Division of Property & Debts
California is a community property state. Dividing assets and debts in a divorce or legal separation is one of the most complex parts of the case — and one of the most consequential.
What you should know
California law requires equal division of the community estate unless the parties agree otherwise or a specific statutory exception applies. Both assets and debts must be characterized as community or separate property before they can be divided.
Our role is to help you identify, characterize, and trace each asset and debt — then advocate for a division that protects your financial future.
First step: characterization
Before anything is divided, we identify what is community and what is separate.
Community Property
Generally, assets and debts acquired during the marriage — from the date of marriage to the date of separation.
Separate Property
Property owned before marriage, acquired after separation, or received as a gift or inheritance during the marriage. Includes rents, profits, and proceeds from those assets.
The Community Property Presumption
Assets acquired during marriage are presumed to be community property even if titled in only one spouse’s name. Rebutting that presumption requires clear evidence or a valid agreement.
Tracing
When separate property is mixed with community funds (commingling), careful tracing through bank statements and records is required to preserve the separate-property character.
Reimbursement Claims
If separate property funds were used to acquire a community asset (e.g., a down payment from inheritance), the contributing spouse may be entitled to reimbursement — absent a written waiver.
Debt Allocation
Debts incurred for the family during marriage are typically divided equally. When community debts exceed community assets, the court has discretion to assign excess debt based on each party’s ability to pay.
Where things get complicated
Pre-marital business or professional practice. Often part separate (the value at marriage) and part community (growth during marriage). Forensic valuation is usually required.
Family inheritance used in the marriage. If you inherited funds and used them on a jointly-titled house or shared account, your separate-property contribution can usually be traced and reimbursed if not waived.
Retirement accounts and pensions. The community portion is the value earned during marriage. Division typically requires a Qualified Domestic Relations Order (QDRO) for ERISA plans.
Real estate with separate property down payment. Reimbursement claims under Family Code § 2640 are common — but only if the contribution can be clearly traced.
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Across the region
Scharf Law, P.C. is based in Folsom and serves families throughout the greater Sacramento region.
Common questions about property division
What is community property in California?
Everything either spouse acquires during the marriage and before separation, other than by gift or inheritance, is community property under Family Code Section 760 and is divided equally at divorce. Separate property, defined in Family Code Section 770, includes assets owned before marriage, gifts, inheritances, and the profits from those assets.
Are debts divided the same way as assets?
Generally yes. Debts incurred during the marriage are community obligations divided equally, regardless of whose name is on the account, while debts from before marriage or after separation are usually assigned to the spouse who incurred them. Creditors are not bound by the divorce judgment, so joint accounts should be closed or refinanced.
What is a Family Code Section 2640 reimbursement?
If a spouse used separate property, such as an inheritance or pre-marital savings, to buy or pay down a community asset like the family home, Family Code Section 2640 allows reimbursement of that contribution at divorce, without interest or appreciation, as long as it can be traced with records. Tracing usually requires bank statements and escrow documents.
How are retirement accounts and pensions divided?
The portion earned during the marriage is community property, even if the account is in one spouse’s name. Defined-contribution accounts are divided by the community share; pensions are typically divided by the “time rule” and paid out through a Qualified Domestic Relations Order (QDRO) or the plan’s equivalent so that taxes and penalties are not triggered.
What if my spouse is hiding assets?
Both spouses must serve complete financial disclosures under Family Code Sections 2104 and 2105, and each has a fiduciary duty to the other. Discovery tools such as subpoenas, depositions, and forensic accounting can locate undisclosed accounts or income. A spouse who conceals an asset can be ordered to forfeit it or pay sanctions under Family Code Section 1101.
General information about California law, reviewed by attorney Taryn M. Scharf (CA State Bar #244097), Scharf Law, P.C., Folsom, CA. It is not legal advice for any specific situation. Ask about your case or call (916) 782-3900.
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Scharf Law, P.C. — 2330 E Bidwell St, Suite 110, Folsom, CA 95630-3897
— (916) 782-3900
Taryn M. Scharf, Esq. — CA State Bar #244097
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