Dividing Property & Assets in California

California is one of 9 community property states in the US. The fundamental rule: all property acquired during the marriage from either spouse's labor or earnings is community property and must be divided equally — not equitably, equally. The court has no discretion to award one spouse more than 50%. **Community property** includes: - Wages and salary earned during marriage - Property purchased with community funds - Business interests acquired or grown during marriage - Retirement contributions made during marriage - Stock options earned during marriage (even if not yet vested) **Separate property** belongs solely to one spouse: - Property owned before marriage - Gifts received by one spouse - Inheritances - Property acquired after separation - Property designated separate by valid agreement

The date of separation is critical in California because it determines when the community ends. Property acquired and debts incurred after separation are separate. Earnings after separation belong solely to the earner. California Family Code § 70 defines separation as the date one spouse expressed to the other an intent to end the marriage AND conduct consistent with that intent. You can be separated while living in the same house if financial or practical constraints prevent moving out — but you must demonstrate the marriage has ended (separate bedrooms, separate finances, no longer presenting as a couple). Disputes over the date of separation are common and can shift hundreds of thousands of dollars between spouses. Document your separation date carefully — emails, texts, letters to third parties, signed separation agreements.

Business interests are often the most complex and valuable community asset. California uses two primary approaches: **Pereira approach:** Used when the business's growth is primarily due to the owner-spouse's efforts. The separate property contribution receives a fair return on investment, and the remainder is community property. **Van Camp approach:** Used when the business's growth is primarily due to the nature of the business itself (capital, market conditions). The community receives a reasonable salary for the owner-spouse's services, and the remainder stays separate. Business valuations require forensic accountants and business appraisers. Costs range from $5,000 for simple businesses to $50,000+ for complex enterprises. Both parties typically retain separate experts, and the court weighs competing valuations.

Retirement accounts are divided based on the community's contribution. For defined contribution plans (401(k), IRA), the community property portion is typically calculated using the "time rule" — the ratio of months married during participation to total months of participation. For defined benefit pensions, the community interest is calculated similarly, and the non-employee spouse can receive payments directly from the pension plan when benefits begin. A Qualified Domestic Relations Order (QDRO) is required to divide retirement accounts. California considers unvested stock options earned during marriage as community property — even if they cannot yet be exercised. The "time rule" applies to determine the community's share.