Property and debt division in California divorce

California law provides for an EQUAL division of any and all property and debt acquired during the time of your marriage. Exceptions to this are inheritances, which are separate assets, as well as student loans, which are separate debts. Note that if you are unaware of the acquisition of the property or debt, then this does NOT exempt you from the equal division. So, this means that if your spouse acquired credit card debt in the amount of thousands of dollars that you knew nothing about, you still have to share the payment of that debt with your spouse at divorce.

Also, note that title to the property is not the relevant issue, but rather the time you acquired the property. If you have a car, for example, that you bought while you were married but only put one spouse’s name on it, then that car is still community property and subject to equal division.

Finally, “equal division” does not mean that we are dividing each and every asset, one by one. What we’re doing, rather, is dividing the value of your property. For example, if you have a house with equity in the amount of $100,000 and the wife has a community property pension in the amount of $100,000, then the husband can take the house in exchange for giving up any right he has to his wife’s pension. Generally, if one spouse can afford to keep an asset, then the court will not order its sale over objection.

Suze Orman’s divorce and finance advice

Some really like, and some really dislike Suze Orman, and regardless of how you feel, she speaks her mind.  She recently weighed in on divorce and finances, and for the most part she has sound advice.

One thing I think needs to be clarified is that, in today’s economy, it can become impossible for one spouse to refinance the house mortgage in their own name alone.  In a perfect world, yes you need to ensure you get your name off the debt so you’re not responsible, but if you both want to keep the house for your own reasons (for the children’s stability, for example, or to try to wait until the market recovers somewhat), then you can include a clause in your divorce decree that makes it clear that you are not responsible for the loan.  If you can, refinance, but if you can’t, it’s not the end of the world.

Retirement planning and dividing assets in California divorce

When a couple is dividing their assets in a divorce case, it’s easy to just look at the numbers on the page and divide them. For example, say we have two stock accounts. Let’s have $100,000 in each account. It can be easy to say that they each take one of the accounts and call it even. But, is it?

It could be, but it’s more likely not. If the couple has two accounts, it’s likely that they have them for a reason. For example, maybe one is intended for the long-term and one is a shorter-term investment. If the couple does not evaluate the projections of each of the accounts, one of them could be left holding the short stick.

During the divorce process, however, you can get very tired of negotiating, of waiting, and of just being in the middle of it all. Evaluating the accounts is just another step that you may think really won’t make a big difference. But ask any financial advisor – it DOES matter, and while you may not care now, you WILL later, particularly if you’re the one with the short stick.

As a couple builds their life, they make plans for their retirement. A smart plan has several components, and the couple is likely thinking not only of their own retirement, but also their children’s college expenses, when each of them will retire, and what kind of lifestyle they’re planning on. They may have compromised during the marriage, but at the divorce, each individual needs to come up with their own plan for these issues. Ensuring that the division of the assets is truly equal, and not just the same dollar figure, will be the first step.

Avoid these shortcuts in estate planning and save your assets, protect your family, and leave a legacy

We’re all looking to save money and get our to do list done as quickly and easily as possible.  But when it comes to estate planning, quick and cheap shortcuts can end up not only costing you in the long run, but can hurt both your family and your legacy.

For example, if you decide to forego an estate plan for your real property, and instead opt for joint tenancy, then you are at best just delaying the probate process, and at worst exposing your home to complete loss in your lifetime. With joint tenancy, there may not be any need for probate or transfer proceedings at the death of the first spouse (just some simple) paperwork, at the death of the survivor, the property goes into probate, which can take years and cost up to 10% of the gross estate value, which can be in the tens of thousands of dollars even for estates with just a house – even one with substantial debt.  Putting a child on title to the property does not solve this problem, and can lead to your child’s creditors seizing the house, the inability to undo the transfer at a later date when needed, a loss of control over the disposition of the house, more complications in transfer at the survivor’s death, and more.

Another shortcut is either being incomplete or too vague in your estate plan documentation.  If you have a living trust, it must be funded completely.  It does not serve you or anyone else to leave “just that one account” outside the trust since it ‘has so little in it.’  Why leave a small account – or a large one – outside the trust and make it more difficult for your family to transfer it? It’s possible then that the bank will just get your money since it will be too much trouble to transfer the account outside the trust.  In addition, if you have provisions for the distribution of your estate, make sure you have alternate provisions in case your beneficiaries do not outlive you.  For example, if you are leaving everything to your children, make sure you have a provision for who gets your estate if the airplane goes down and you all pass at the same time.

There are a lot of aspects of estate planning that can easily be completed improperly, costing you, your family, and the estate you worked your life to build. Estate planning is not the place to look for a quick or cheap solution, but rather to take the time to ensure that all you’ve worked for is left just the way you want it.