In divorce, all of the assets and debts need to be identified, characterized, valued and divided. The mandatory disclosures, and discovery process, help spouses identify the assets and debts which then need to be characterized as either community property or separate property. In principle, each spouse keeps their separate property, and the community property is divided in half.
The community property assets and debts need to be valued so that they can be divided. For assets like bank accounts, the value at the date of separation is often used. Sometimes there is a dispute over the date of separation which needs to be resolved. Real property is typically valued at or near the time of trial, or settlement; or real property can be sold with the market determining how much the home is worth. Personal property can be divided in kind. Retirement accounts and pensions are typically valued using a special process which may require the retention of a domestic relations order expert.
Sometimes, for valuation and characterization, a forensic accountant will be required, especially if separate and community property assets are comingled. As a general rule, assets and debts are presumed to be community property if acquired during marriage, with the burden on the spouse asserting that the asset is their separate property tracing it to a separate property source. Some tracing is relatively easy, such as the down payment on a home from a family member, an inheritance check, or a retirement account from before marriage with no post-marriage deposits. Other tracing will require a forensic accountant’s assistance.
When one spouse receives more of the assets (like the home) than the other spouse, the estate will need to be equalized with an ‘equalization payment’ which will likely need to be secured if there are insufficient other assets to equalize the community’s estate.
Sometimes post-judgment enforcement actions are needed for a spouse to receive the ‘equalization payment’ due under the terms of the judgment.
If all assets and debts are disclosed and can be easily valued, this part of the case should be straight forward. Ideally, each spouse gets their half, and the community estate is divided 50/50.
