California is one of nine states that have adopted the community property system. Under this system, all property acquired during marriage is presumed to be community property. A spouse who believes that some of the marital assets are his or her separate property has the legal burden to present the necessary proof to rebut the community presumption. This most often involves property acquired before marriage or assets received as a gift or inheritance during the marriage. It is also necessary to allocate any increase in the value of separate property during marriage between the community and separate property interests.
The process for meeting a spouse’s legal burden of establishing separate property is known as “tracing.” There are two primary methods of tracing: direct tracing and the recapitulation method. Tracing is also used to allocate the community and separate property interests in commingled financial accounts or other assets.
Less than five percent of divorce cases are decided through a trial. The vast majority of divorce cases are completed through settlement negotiations (including mediation or other forms of alternative dispute resolution). This process is finalized through a marital settlement agreement, which is signed and approved by the court. In most cases, the marital settlement agreement involves dozens of negotiated terms addressing specific details for child custody and visitation, child support, spousal support, property division, equalization, debts, tax obligations, reimbursements and credits. The marital settlement agreement should address as many contingencies and future events as possible, so that any future disputes can be avoided before they happen.
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