Hey everybody, it's Andy and welcome again to my office in Modesto, California. I'm
an attorney licensed to practice law in California as well as New York and in
this video I'm gonna go over some practical problems that you might
encounter when you try to apply community property law in the real world.
In the real world here is going to be basically a California divorce case. So a
while back I recorded a video that basically introduces the, like the idea,
the term, the concept of separate property and community property. I'm
gonna go ahead and link that video. I think it pops up over here, if I'm not
mistaken, but the basic idea there is that community property - it's defined in
California Family Code section 760 - basically includes all the stuff that
you acquire during the marriage. Everything else that you acquire from
before, everything else that you acquire after generally is going to be separate
property. That's Family Code section 770 in California. There are some exceptions
to that also, so don't, I mean that's not, you know, precise what I just described,
but that's a good rule of thumb to kind of keep in mind. Stuff that you acquire
during the marriage, stuff that you acquire before or after. So the concept
itself is you know not terribly complicated I think, but when you
actually try to apply community property law in the real world again, you know, in
a California divorce, you might run into some problems. The application sometimes
can be, you know, more difficult than the concept itself. So I'm gonna go ahead and
go over some of the, you know, problems that are pretty common I think. So number
one is going to be the existence of a hybrid asset. So a hybrid asset is going
to be something that is not 100 percent community or 100 percent separate
property, like it doesn't neatly fall into either/or, like it's basically some
percentage separate, some percentage community. A really common reason why
this happens is basically something that you may, you know, that you might buy,
you know, for instance, before the marriage. You pay for a little bit, but
then you pay for it during the marriage as well. So the thing is you purchase
something, you finance it over time. During that time that you're financing
it or that you're paying for it, a marriage occurs, for instance. So a really
common kind of, you know, scenario would be let's say
that one person, you know, like one of the spouses, when they're single, they buy a
house, you know, themselves. So they make a down payment, you know, they pay for the
mortgage, you know, themselves for say five years or so and then after year
five, you know, they, they get married and then after that, they pay for the
mortgage except now it's jointly paid, like, you know, the husband and the wife,
or the two spouses, pay for the mortgage together whereas before it was just the
husband paying or just the wife paying or something. So yeah, in a situation like
that, the house is going to be a hybrid asset. Some percentage is going to be
separate, some percentage is going to be community. If you're interested in the
precise formulas for that, there are formulas. I'm not going to go over them
here because, you know, the formulas can get really involved, but they factor, you
know, they consider things rather, factors such as, you know, the purchase price of
the house, the appreciation of the house, the, you know, the equity in the house, you
know, the date of marriage, the, the length of the marriage, etc, like all that stuff
will get fed into the formula to actually compute how much the split
actually is, like how much is separate how much is community. Yeah again, not
gonna go into the formulas precisely, but there are formulas that actually will
compute values like that. Yeah so that's number one, the existence of a hybrid
asset can make applying community property law in the real world more
complicated than the concept itself. Number two. As you can probably tell from
the very beginning, you know, of this video, the date of acquisition is really,
is really important when it comes to differentiating between 'is something
community property or separate property?' The date of acquisition, a lot of times,
is something that can't be proven, just, and the only reason is because
documentation that might prove the existence, er sorry, prove the date
rather, documentation that might prove the date of acquisition either doesn't
exist at all, like just it was never created or it has been lost in
some way or, you know, nobody knows where it is or it's been destroyed or
something. So documentation to definitively prove 'yes this was acquired
during the marriage' or 'no this was not acquired during the marriage
I had it from before.' Documentation to prove, you know, the precise date of
acquisition, a lot of times actually can't be found or it's been destroyed or,
you know, it never existed. For certain things like houses, let's say,
you know, to kind of go back to my earlier example, for houses, obviously
there's gonna be deed paperwork, mortgage paperwork, title company paperwork and
stuff. Hopefully, you know, you have some of that still if this is your situation,
but if you don't, you know, you can go to the mortgage company, you can go to the
county or something to get replacement paperwork. A lot of times, you know, if you
don't have paperwork at all it's, you know, it's pretty easy, I guess, but if you
do have paperwork, but you've lost it, it's not always obvious where to go get
replacement paperwork either. So just the reality is, a lot of times, you have a
situation where the precise date of acquisition can't be proven. Inevitably
there's gonna be one spouse who thinks that they had it from before, like they
have this item from before, whereas the other spouse thinks 'No you didn't have
this from before. We bought this while we were together. I own half of that. You
need to split that with me.' Yeah so proving the precise date of acquisition,
a lot of times, can be really complicated because there just is not good proof one
way or the other. Yeah so number three. So number three
basically is going to be, you know, commin, blah, let's try that again,
commingling is what I meant to say, commingling of funds or of assets. Here's,
here's what I mean. For whatever reason, I actually encounter this a lot when it
comes to inheritances. So I know earlier I mentioned basically, you know, the
definition of, you, know separate versus community property. One exception to the
general rule that whatever you acquire during the marriage here, you know,
that, that stuff that you acquire is going to be a community. One exception to
that is stuff that you receive via inheritance. So I'll give you an example.
So let's say that, you know, you get married and during the marriage you have
a rich uncle or a rich aunt or, you know, your parents pass away or something and,
you know, you know, in their will or in their trust or
something, they leave you a huge amount of money. Let's say, you know, 10 million
dollars. Now if you have 10 million dollars, even though you receive it
during you, blah, even if you receive that rather during the marriage, that's
an inheritance. By statute in California that is separate property so if you do
get divorced, do you have to split that? No. Because again, it is separate property.
It's one of the exceptions to the general rule that community property is
whatever you receive or acquire during your marriage.
Here's the problem that commingling poses. So let's say, for instance, that you do
receive a very large inheritance - ten million dollars in, you know, the example
that I'm using. It's very important what you do with that ten million dollars and
what you don't do. Uh, and, unfortunately, I guess, ten million
dollars might be kind of an extreme example, but let's just say one hundred
thousand, for example, also. A hundred thousand dollars that you receive during,
you know, the marriage because of an inheritance of some kind. A lot of times
people will go 'Oh,hey, you know, I want to save that money for a rainy day.'
Great. What they then do is then they put it into their savings account because in
their mind that's actually what makes sense. Money that you have that you don't
need that you're putting away, it has to go into a savings account. That's what
we're all, that's what we're all taught. The problem. The problem is is that if
you put that hundred thousand dollars, which is again separate property, you mix
that, for instance, like you put that into a savings account that has money in it
already. And specifically let's say that we put that hundred thousand
into a savings account that has community money in it. So you have
hundred thousand dollars of separate property money over here you received by
inheritance. You put it into a bank account that has a hundred thousand
dollars, let's say, of community property in it. Now you've mixed it all together.
So you have money, er sorry, you have one account, rather, one savings account,
that has community property money and, and separate property money. It's all mixed
together. How do you unmix it to, basically, divide it in the event of a
divorce? Sometimes you can't and there's a case
of California which - I swear to God this is the actual name of the case - um, it's
called Marriage of Mix, which I'll write over here and also, you know,
link down below for you, but there's a case called Marriage of Mix that
basically says that if you have commingled funds - separate property and
community property money mixed together, for example - and it is not possible to
unmix it, the presumption is that it is all community. So, in other words, what's
often, you know, what often happens is you have separate property money - an
inheritance, let's say - you put it into a savings account because you want to, you know,
hold onto it and you put it into a savings account that has community
property money in it already. Time passes, you know, all the money, you know, mixes
together, withdrawals are made, etc. Now, you know, when a divorce
happens, you have to try and, you know, basically unmix it somehow and let's
just say you can't. Most of the time you actually can't. That hundred thousand
dollars separate property inheritance now is community and you have to split
it. So hopefully all that made sense. The basic idea is that if you don't guard
your inheritance properly, like you don't segregate it, you know, properly, does it
transform from separate property to community property? Technically not,
however, it is something where you do end up having to split it, you know, a lot of
times. You do have to basically divide your separate property money with your
spouse just because you commingled it earlier. So hopefully that made sense. The
basic takeaway from that point is if you have separate property money and you
have community property money. For the love of God, do not commingle the two. Keep it
separate in, it seems a little weird to, you know, have to do this, but if you
want to keep it separate, separate, you want to keep it segregated, how do you do that?
It's actually really easy. You have one checking account that has separate
property money in it. Nothing else except separate property money. It's a hundred
percent separate. You have another checking account that is 100 percent
community. No separate property money over here. No community property money
over here. 100% separate. 100% community. So you have to have two, two
sets of accounts basically. I've used a checking account in my example here, but
you can apply that same idea to a savings account money, market account, CD,
etc, like you can apply it basically to a whole bunch of different accounts,
but the basic idea is you have to keep it segregated. Otherwise you might lose,
you know, the separate property nature of it and you might, you might end up having
to split it with your spouse in the event of a divorce.
So yeah, comming, commingling is bad. Segregation of money is actually good. So
the last point is going to be date of separation. So I think that's number four
if I'm on that now, number four. So Date of Separation is this. Community
property rights, again, are during that time period from the, you know, the very
beginning, stuff that is during the marriage, stuff that's before, stuff
that's after. So the marriage the, the dates, I guess, that basically bookend the
period of marriage. The date of marriage is, you know, when community property
rights start. The date of marriage actually most people, to be honest, don't
really disagree about that. It's not technically the date that you actually
have the church ceremony. It's the date that the marriage, like the, like the
marriage of paperwork, I guess, like, you know, all the civil forms that you have
to fill out and file and all that stuff. That's the date where all those forms
are filled out. So the date of marriage, like I said, most people don't really
argue about that too much. The date of separation, however, sometimes
people can. Yeah, so the date of separation is when the community
property rights end in the marriage. Date of marriage is when they begin. Date
of separation is when they end. Date of separation in California, unfortunately,
has a very vague definition of it, for it. It's California Family Code section 70
which I will, you know, write over here as well as link down below. Date of
separation in California is defined as the date that a complete and final break
in the marital relationship has occurred. What the hell does that mean? I have no
idea. It depends on each situation. The, the code section, section 70, goes over a
little bit of guidance, I guess, and, you know, it provides some guidance. Date of
separation can be evidenced by both of the following: number one, the spouse has
expressed to the other spouse his or her intent to end the marriage.
So expression of the intent to end the marriage, you know, that's one criteria to
meet to show what a complete and final break is.
Criterion number two is conduct of the spouse that is consistent with his or
her intent to end the marriage. So, I guess, to recap, date of separation is
when a complete and final break occurs and that's evidenced by one spouse's
intent, you know, vocalized or expressed intent,
to end the marriage as well as that spouse's conduct, you know, consistent with
that intent to end the marriage. As you could probably guess that is subject to
a lot of interpretation. Yeah, so it's, let's just leave it at that, I guess,
like basically date of separation in California is something that unless the
parties agree on they can actually fight for quite a while. Yeah so, uh, I guess,
Family Code section 70 also, this is subsection (b) if I recall correctly, says
that the date of separation when the court is trying to determine that,
they can examine any relevant evidence. They can take any, sorry, they can take
all relevant evidence, rather, into consideration when determining when the
data separation occurs. Yeah, so I mean, I think hopefully you can see what the
intent of the date of separation is, but unfortunately, there is no kind of
bright-line criteria that you can look at to say 'Yes we've separated and it was on
this date.' California, unfortunately, does not define date of separation that way. It
is something that's very amorphous and the parties can, if they want to, argue
about it for quite a while. Yeah so hopefully all of that made sense. Again
trying to really quickly summarize here. So when you're talking about applying
community property law in the real world, some problems that you run into: Number
one is the existence of a hybrid asset. Partially community, partially separate. A
single asset can be both and, obviously the communi, oh, the division, the divisible
part is only the community property part. So hybrid assets that's number one.
Number two is that it's not always easy to prove the date of acquisition for a
particular item. Could be because there was no documentation at all and there
really is no way to prove it or there is documentation to prove it or other
evidence to prove it, but it's been lost, nobody, nobody knows where it is. If it
has been lost, maybe you can get replacement copies,
maybe not. So proving the date of acquisition is actually gonna be really
complicated in certain situations. Sometimes it's pretty, you know,
clear-cut, sometimes not. Number three is that segregation of separate property
funds and community property funds a lot of times will make it so the separate
property funds have to get split in a divorce anyway.
Just remember commingling is bad. Segregation of funds, particularly, you
know, because money is fungible, segregation of funds is is good
basically. And the last thing, number four, is going to be that the date of
separation in California, it's really important because that's when community
property rights end, but, unfortunately, California doesn't really have a
clear-cut definition of what date of separation means. It's whenever, you know,
one party believes that the marriage has suffered a complete and final break. The
other party might, might disagree, for example, I mean, you know, you guys are off
to the races and the court has to make a determination. So, hopefully all of that
made sense. This is not a comprehensive list by any means. There are a variety of
problems that occur when you're trying to apply community property in the real
world. This is just, you know, a partial list of the ones that I encounter most
often. So hopefully all that helps. Go ahead and rewatch this video if you want
share, comment, like, subscribe all that stuff and I will talk to you guys next
time. Thanks.