Protecting Your Financial Future During a Divorce
Asset protection is one of the most critical components of a California divorce, particularly when substantial property, business interests, or investments are involved. At Gilligan, Frisco, Trutanich & Sarris LLP, our experienced Family Law attorneys help clients navigate this aspect of the dissolution process with discretion and a strategic plan grounded in California community property laws. We understand how daunting it can feel to protect what you have built, and we are here to guide you through each step.
Divorce represents one of the most significant financial transitions you will ever face. When your marriage ends, the financial stability that you have built may be at risk. California is a community property state, so understanding how to protect your assets is essential to preserving your wealth and security in a dissolution matter.
How California Community Property Law Affects Your Assets
The distinction between community and separate property can be unclear. Our attorneys at Gilligan, Frisco, Trutanich & Sarris LLP understand the distinction and have detailed knowledge of how California treats premarital assets, inherited property, business ownership, investment accounts, digital currency, and compensation. This process can feel complicated, but we can help you understand what is at risk and work with you to develop a strategic plan to protect your assets.
California is one of only nine community property states in the U.S., and this fundamentally affects how your assets will be divided in divorce. Under California Family Code Section 760, community property includes essentially everything you and your spouse acquired during your marriage. This includes all income either of you earned, property purchased with that income, and debts incurred during the marriage. Here is what many people find surprising: both spouses have equal ownership interest in all community property, regardless of which spouse earned the income, whose name appears on the title or account, which spouse managed the asset, or whether one spouse contributed far more financially than the other. California Family Law defaults to an equal split of all community property, notwithstanding these contributing factors.
Separate property, on the other hand, is protected from division. California Family Code Section 770 defines separate property as any assets owned before the marriage and any assets acquired after the date of separation from your spouse, along with any profits from that separate property. Property you acquire with your separate property funds also remains separate, as do the rents, issues, and profits that come from your separate property.
The critical difference is this: separate property is not subject to an equal division in divorce. California Family Law allows each spouse to keep one hundred percent of their separate property assets. The challenge is making sure your separate property is properly identified with supporting, irrefutable documentation, so your separate assets stay separate and are not unintentionally identified as community property in the divorce. We work closely with you to interpret financial records, trace the history of assets, and identify the best path forward in your best interest.
There are common challenges that spouses face when distinguishing assets during a divorce. One of the most significant threats to separate property in California is commingling, which occurs when separate and community assets become so intertwined that they can no longer be distinguished; this often happens when an inheritance is deposited into a joint account or when separate funds are used to improve a home acquired during the marriage. Once assets are commingled, courts may classify them as community property subject to equal division unless the spouse claiming a separate interest can successfully trace the asset back to its source. Another common threat is transmutation, which involves changing the character of property from separate to community or vice versa. Unintentional transmutations often occur through estate planning efforts during the marriage or poorly documented transactions. Business owners and investors face a different risk with their separate property assets: appreciation. An increase in value of a separate property business or asset during the marriage may be subject to equal division between spouses in a divorce. Our attorneys are well-versed in the Pereira and Van Camp methods that the California courts often use to determine the community’s interest in the growth of that business. Presenting a detailed analysis of how separate property has changed can significantly impact how much of the asset remains separate versus being subject to division at divorce.
If separate property funds were used to pay for community assets, those funds may be subject to reimbursement. California Family Code Section 2640 provides for a spouse to request reimbursement of any separate property funds used to acquire or improve community property. Common reimbursement scenarios include using separate property for the down payment on a family home, paying off community property debt with separate funds, making home improvements or renovations with inheritance money, or funding business investments using assets you had before marriage.
If you suspect your spouse may be hiding assets, transferring property to friends or family, or deliberately wasting marital assets, there are protective measures available. Our attorneys at Gilligan, Frisco, Trutanich & Sarris LLP regularly collaborate with forensic accountants, business valuation specialists, appraisers, financial planners, and other experts to assist in evaluating complex assets. These established relationships allow us to present a clear and credible financial picture with proper classification of your assets.
At Gilligan, Frisco, Trutanich & Sarris LLP, we start by conducting a comprehensive overview of your unique financial circumstances. We help you understand what is at stake and develop effective strategies to protect your interests. Our experienced team has decades of experience helping clients through difficult divorces, and we understand how to handle cases involving complex financial issues.
Whether you are considering divorce, you are currently going through proceedings, or you are planning ahead for your financial future, the steps you take today will significantly impact your financial security for years to come.