Famous last words during a divorce: Oh, property division should be easy
California’s divorce laws may make property division look easy, but you have to know how big the pie is before you can split it down the middle.
More than a few California divorce actions have made headlines over the years, and the division of marital property has been at the center of a few of them. When Frank and Jaime McCourt divorced, for example, their dispute over ownership of the Dodgers baseball team made headlines for months. The team was not the only point of contention, of course, but it was the subject of numerous appeals filed by Jaime and her legal team. The case ended in February 2015 with the denial of Jaime’s final appeal.
The McCourt case is a good example of just how complicated property division can be. The formula seems simple enough: California is a community property state, so the courts divide marital property equally between the spouses. How was it, then, that Jaime McCourt walked away more than $900 million shy of a 50/50 split?
Value is just one part of the puzzle
Granted, Jaime’s $131 million settlement is nothing to sneeze at, and the couple falls into a high-asset category that many of us only dream about. That does not mean that couples whose net worth is a few zeroes short of the McCourts’ will not face the same type of issues they faced. You may not have much property, but if there are questions about its value or its provenance, finding that 50/50 split can be just as complicated.
Complicated, however, does not have to mean contentious. With enough preparation, and with the assistance and advice of an experienced attorney, a couple can resolve questions and avoid the headaches and costs of lengthy litigation.
Typical questions your attorney will ask
In a community property state, anything acquired during the marriage is considered marital property subject to the 50/50 rule. If you bought a car before you were married, that car is still your separate property. If, however, you bought a car during your marriage, paying for it with your own money, the car is marital property.
When you meet with your attorney, then, be prepared to talk about everything you and your spouse owned both before and during the marriage. You and your attorney, along with other tax and valuation professionals, will determine if something is separate or marital property and, if the latter, how much it is worth.
To answer those questions, your attorney will ask you questions like the following:
When did you and your spouse separate? Property division depends on the fair market value of each asset on that date.
Did you have a valid ante- or post-nuptial agreement? If so, the agreement will govern the disposition of property — but only if the property is covered by the agreement. If the agreement is limited to how real estate holdings will be handled during divorce, everything else will be subject to the standard property division process.
Have you identified all of your and your spouse’s assets, including intangible assets and assets located outside of California? This process can be stressful, and people often forget to include pension and retirement plans, even Social Security disability or death benefits in their list of assets. In some cases, future earnings may be an asset — for instance, if one spouse supported the other during medical school. As far as property outside of California, remember that “property” is not limited to real estate. A foreign bank account is just one example of an asset that may be overlooked or may be hidden.
Have all of your and your spouse’s debts been identified? Remember that property division includes the division of debt. This includes credit card debt, mortgage balances, loan balances, medical bills — everything either of you owes.
Determining the value of an asset may be much easier if you have some documentation to back it up. A current statement, for example, or a receipt or appraisal. The same is true when it comes to determining which spouse will be awarded an asset. If you can show the history of the asset — say, your grandmother’s art collection — your claim to that item will carry more weight.
Your attorney should ask you, too, if you or your spouse will need help making ends meet until the divorce or the property division agreement is final.
Do not be surprised is your attorney has additional or different questions. This is not an exhaustive list of the information you will cover as you discuss the division of your property. Remember, too, that every case is unique — and not just because we can’t all own a baseball team.