This article discusses general aspects of community property in California. The principles set forth below, however, can be changed by a premarital agreement. A premarital agreement is commonly referred to as a prenup or prenuptial agreement, and is often used by spouses to determine property rights during marriage and upon divorce.

All property acquired by married persons while domiciled in California is classified as either community property or separate property. Generally the California marital property system is based on the principle that the husband and wife contribute equally to the accumulation of wealth during a marriage regardless of their respective salaries or income. In the absence of a premarital agreement (aka prenuptial agreement), all property acquired during marriage by the labor of either the husband or wife is community property that is owned equally by both spouses.

Certain property, however, is classified as separate property depending on factors such as when and how it was acquired. Generally property owned before marriage or acquired after permanent separation is separate property unless it is transformed into community property. However, parties may avoid the California community property system by agreement, such as a premarital agreement commonly known as a prenuptial agreement.

The California Family Code § 760 states: “Except as otherwise provided by statute, all property, real or personal, wherever situated, acquired by a married person during the marriage while domiciled in this state is community property.” However, the California Family Code provides exceptions including but not limited to the following: property received by gift, bequest, devise, or descent; rents, issues, and profits of separate property; and property acquired in exchange for separate property.

A simple example of this is if Husband is given a gift or inheritance from his parents then that property would be Husband’s separate property unless he did something to change that separate property to community property. Another example is if Wife had a rental house that was separate property and she sold it and used all the proceeds to acquire some other property – generally that property would also remain Wife’s separate property. Finally, if Wife had a rental property that was her separate property and she received rental income then that income would also be her separate property. These examples are general illustrations. They are not exhaustive of possible separate property and they are simple illustrations that in reality can be much more complex.

There are also situations where the separate property presumption may overcome the community property presumption. In addition to the exceptions discussed above, other exceptions include if the parties take written title to an asset in a way that shows that the parties agreed to hold it other than as community property or if the parties agree either before or during marriage that the property is not community property. Another example is if one spouse took title to property in a way that shows the property was a gift from the other spouse, such as if Husband buys Wife a car for her birthday and put the title in Wife’s name alone.

One spouse may bring a separate property business into the marriage and devote his or her community labor to the management of the business. At divorce or death, the business may have appreciated in value and substantial assets may have been purchased with business profits. There are two methods in California that the courts have developed to apportion between the separate property component of the business that the managing spouse brought into the marriage and the community property value added by that spouse’s labor during the marriage.

First, when management by the spouse was the primary cause of the growth or productivity of the initially separate business, the law developed in the case Pereira v. Pereira, 156 Cal. 1 (1909), is applied. Second, generally when the character of the separate business is largely responsible for its own growth or productivity, the law apportions the separate and community property using the methodology developed in Van Camp v. Van Camp, 53 Cal. App. 17 (1921).

Essentially both of these cases allow for an apportionment of the separate and community property. Thus, under the law without a premarital agreement, one spouse would be entitled to a community property interest in a separate property business that the other spouse brings to the marriage, and the amount that would be community property would depend on the type of business and the community labor devoted to the management of the business.

If you have questions regarding Family Law or specifically a premarital / prenuptial agreement then contact The Law Offices of Amanda Hill located in Beverly Hills at (310) 860-7445 to have an attorney help you with your legal needs. You can also visit our Family Law page .

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