For the majority of individuals who are in the unfortunate position of filing for divorce, the economic ramifications of the post-separation phase of the relationship is the last thing on the mind. However, once two married individuals begin living separate and apart, with the intent to permanently end their relationship, the entire nature of the couple’s economic relationship undergoes serious change.

Community vs. Separate Property

While married, all income earned by either spouse is considered “community property.” All purchases paid for with community property is similarly classified as community property. All debts incurred during marriage are almost always classified as community debts as well.

However, once a couple separates with the intent to get a divorce, this entire landscape changes. Any income earned by either spouse is now their own separate property, and any debt incurred is now that spouse’s separate debt. This seemingly innocuous change can cause major problems down the road. When the petition for dissolution is finally filed and the divorce proceedings get under way, one of the largest and most contentious issues involves the marital estate.

Dividing the Marital Estate

When a couple goes through the divorce process, all community property is divided equally between the parties, as is all the community debt. Troubles can abound during the post-separation phase, however, when one or both parties continue to deposit earnings (now separate property) into a joint checking account. This can be particularly troublesome if there is a significant amount of money already in the account that was deposited before separation. The “co-mingling” of separate and community funds creates confusion later on, particularly if either or both parties continue to make purchases from such an account. Months later, during the property division phase of the dissolution, these purchases must be classified as “community property” or “separate property.” This can create an accounting nightmare for each party, and their respective attorneys.

Another issue that commonly arises involves the payoff of community debt with the separate property income of one spouse. This issue manifests itself most frequently in the mortgage paying context. A house purchased during marriage is typically community property. But when a couple separates, one spouse typically remains in the home, and often times begins paying the entirety of the mortgage payments. However, if these payments are made from that spouse’s income (now separate property), the paying spouse is entitled to a reimbursement for these payments during property division.

Facilitating Property Division

These are just a couple potential property division issues that arise after a couple has separated and before they are divorced. These issues stress the importance of maintaining a separate account for all separate property. (both during marriage and after separation) These issues also demonstrate the need to keep accurate records of all payments made to reduce community property debt. If you are in need of assistance with a family law matter, or have any questions regarding post-separation economics, contact attorney Kevin Morrison of the Law Office of Bowman and Associates today at: (916) 923-2800.

Sacramento Employment Law Attorney Chris Phillips helps clients across California. If you or someone you know has legal questions regarding bankruptcy, sexual harassment, Chapter 7, wrongful termination and more, Chris Phillips is an aggressive advocate for your rights.