Property Issues in the California Divorce

California is a community property state. This means that most property and retirement benefits acquired after the marriage are owned equally by the husband and wife. It doesn't matter who earned it, each party owns one half of the money and property that's acquired during the marriage.

There are exceptions to the community property laws that are called 'separate properties.' These are such things as:

- If you earned money or bought and paid for property before you were married, that's your separate property and your spouse has no claim to them.

- Any retirement benefits you earned before you were married are your separate property.

- Anything that was given specifically to one party of the marriage, rather than both, is that partie's separate property. If, for instance, your father-in-law gave your wife a washing machine, and didn't intend it as a gift to you, that's your wife's separate property and you have no claim to it.

- Any inheritance that was specifically to one party or another is not community property.

-Property that you accumulated after your date of separation is also considered separate property.

Everything else is considered community property and has to be divided at the point that the marriage is dissolved.

"That's the reason that there's so much stress on the date of separation in California. Anything you get from the date you split up with your spouse is your separate property, so it can be extremely important to be able to establish that date. In some cases there's no sweat about that. One person moves out and rents her own place, the lease is pretty clear evidence of the date. In some cases, though, you may actually have people living together all through the divorce procedure, but sleeping in separate beds. The date of separation then becomes more a matter of when they felt that they ceased to be husband and wife, and that can be tricky to prove." - John S., Attorney at Law

Not at all. Any agreed property settlement will be approved by the Court, whether it's 50/50, 25/75, or 90 percent to one party and 10 percent to the other. The important thing is that you both agree how the property will be divided. If you can't reach an agreement, the Court will divide it for you and it will try for as near a 50/50 split as possible. One of the things that's really important to emphasize is to talk to each other. Sit down and hash it out, try to get a good agreement going before you start the process. If you can't agree, then you can end up in a contested case and the only winners there are lawyers.

"The Family Code specifically states that it's in the best interest of the state for the property to be divided equally. You don't have to, of course, but you want to be really sure that the Judge understands that you've both agreed that an unequal division is alright. The easiest way to do that is with a marital settlement agreement. It's like a contract you draw up - you both sign it and the Judge knows that's there's no contest. The down side to it is that you probably end up having to pay an extra filing fee, because they consider the marital settlement agreement a response. But, hell, if it saves you having to go to court, it might be worth the extra hundred bucks." - Pete K. , Attorney at Law

Your debts have to be divided at the point that your divorce is granted, just like your property. And, again, if you agree on who's taking what debt, the judge will go along with that. You need to remember, though, that your creditors aren't a party to your divorce. Even if a judge assigns a debt to one party, the creditors aren't bound by that. If your name is on the contract, they go after you, too.

"Too often, people have a rather naive view that the judge can protect them from their creditors by assigning debts to the other party. While that may make the other party vulnerable, it doesn't protect the person who isn't assigned the debt. If, for instance, you set up a joint bank account and you were both issued credit cards on that account, you're both responsible for the amount that's owed. The judge has no power to order the bank to go after only one party." -Abraham M. - Attorney at Law

While you remain married, your community estate can still be liable for debts that your spouse incurred before you got married. Once the divorce is granted, the judge will assign debts incurred before the marriage to the person who incurred them, and you will no longer be liable.

"Your separate property is not liable for your spouses' separate debts. They cannot, for instance, go after a house that you owed before you were married. Additionally, your separate earnings cannot be held liable for your spouses' debt. In other words, if you deposit your paycheck into a bank account in which your spouse cannot make deposits or withdrawals, that's your separate earnings, and it can't be touched."
- Martha T. , Attorney at Law

The Superior Court can't void contracts. If you agree that your spouse should have the car (furniture, house, computer, stereo system, etc.) and he or she doesn't pay for it, you'll have to honor the contract if you signed it. If your spouse wants the car, he or she should be able to demonstrate that they have the ability to pay for it. The best way to demonstrate that is to have it refinanced in their name alone. If they can't get it refinanced, then you shouldn't agree to it, unless you're willing to make the payments yourself.

Of course, if it comes down to crunch time, and you're looking at a court fight, then you want to look carefully at the finances involved. If you're going to spend $5,000 fighting for a car that only has $3,000 owing on it, you're losing your perspective on things. It happens, but it's not good. I had a client once who paid me over a thousand bucks to fight for a Chihuahua dog. I told him, 'Look, take $20.00 bucks, go to the pound, and buy yourself a REAL dog.' He wouldn't listen, though. He and his wife were that far into their hatred for each other." -James T., Attorney at Law

As long as you remain married, you are liable for your spouse's debts under California law, even debts that he/she incurred before you were married. Once you separate, however, any debts that he/she incurs are separate debts and will be assigned to him/her when the divorce is granted. A notable exception to that, however, is any debts that your spouse incurs for, "lifes' necessaries," during the separation. In other words, if you toss your spouse out of the house and he/she has to borrow money to pay for food and shelter, you can be held liable for that debt, even though you've separated.

"Another exception to that would be if you were able to demonstrate that your spouse had squandered the community estate for the purpose of depriving you of your share. Say your wife goes out and maxes out all of the credit cards, just to drain the estate. In that kind of a case, the judge can order an unequal division of the property to compensate you for your loss." - Don W., - Attorney at Law

I HELPED MY SPOUSE PAY HIS/HER CHILD SUPPORT FROM A PREVIOUS MARRIAGE. CAN I GET ANY OF THAT MONEY BACK?

Only under certain circumstances. If your spouses' previous child or spousal support obligations were paid out of the community estate, AND your spouse had separate property or earnings that could have been used to pay that support, THEN you have a right to be recompensed for that money.

"I had a case just like that a few months ago. The wife was actually earning considerably more money than the man, so she helped out with the child support. Just a matter of being a loving couple at the time. In the settlement, though, there was no doubt that the man had been earning adequate sums to pay his own child support and still live fairly well, so he had to pay her back." -James T., Attorney at Law

This is one of those cases where all too often the answer is no. Until a Court rules one way or the other, everything you own is considered community property, meaning you both own it. If it's your own property, you've got a right to destroy it, if you want to. If you call the cops in this kind of a situation, they'll tell you that they aren't Judges and they can't arrest someone for destroying their own property.

You can, of course, turn it into a contested divorce and ask that you be reimbursed for the property damage. In most cases, you end up paying the lawyers more than the property is worth. If you're going to do that, take a long hard look at what the property's worth and what kind of money your spouse has to work with. If he or she doesn't have the money to pay for it, there's not much the Judge can do about it.

The very best thing you can do, if you think there's any chance of your spouse going ballistic and breaking things up, is to get your stuff out of there before you file for the divorce. Remember, once you file for the divorce, you're placing yourself and your property under the jurisdiction of the Court and you're not supposed to remove it. There are restraining orders on the initial pleadings in California, so you've got a bit of protection on it. Remember, though, a restraining order's just a piece of paper. People get killed because they relied on those pieces of paper instead of their common sense.

"Oh, yeah . . . you hang around family law long enough and you see some pretty severe cases. One of my clients was a soldier, and his wife went through the closet with a straight razor. Absolutely shredded all of his uniforms. In another case, the wife worked over the family car with a baseball bat. Totaled it. I'll never forget this one idiot I had for a client. I was trying to communicate the difference between community property and separate property. I said, 'Look, that car's your separate property. You can sell it, keep it, hell, you can burn it if you want to.' Goddamned if I didn't get a call from the fire chief the next morning asking if I 'd really told my client it was alright to burn his car. And that's just what he did. Went home and poured gas on it and burned it up. A lesson in watching your words." - Dan E.. Attorney at Law

Well, many people do and just as many regret it later. The rule of thumb is that, once the divorce is filed, you're not supposed to remove anything but personal property. The best step on this is to have a mutual friend, pastor, or counselor help you make up a couple of lists as to who gets what. Then you meet at a mutually convenient time, with your friend or pastor there, and you split the property.

If your spouse absolutely refuses to be reasonable, you can show up at the door with a cop and he or she will allow you to remove your personal property without being harassed. By personal property, we mean gender-specific clothing, toilet articles, and things like that. Normally, the police will NOT allow you to remove computers, stereos, refrigerators, or furniture, unless both parties agree to it.

If you have possession of the children, the police will often allow you to remove whatever you need to take care of the kids. Do NOT take the kids with you, if you think there's any chance that your soon-to-be-ex might grab them.

Of course, there are people who sneak back into the apartment when the spouse is away and cart off the property. You're not supposed to do that once the divorce is filed and, if your case becomes contested, the Judge isn't going to like it. Once again, if you think there's any chance of this kind of thing happening, the best thing to do is to quietly get your property out of the house before you file for the divorce. And don't take the other person's stuff. It just causes problems down the road.

"I strongly advise my clients to stay out of that kind of a situation, unless they have several credible witnesses present. Divorces can involve some extreme emotions, and it's best to just stay away from your spouse if there's any possibility of violence. The last thing you want going into a divorce is a charge of spousal abuse. If you don't have any witnesses there, it's just your word against theirs." - Pete K., Attorney at Law

- If your spouse is still in town and you've got keys to the car, you can just go by at three in the morning and take it back. Don't go over and make a big scene, though, because you stand a very good chance of getting arrested and still not having your car. If you do get it back, get it out of town or get the locks changed before your spouse comes over and takes it back again. Don't remove it from the State of California, though, if you've already filed for the divorce.

- If your spouse is still in town and you don't have the keys, you can try talking to the dealer who sold it to you. If the dealer thinks he's going to lose the car that you haven't finished paying for, he may be willing to repossess it and then work a deal with you. Same deal about changing the locks or making the car inaccessible.

- If your spouse has actually left town and you have the keys, you can do the same as above. Be sure to get either the title or the contract to carry with you, so you don't get arrested for car theft on your way back home.

- If your spouse has left town and you can't get to the vehicle, about all that you can do is to put the vehicle in the petition for divorce and ask that it be awarded to you. Put the vehicle identification number in the final Judgment of Dissolution and then you can go get it after the divorce is granted.

"Oh, sure, we all know there are restraining orders on the back of the Summons and you're not supposed to take any property out of state. Try arguing that with a cop in Boondoggle, Minnesota after your wife ran back to her parents' house with your car. - Antonio, B., Attorney at Law

Sounds like some kind of a disease, doesn't it? Quasi-community property is actually property that you or your spouse acquired out of the state, but which would have been community property if it had been acquired here. Now, to a certain extent, it doesn't make any sense for a Superior court in California to be dealing with it. If you bought a house in Kansas, California doesn't have any jurisdiction over that property. We can't issue orders that are enforceable about property outside of the state.

Where it begins to make sense though, is when the Judge has to split up the property. Then he's going to be going for an equitable division. If you and your spouse are fighting over who's going to get the house, and you just happen to have a strip mall in Oregon, the Judge can take that into consideration when he's making his decision. Even though it's NOT community property, since it's not in a community property state, the Judge can treat it as IF it's community property for the sake of fairness in dividing the property that's in California.

"The court can't force a sale of property in another state, but the judge can order you to provide your spouse with conveyances to the property. The judge has enforceable jurisdiction over you, as a part of the division of the estate." -James T., Attorney at Law.

- One or the other of you is awarded the house. If that's the case, the other party will need to sign off on new deeds, or you'll need a Court order awarding the house to the party that gets it as a part of the divorce decree.

- You can sell the house. If you do, the profits (if any) are community property and have to be divided one way or another. If you and your spouse can agree on it, you can divide the profits anyway that you want to. If you can't agree, a Judge would probably try for as near a fifty/fifty split as possible.

- You can maintain joint ownership of the house. If that's the case, you should be really good friends, because you're basically entering into a business partnership with your ex.

By far and away, the best solution is to just sell the property and split any profits, if it's feasible to do so. Obviously, there are times when the housing market is down and houses just don't sell or you can't make enough to cover the note. You can't afford to pay rent and a mortgage and you can't sell the house. If that's the case, you need to ask for the house. Remember, if your spouse is awarded the house and doesn't pay for it, you're still liable.

"There are some other moves you can make with it, of course. If it looks like you're going to get stuck with alimony, for instance, you might make a deal that you pay the house payments as a part of the alimony, and split the profits from a future sale. There are creative options out there."
Dan E., Attorney at Law

Well, the first thing you should do is figure out how much the house is worth. Most of us owe much more on our houses that we've got in equity. Basically, then, the house becomes a community debt, instead of a community asset. The easiest way to resolve that problem is to ask a realtor or appraiser to give you an estimate on what the house is worth. If you owe more than you can get out of it, there's nothing to divide.

If there is equity in the house, then your spouse can get half of the profits. Remember, if you owned the house before the marriage, the equity accrued prior to the marriage is your separate property. Any equity accrued after the marriage is community property and can be divided.

"An issue you might want to explore is a simple buy out of equity. Sometimes people are hurting for cash after a divorce and they might prefer immediate cash to waiting for a sale. Or, perhaps, agree to a limited time alimony payment, if you think they'll go for it. That's one of those places where you can sit down and do some serious horse trading if you're still talking to each other." -John S. ,Attorney at Law

That depends on your spouse and your relationship. If you have a good spouse and a friendly relationship, no problem. You should be sure in your own mind, though, that your spouse is as committed to selling the house as you are.

Now, you can have a situation where one party continues to live in the house after the divorce and both parties continue to own the house, with the agreement that there will be a split of profits when the house sells. That can work out, if you have a low equity house and you really don't want to just break even or take a loss. One party gets to stay there, and the other party has a continuing investment without having to pay in to it. Under some circumstances, that works out fine.

"Well, obviously a realtor can't sell a house if he can't show it. I've seen cases where the person in the house chained a couple of dobermans out in the front yard, or they made sure that the house was good and filthy anytime the realtor was coming over. It can turn into a nightmare pretty fast." - Don W. ,Attorney at Law

If you owned the house completely before you got married, the answer is no, that's your separate property. Unfortunately, what most of us mean by owning a house is that we signed the papers before we got married. Anything that was paid into the house after you got married is community property and your spouse can ask for half of that principle (not the interest.) In most cases, where there are only a few months or years of marriage, it's not worth getting into a fight over. If you've established substantial equity in the house since you got married, though, your spouse can, and probably will, ask for half of that equity. In that case, you may end up having to sell the house even if you owned it prior to the marriage.

"Especially in California, of course, we can see dramatic increases in property values in a very short period of time. We saw that in Silicon Valley during the computer boom. People were paying huge amounts of money for shacks. Always a good idea to check your local real estate listings and visit with a realtor about what your house is actually worth." - Dan E., Attorney at Law

Student loans are specifically exempted from community debts under the California Family Code. They are normally assigned to the person who used them.

"Student loans are usually just handed off to the person who got the education. But, there are some factors that the judge can consider when it comes to payment for education. Say you paid for most of your spouses' education and you want to be reimbursed for that. The judge is going to look at how much you paid, but also whether or not you profited from your spouses' education. They've got a ten year rule, there. If you paid for the education and it was more than ten years ago, the presumption is that the community estate profited from the investment in the spouses' education. If it's less than ten years, the presumption is that the community profit hasn't been that much." - Martha T., Attorney at Law.

While community property laws say that anything that is accrued during the marriage is divisible, including military retirement, the Federal laws over-ride the State laws. Federal laws state that military retirement benefits can't be divided unless there are at least 10 years of marriage while the party is on active duty.

If you have been on active duty for that period of time and you are dividing military retirement benefits, the odds are very strong that you need a lawyer to process your divorce. The formula for dividing military retirement benefits is extremely complex and not one which you should attempt to do for yourself.

In most cases, retirement benefits are divisible as community property. If you've both earned retirement benefits and you're each getting your own, no sweat. If, however, one person has earned a substantial amount and it's being divided, you're better off going with a lawyer. At the least, you're going to need to consult an actuary and find out how much each party gets. Most companies with retirement benefits will also have personnel offices where you can get some help figuring out the actual amounts and setting up the paperwork.

"Then, you have to have a Qualified Domestic Relations order (QDRO) prepared, and they're an absolute bitch to prepare. They're so complicated that many divorce lawyers don't even prepare them; they subcontract them to lawyers who specialize in them. That's not to say that you can't do your own divorce if you need a QDRO, but you'll definitely have to hire a lawyer to take care of that part of it, unless the company you work for provides that service." - Pete K., Attorney at Law

Community property is generally anything that you acquired after the date of your marriage, even retirement benefits. The idea is that when two people become married, they become one unit, at least economically. It doesn't matter if only one party is working, or if one party makes much more money than the other. Everything that comes in, everything that's purchased, is owned by both parties equally (with the exceptions listed under separate property.)

When you file for a divorce, of course, the property has to be dealt with. It can be divided, sold and the profits divided, or you can go on owning it jointly. The Family Code of California says that the judge in a divorce case has to divide the property equally. Does that mean that you have to come up with an exact 50/50 split for the judge to grant your divorce? Not at all.

Contrary to the scenes that you see in the movies and read about in the tabloids, most people don't get into huge legal fights over their property. In most cases, the two people divide the property themselves and the judge approves of their agreed decision. And, when two people are splitting up, there's usually a sort of a natural flow to that process. Men tend to want their tools, computers, motorcycles, stereo systems. Women tend to be more concerned about appliances, furnishings, art, and jewelry, Most of the items that they might both want aren't really worth hiring lawyers over and so they work out compromises.

As long as the two parties agree on the property split, the judge will go along with whatever they come up with. If you can't agree, then the judge is bound by law to divide the estate as nearly equally as possible. That means that he or she is going to assign both the property and the debts in such a way that you both come out with about the same net worth. Of course, that's minus the large wads of cash you both left at your lawyers offices.

There are exceptions to the rule that married people own everything equally and you find them under the category of separate property. Separate property is owned only by one party to the marriage and there are several rules about it that you need to know.

1 - Anything that you owned prior to the date of your marriage is your separate property. That means that if you owned a car or a house free and clear before you got married, it's totally your property and your spouse doesn't have any claim on it. Of course, anything that you paid into it after the marriage and from community funds, is community property, and your spouse can ask to be compensated for that.

2 - Anything that you acquired after the date of separation is your separate property. That's why lawyers make such a big deal about the date of separation: its very important to be able to establish the exact date that you split up in a contested case in order to prove that it really is separate property.

3 - Anything that was given specifically to one party, rather than to both of you, is separate property. For instance, if your mother gave you her mother's wedding ring so that you could pass it down to your daughter, that wouldn't be community property. If your father was worried about your driving around in a 72 Pinto and gave you his old car, that wouldn't be community property, unless he intended for you both to have it. Inheritances specifically to one person fall under the same category.

4 - Personal injury awards are usually separate property. If you get hit by an ice cream truck and you're awarded $30,000 for injuries, that's your separate property. In a contested case, though, a judge can order that up to one-half of that money can be given to the other spouse, if its required for a fair division of the estate. Another reason to avoid contested cases.

5 - Some military benefits become separate property. If you have a service related disability, you can convert some of your retirement benefits into VA disability benefits, and that becomes separate property.

Quasi-community property is property that's owned in another state, but would be community property if it was owned in California.

Say what???

Well, here's the deal on that one: a California judge has the authority to divide California property, but he/she doesn't have the authority to order another state to do one thing or another. So, traditionally, the judges only dealt with property that was owned within the state of California.

So . . . suppose that you and your spouse live in a modest little house and drive a modest little car. Meanwhile, your spouse has been investing in strip malls in Florida and is quite a wealthy person by the time the divorce rolls around. In the traditional model, the judge would look at the house and the car in California and order it split equally, and not rule on the malls in Florida. Using the concept of quasi-community property, however, the judge can include the value of the property in Florida, even if he can't order it sold or divided. So, he/she might give you the house and the car and order that your spouse give you a cash payoff to compensate you for the property thats out of state.

It all sounds so cut and dried when you read about it in a book: this is my separate property over here and this is my community property over there, and the two things are really easy to tell apart.

Of course, nothing's ever that easy in real life. When two people get married, they're not usually planning for their divorce on their honeymoon. We have a tendency to mix our separate property in with the community property and then it can be really hard to get it back out again.

Suppose you've got a checking account with ten thousand bucks in it when you get married. Of course, you're married now, so you want some of those nifty checks that have both of your names on them, and you run right out and order them. Then you keep having your paycheck direct deposited into that account over the next five years, only that paycheck is community property now. And you use the account to pay all of the monthly bills and maybe you and your spouse think, "Hey, what's the point in having to hassle with two checking accounts?" so your spouse starts depositing into that account, too.

And then your wife runs off with the milkman or your husband falls in love with his troll secretary. What happened to that ten thou that you had in the bank when you got married? Well, the technical term is that it was, "commingled," with community funds. In laymans terms, that means that it's been so thoroughly mixed in with community property that all of the king's horsemen can't ever drag it out again.

In order to establish it as separate property, you've got to be able to prove a clean trace of the property. That means that you can prove that it was your separate property before you got married and that it's never become separate property.

For instance, if you had it in that account when you got married, and you never used that account for any other purpose and didn't deposit any community funds in it, that's a nice, clear trace. Or, you may have set up a pre-nuptial agreement that says, "This is my separate property, keep your cotton picking hands off of it." Or you might have a marital agreement after you were married that says the same thing.

For most of us, though, the odds are that we've mixed up a fair amount of our community and separate property by the time we get divorced. We just have to bite the bullet and treat it as community assets.

California law also allows you to wave a magic wand and change separate property to community property, or vice verse, and even change your separate property into your spouse's separate property. Its called, "transmuting," your property, and it means that both of you agree in writing to the change.

Why would you want to do that? Well, suppose you get some inside information that the next hot fad is going to be chocolate covered bagels, and you want to invest in a bakery, only you don't have the money. Your wife, on the other hand, is sitting on a nice wad of cash, but she's not interested in investing. She insists that a chocolate covered bagel is actually a doughnut, and we've already got doughnuts, so who in the hell would buy one?

You're still convinced that you're going to make a fortune off of them, though, so you've got to figure out a way to convince her to give you the cash. So, you've got that piece of land you bought near Tahoe before you got married, and you agree to turn it over to her, in exchange for the bagel bucks that you need. Since your'e married, though, it would remain community property if you just changed the deed. BUT, if you sign an agreement saying that it's her separate property, shes got it free and clear in case of a divorce. So here you've transformed your separate property into her separate property.

You can also agree to turn separate property into community property, like turning the land you owned in Tahoe into a community asset, where you'd still have a half share. Or, you can turn a community asset into a separate asset. If you'd bought the land in Tahoe after you got married, for instance, you can agree that it becomes your wife's separate property and you lose all of your community interest in it.

Now, when you take all of that into a divorce scenario, it starts to make a little more sense. Many people who are going into a divorce don't want to get into a fight, but they just don't trust the other person. Sometimes that's based on a sense of personal betrayal because their spouse filed for a divorce. Other times, its because their relatives and friends are sticking their big noses into it, and telling them they'll get screwed over if they dont fight the divorce. ("You know what your Uncle Fred did to me, may he rot in hell. Don't let this worthless man do it to you, honey . . .")

So, they want to see something in writing. They want it all spelled out in black and white, exactly what they're going to get out of the divorce settlement. Enter the Marital Settlement Agreement, or MSA. The MSA is a contract between the two parties in the divorce. It says, "We agree that this is the way that we want to settle our property and our debts," and then it lists who gets what. Both parties sign it and the judge almost always goes along with it. And, you can use the MSA to transform property, so you can bargain away to your hearts content.

Take a couple that's been married for 15 years: the husband worked for the same company for all of those years and has always planned an early retirement, so that he can go fishing every morning. In a divorce, his wife would be entitled to one -half of the retirement benefits he's earned during the course of their marriage, so there goes that early retirement. But wait . . . he's got a piece of property in Tahoe, too, and it was all paid off before the marriage took place and his wife loves to ski. So, he agrees in the MSA that the property in Tahoe is his wife's separate property and she agrees that he gets all of his retirement benefits.

And that's another example of the importance of the agreement in a divorce. Left up to a judge, the retirement would have been divided, the land in Tahoe would have been awarded to the husband who couldn't use it because he couldn't retire early, and no would have gotten what they wanted.

This is another one of those property concepts that may or may not be important to you in a divorce setting. Say that you and your spouse purchased 40 acres in the mountains, because you always dreamed of owning an alpaca farm when you retired. The deed is recorded as husband and wife jointly holding that property. Then a divorce rolls along. What are the consequences of that joint tenancy?

First of all, creditors from either spouse can come after the property. In other words, even if it was just your spouse who ran up all of the debts, they can still try to attach your interest in the property. Second, in joint tenancy, there is an automatic right of survivorship. If you file for a divorce and then you get run over by an ice cream truck, that property is still going straight to your spouse, no matter what you may have put in a post-separation will.

And, that really bothers some people. We do have a pretty extended waiting period before the divorce can be granted in California (6 months from the date that the respondent is served) and a spendthrift spouse can rack up a lot of debts during that period. And, of course, the idea of property passing to someone you're divorcing if you die during the waiting period doesn't sit well with some people.

The solution that some people use is to change the manner in which the property is held. California law allows either one of the parties to change the holding from joint tenancy to tenancy in common. Basically, that means that, although you both still own the property, you hold it as two separate property shares. Creditors cant come after your share because of what your spouse has done, and you can direct in your will who gets your share if anything happens to you.

Of course, before you run out and hire a real estate lawyer to change the holding, you may want to think about it. If you think its going to be a fairly friendly divorce and youre both in good health, why bother?

In the normal divorce, few property issues will be as important as the family house. Especially in California, where we've seen such dramatic rises in property values, even houses that you've owned for a relatively short period of time may have a great deal of equity in them. Equity, of course, is the main thing to concentrate on here. If you bought a house together and then you filed for a divorce a year later, theres not much to split, unless you paid a HUGE down payment.

If you're approaching your divorce from the point of view of agreements,, rather than fighting, you can do anything that you like with the house. You can have it awarded to either party, you can maintain joint ownership on it, or you can sell it and divide the profits any way that you see fit.

If you can't agree on what to do with it, then the judge will decide for you. And, again, state law requires the judge to aim for as close to a fifty/fifty split as possible. If you have a lot of equity in the house, that can mean a simple order to sell and divide the profits equally. If you owe a great deal, that can mean an equal division of any debts remaining after the sale.

There's even a provision in California law that allows the judge to order the house sold, but defer the sale. In a case where having to move might have a severe impact on the children of the marriage, the judge might allow the parent who gets custody to go on living in the house for a specified period of time and then have the house sold and the profits divided. If that sounds like a royal screw, there are some conditions that are usually built in there. The parent who is living in the house is usually ordered to make the mortgage payments and pay the taxes on the house. In some cases, where you could be making a LOT more money renting out the house, the difference can even be charged as a credit to your child support.

Even in a friendly divorce, coming to terms on the actual value of the house can sometimes be perplexing. If you're just selling the house, no sweat. Sell it and divide the profits. If one of you is buying the other person out, it gets a little more complicated.

The simplistic approach would be to say, "Okay, we've paid this many dollars into the principle since we bought the house, so we'll divide that number by two and that's what I'll give you for your share of the house." Of course, that's not factoring in the California real estate market. In the Santa Cruz area, cabins that people paid $80,000 for twenty years ago are now selling for $400,000, considerably more than what was paid into principle.

One approach to that dilemma is to do an informal appraisal yourselves. Start looking at houses that are selling in your neighborhood that are similar to yours. Scan through the classifieds and look for similar houses with similar square feet. Even ask a realtor to drop by and give you an estimate on what they think the house is worth. (Be careful on that one, though. Some realtors will really inflate the value of the house in the hope that you'll sign on with them. Others drastically under value, so that they can move it quickly and get the commission,)

On a more formal level, you can hire a professional appraiser to do all of the work for you. Since they're being paid a simple fee, rather than a commission, they tend to be a little more honest. And, you might think of having a real estate inspector come and inspect the house.

There is also a common situation where one person owned the house before the marriage, but was still making payments on it. After the marriage, community funds were used to pay the mortgage. While the house remains the separate property of the person who owned it to begin with, you can ask to be reimbursed for half of whatever was community funds expended on it.

In another scenario, you may have even used your separate property to pay for your spouse's house which was her/his separate property. Say your wife or husband owned a house before you got married. He or she loses their job and you take over the payments on the house until they get back on their feet. Can you get that money back? Well, youv'e got a right to ask for whatever of your separate funds you paid into the principle or for improvements on the house. You cant get back money that paid the interest, the taxes, or the maintenance. But, when you're figuring the improvements, you can't count your own personal labor that went into the work.

Debts are usually considered along with the property. Your property, minus your debts, is your net worth. Dealing with the one without considering the other is nonsensical.

And not giving careful consideration to the debts can have very long term and unpleasant consequences. Say George has been married to Lucille for 20 years and they have a house, cars, and 3.5 children. George develops that peculiar mental disease of men in their mid-forties and falls madly in love with his 18 year old secretary. After a few trips with her to the Notell Motel, he tells his wife that he wants a divorce. She's devastated, the kids are in shock, the relatives and friends won't speak to George except to hiss at him.

George feels massively guilty, so he agrees to give everything to his wife, if she agrees to pay for it. The only problem is that Lucille hasn't worked in 20 years and the house payment is $2,000 a month. She fails to make the payments. So the mortgage company repossesses the house, the furniture company and the car lots come after George, he has to declare bankruptcy and his credit is shot to hell. Meanwhile, his secretary figures he's a real loser and she runs off to Lodi with some guy named Butch who rides a Harley. Poor George.

Now, the reason that all of that happened to George is that he didn't understand two very important concepts: contracts and jurisdiction. When George filed for the divorce and Lucille filed a response, the judge had jurisdiction over George, Lucille, their kids, and their property. The judge did not have jurisdiction over the mortgage company, the car companies, or the furniture company. The judge could ORDER George to give Lucille the house. The judge couldn't order the mortgage company to take George's name off of the note. So, when Lucille didn't make the payments, George was still responsible.

In other words, the judge in a divorce can't cancel out contractual obligations. If you and your spouse have credit cards with both names on the applications, the credit companies can come after either or both of you to pay those debts, no matter what the judge orders. If you even co-signed on the application for your spouse's credit card, the credit company can take that as a reasonable expectation that you were willing to cover those debts.

So, walking into a divorce situation, you need to try to be a bit of a psychic and predict the future. If your spouse says he or she is going to pay a debt as a part of the divorce settlement, with he or she really do it? Is he or she a responsible person who cares about their credit rating and pays bills promptly? Will he or she be able to find good enough employment after the divorce to cover all of those bills? Will you be able to cover the bills if he or she doesn't?

Sometimes you can get a little creative with those situations. Heres an example: Mike and Zinnia were married for over 18 years and had two kids. Zinnia had a little problem with credit cards: she never met one that she didn't love. While Mike was working 60 hour weeks, Zinnia was out there charging up the cards. Mike finally left her, when she refused to get counseling for her spending problem.

Now, Mike was looking at the divorce settlement and he had NO reason to believe that Zinnia would pay off any of the debts, even if she agreed to. All of her past behavior pointed toward someone who really didn't care about being financially responsible. So, he worked out a deal with her. As part of the divorce settlement he agreed to take on all of the debts, knowing that he'd have to eventually, anyway. In exchange, she agreed to lower alimony payments and to let him live in the house for as long as he wanted, with the community equity to be split when it was sold.

That's a good example of using your head and turning a deficit to your advantage. Here's another example that lawyers see quite frequently: the woman is getting custody of the kids and wants the car to be able to take them to daycare and school. The man's not sure at all that she's going to be able to make the payments on the car, and he doesn't want to get stuck with that, in addition to his child support.

An amazing number of people in that situation will hire lawyers and spend a fortune fighting over who's going to get the Honda. A few will stand back and look at it and understand the other person's position. Of course, the woman needs a car to take care of the kids, but she also understands her husband's concerns about being over-extended financially. Of course, the man wants to protect his credit in the divorce, but he also understands that his wife needs a car to take care of the kids, and he wants his kids to be in a safe vehicle. Creative solution? Trade the car in on two good used cars, with notes that you can afford post-divorce.

Oddly, in a state that places so much emphasis on community versus separate property, creditors can even go after your community property for debts that were incurred by your spouse before you were married. However, California also emphasizes separate earnings. What that means is that if you have a bank account that you put your paycheck in to, and your spouse has no right to deposit or withdraw on that account, your spouse's creditors can't go after that money.

Many people don't think of retirement benefits when they're contemplating a divorce because they don't feel like it's something you can get your hands on. It's hard to think of something you won't get for many years as something you own. Nonetheless, retirement benefits can be a big part of a divorce settlement. Any retirement benefits that you earn during your marriage are considered community property, not including social security benefits or disability.

Here's how that works: if you were married for 20 years, worked the same job for those 20 years, and then went out and got a divorce, your spouse would be entitled to one half of your retirement benefits. If you were married 15 of those 20 years, your spouse would be entitled to 15/20s, or three quarters of one half of your retirement, and so on.

One major exception to the community property 50/50 ownership rule is the military. Although military retirement benefits are theoretically community property, federal law says that they can only be divided if the parties have been married for more than 10 years. And you see cases in military communities where wives are holding on to a rotten marriage for dear life, because they want to make it past that 10 year mark before they file for divorce.

Division of retirement benefits is one of those areas where many people play, "Lets Make a Deal." The person whose employment earned the benefits may offer to pay off all of the bills, or perhaps do an immediate cash pay off to get the other party to give up their rights to it.

Such arrangements should be approached with caution. In one military family, the husband persuaded the wife to give up all claims to his retirement. In exchange, he agreed to deed over the house to her and continue paying the mortgage. Shortly after the divorce, he moved to

Panama

and defaulted on the house payments. She lost the house and her claim on 18 years worth of retirement benefits.

As a rule of thumb, the longer you've been married, the less likely it is that you should bargain away your share of the retirement benefits. It may be tempting, as you go through the divorce. Many people are hurting badly for extra cash after a marriage fails, but it's usually best to hang on to those benefits. You can actually begin drawing on those benefits as soon as the other party is eligible to retire. In other words, if they could retire at 20 years, but choose to work for 30 years, you can start drawing your benefits at the 20 year mark. Of course, anything they earn after you start drawing your benefits isnt community property, so you don't draw on the increases they get by working longer.

If you've been married for a substantial period of time, you may actually need to hire an actuary to calculate exactly what the retirement benefits are worth. And you'll probably need to hire an attorney to prepare a Qualified Domestic Relations Order (QDRO), although some of the larger companies and organizations will provide them through their personnel departments. QDROs are definitely not something you want to attempt to do yourself, unless youre an accountant.