When a couple divorces in California, all assets acquired during the marriage are considered community property. According to the laws of the state, these assets are divided in half. If the parties also own separate property, it is not subject to division as long as it was kept separate during the marriage. Some assets are a combination of separate and marital property and must be treated according to certain laws.
Supreme Court ruling
A Bay Area couple recently went to the state’s Supreme Court for a ruling on the division of a retirement pension increase purchased with military credits the husband had earned prior to the marriage. Originally, a lower court had ruled in favor of the wife, who argued that she was entitled to half of the pension and half of the increase as well, since the couple had used marital assets to pay into the retirement plan.
The Supreme Court overturned this ruling, stating that the key issue was that the husband had performed his military service prior to the marriage, so the credits he earned during his service were not marital property. As the increase was purchased with those credits, the increase in the retirement policy would not be considered marital property. The Supreme Court ordered the husband to pay the wife half of the cash installments that were paid into the plan during the marriage.
The gray area between marital and separate property
This case illuminates a gray area of the division of assets. Many people assume that if one spouse owns an asset, such as a pension plan or a piece of real estate, that appreciates in value during the marriage, the increase in value is now community property. This is not the case. While it might be considered community property, this ultimately depends on a few conditions, such as:
When the asset was acquired
How the asset was acquired
What contributed to the increase