SEPARATE VS. COMMUNITY PROPERTY
Property that was acquired prior to the marriage is considered the separate property of the party acquiring the property and not subject to division with the other party. However, it is possible to have a community lien against separate property. Property acquired during the marriage is presumed to be community property subject to division.
The situation of property acquired prior to marriage being subject to a community lien arises most frequently in the case of real estate. If property is purchased prior to the marriage, but mortgage principal is paid down during the marriage or other community money is put into the property during the marriage, the community is entitled to a share of the equity for those contributions. The community is also entitled to a portion of any appreciation in the value of the real estate from the date of marriage to the time of the divorce. The community lien is determined by use of a formula established by case law. The opposite situation occurs when property is purchase during the marriage, but separate property is used for the down payment or separate property is used to improve the value of the property during the marriage. In these cases, the party claiming a separate property interest must be able to prove that the property used was, in fact, separate property and trace the money into the community asset.
In addition to real estate, it is frequently the case that one party can retain a separate interest in retirement accounts, retirement benefits and savings plans, where the account or plan was established prior to the marriage, but contributions were made during the marriage as well. This calculation is usually done by use of a person who can prepare a Qualified Domestic Relations Order (“QDRO”) or other similar Order dividing the account, benefit or plan. A separate property component is more difficult to establish in bank accounts that were established prior to the marriage but is also used during the marriage, if money is deposited into the separate account during the marriage. Depending on how long this occurs, it may be that any separate property may become commingled with community property to such an extent that the property can no longer be separated. In such a case, the Court will consider the account to be community property.
As with real estate, it is possible that a separate property component may be established in personal property acquired during the marriage, if purchased with separate property. As with real estate, a party claiming a separate property interest must be able to prove that the property used to purchase the item was, in fact, separate property and be able to trace the use of the separate property to the purchase of the item.
If you would like more information regarding whether your property might be considered separate property or have a separate property component, please contact us at 480-222-5662 to schedule a free consultation.