We know that legal stuff can be confusing, especially when it comes to something as personal as marriage, divorce, and finances. If you’re a California resident (or plan to be), it’s helpful to understand the state’s “default” laws on property division and spousal support. In other words, what happens to your stuff if you get a divorce without a prenup.
What happens to my stuff when I get a divorce in California (without a prenup)?
We’ll break it down into different types of property (income, stock options, intellectual property, appreciation, separate property exchange, business ownership, debt, and spousal support). Let’s dive in.
Income you earn during the marriage
California sees this as “community property.” This means it’s generally split 50/50 in a divorce. It doesn’t matter if one of you earns way more than the other – it’s still split down the middle. For example, if Michael earns income from his employment during marriage, said income in a CA divorce will be subject to a 50/50 split (unless an exception applies). Exceptions may include:
- Passive income from something you owned before marriage is usually considered separate.
- If one spouse used their earnings to pay for the other’s education or training, they might be reimbursed for those expenses. For example, if John uses some of his income to pay Jane’s student loans, John may be reimbursed for these payments for her loans.
- In cases where one spouse misappropriates assets (e.g., tries to hide assets or unfairly benefits themselves), the court can adjust the split to make things more equitable.
Income from investments
It’s usually the same deal as above–community property, split 50/50. There are some exceptions, like if the money came from something you owned before marriage.
Stock options
This can get a bit tricky. It depends on when they were granted and when they vested. Sometimes, they’re community property, sometimes not. If a stock option was granted and vested before marriage, then it is considered Separate Property and not subject to the 50/50 split. If stock options are granted and vested during the marriage, they are considered entirely Community Property. However, if the stock options vest during a marriage or if they are granted during marriage but vest after separation, they may be subject to Community Property division based on certain formulas.
Retirement accounts
The money you put into a retirement account *during* marriage is generally community property, split 50/50. For example, imagine Natalie had $100,000 in her 401k before getting married. During her marriage, she adds $50,000 from her earnings. In a divorce, the initial $100,000 (plus any gains on that amount) would likely stay hers, but the $50,000 she added during the marriage (and any gains on that) would typically be considered community property. On the other hand, if you had the account *before* you got married, the money you put in then (plus any gains on that money) usually stays yours.
Intellectual property, like patents or copyrights
This could be a logo from a business you created, artistic works, etc. Anything you create before marriage stays yours. But if it increases in value during the marriage (because of your work or your spouse’s), then things get more complicated. Since intellectual property isn’t easily divisible, its value is often balanced out by adjusting the division of other community assets. For instance, if the intellectual property is worth $100,000, one spouse might receive an extra $50,000 worth of other shared assets to compensate.
Appreciation of assets
Let’s say you have a house worth $200,000. It appreciates $200,000 during the marriage (making it worth $400,000 during the divorce). Usually, that increase in value is yours to keep. But there are exceptions, especially if your spouse helped make that happen (like by renovating your house).
Separate property used to buy more property
Let’s say you have a house that you bought before marriage, and it’s paid off. You sell the house and use the proceeds for something else. Should the new purchase with the house money be split 50/50? Property acquired in exchange for your separate property has a presumption of being community property, although there may be a reimbursement for the original property.
For example, if Gene has a home prior to marriage (i.e., his separate property) worth $500,000 and then sells it and uses the money to buy a new home during the marriage, and that new home appreciates to $1 million, he may be able to receive a reimbursement of $500,000, but the appreciation may be considered community, and thus, split 50/50.
Business ownership
If you owned a business before marriage, it’s usually yours. But if it grew in value during the marriage (and your spouse contributed to that growth), they might be entitled to some of that increase. For instance, if Ashley’s business was worth $500,000 before marriage and grew to $5 million during the marriage, the $4.5 million increase in value might be considered community property, subject to a 50/50 division, while the initial $500,000 remains Ashley’s separate property.
Debt
Debts taken on before marriage? Those typically stay with the person who took them on. (Phew!) Debts during the marriage? These are usually split 50/50, even if only one person’s name is on the loan. There are some exceptions, though (like student loans). If you took on a student loan during the marriage, it is yours and yours alone.
For example, William takes on a credit card to fund his online shopping habit. He racks up $10,000 in debt during the marriage. His wife knows a little about it, but not exactly how much. What is the result of a divorce? His wife is responsible for 50% of that debt.
Spousal support
This is sometimes called “alimony” in other states. It’s the financial payment from one ex-spouse to the other. In California, without a prenup, there is temporary and permanent spousal support. The amount depends on things like your income, how long you were married, and each person’s ability to support themselves.
Why does this matter?
Spoiler alert: You have a prenup already! It’s the default laws of your state. So, if you’re a California resident (or plan to be soon), and any of the above situations sound unfair to you, you should consider getting a prenup. This can help to make sure your money gets divided by your rules, not California state law.
Raymond Hekmat’s practice of law has been devoted exclusively to areas of California family law focusing on prenuptial agreements, divorce consulting and mediation, since earning his Juris Doctorate degree from Loyola Law School in 2009. During his tenure at Loyola, Raymond was President of the Evening Bar Association, and was awarded the Alumni Association Governors’ Alumni Award. While earning his degree, Raymond worked as a law clerk, and later an associate, for a Beverly Hills family law firm. Prior to founding HLM, Raymond’s practice involved complex family law litigation involving high-asset property division, complex custody litigation, jurisdictional issues, division of community estates and prenuptial agreements.
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