What Can I Do to Avoid California’s Community Property Rules?

Hossein Berenji, Jun 20, 2019

It’s not uncommon for spouses to have significantly different incomes. While you’re married, the disparity in income probably isn’t an issue. You both share everything and where the money comes from isn’t really a consideration. Things might be different if you decide to get a divorce. You might want to keep your hard-earned money or walk away from the divorce with more property than your spouse.

This won’t happen if you get divorced in California. Along with nine other states, California is a community property state. Spouses are entitled to one-half of the marital assets when they split up. It doesn’t matter which spouse contributed more during the marriage. With a few exceptions, the property (and debts) you obtain while you’re married belong to both spouses equally.

There might be ways to get around California’s property division laws. You could try to get divorced in another state, use a prenuptial or postnuptial agreement, or try to classify some community property as separate property.

Equitable Distribution States

Most states, including Florida, Oregon, and New York, are equitable distribution states. Equitable distribution means that assets and debts are divided fairly. This can mean that both spouses end up with half of the marital assets, anyway. However, courts will take several factors into consideration. These might include:

  • Income
  • Financial need
  • Earning capacity
  • Contributions (financial and non-financial) to the marriage and family
  • Custody
  • Personal assets, and
  • History of abuse or domestic violence.

A judge may be more inclined to grant you a larger share of the marital assets if you’ve worked hard every day in your life and earned the vast majority of your marital wealth, while your spouse quit work to sit by the pool. On the other hand, a judge may decide that your spouse deserves a greater share of the assets if they work, helped to put you through school, take care of the children, and earn less than you.

You can’t just decide that you want to get divorced in an equitable distribution state. That state must have jurisdiction over your divorce. You have to have ties to that state in some way. If you and your spouse both live in California, you’ll have to navigate your divorce in California. However, if your spouse lives in Florida, you could potentially get divorced in Florida, as long as you satisfy the residency requirements.

Prenuptial or Postnuptial Agreements

If you can’t get divorced in another state, you might be able to sidestep California’s community property laws if you have a prenuptial or postnuptial agreement. These are private contracts between you and your spouse. A prenup is executed before you get married, while a postnup is done after you’ve tied the knot.

The terms of a prenup or postnup can supersede some state divorce laws. They’re primarily used to dictate how property will be divided in the event of a divorce. As long as the contract is legal and valid, you can control who gets what when you split up. The division does not have to be equal or necessarily fair.

Convert to Separate Property

Anything you owned before getting married is considered separate property. That is, unless you convert that separate property to community property. Community property can also be converted to separate property.

You might want to consider:

  • Putting real estate and other property in one spouse’s name, and
  • Keeping your income in a separate bank account, which can only be accessed by you.

However, you’ll need to make it clear that both spouses intended to reclassify community property as the separate property of one spouse.

When all else fails, it’s important to sit down and discuss how property should be allocated with your spouse. It can be beneficial to consult with an experienced family law attorney as you navigate this process.