosure process (FL-142) can be used as a checklist to help you remember everything. Generally there is no need to list individual pieces of furniture and appliances, unless it’s helpful for dividing them.
Characterizing the items as marital, separate or mixed property can be somewhat complex. Marital property in California law is called “community” property. In general, everything that was acquired during the marriage and before separation, other than gifts or inheritances, is considered community property.
The value of financial assets and debts can usually be determined from account statements. For physical assets, current market value is usually used. Some items such as a house, a business or a pension may require the services of a valuation professional.
There are many considerations involved in coming up with an agreeable division and many creative ways to go about it. Seeing who would be the most logical “owner” of each asset and debt is usually a good place to start. Sometimes there can be major tax implications that may not be obvious on the surface. For some couples, what is agreed in the division of assets and debts affects the spousal support agreement and vice versa.
If you are unable to come up with your own division of assets and debts, a judge will have to do so. If the value of your assets exceeds the value of your debts, the court is required by law in California to give each spouse exactly half the total value of marital property. If your debts exceed your assets, a judge does not have to make an equal division and can take into account each spouse’s ability to pay the debts.
Separate Property & Reimbursements
Separate property, which for example was acquired by a spouse before marriage or after separation, is not subject to division by the court. However, it is a good idea to have the court confirm as part of your divorce settlement which items of separate property belong to each spouse.
Under the umbrella of division of assets and debts, there are also sometimes requests for reimbursement. For example, a spouse could ask for reimbursement from the marital community or the marital community could ask for reimbursement from a spouse.