Split the sheets in California, and your wages are no longer community property.
That’s because property acquired during marriage but after a marital separation isn’t community property.
That’s been California law for a long while.
The sticky wicket has been drawing the line when the marriage has broken down and the couple has separated.
“When” they separated determines whether the estranged spouses have to split their earnings with each other. It determines whether the creditors of one spouse can reach the wages of the other to pay the other’s debts.
Can estranged spouses live under the same roof and be living “separate and apart”?
Supreme Court makes separation expensive
In 2015, the California Supreme Court ruled that a couple isn’t “separated” when they live in the same house. Even when they shared little else besides the address.
In the Bay Area, land of ruinous housing prices, I’ve seen many estranged couples continuing to share a house for a long while because neither can afford to move out.
Yet, according to the Davis decision, a couple is not separated and they continue to acquire community property until they no longer live in the same dwelling.
New law looks beyond common address
The justices kinda invited the legislature to change the law if they didn’t like the Davis result. And they did.
New California law provides that spouses can live “separate and apart” under the same roof for purposes of California community property law.
Seven things you probably didn’t know about community property
The new law makes determining the date of separation messier, but more in conformity with economic realities.
A court trying to determine whether assets are community property has to look beyond the residence address. Other indicators, not just where the spouses live, can show that there is no intention to resume the marriage.
Why this matters
Assets acquired during marriage and before separation are community property. Simplest example is wages.
But suppose one spouse starts a business or writes a best seller when the marriage is rocky. If there has been no separation, the business or the book royalties must be divided equally.
If the spouses have separated, different result. The new asset is the sole property of the spouse who created it.
Or, more prosaically, suppose one spouse buys an expensive new car. If they’ve separated, the debt is exclusively the responsibility that of the borrower. If they aren’t living “separate and apart”, the debt is payable from the community.
The new look at what it means to live “separate and apart” will inject more reality in the the “when” question, at the expense of making the determination more complex.
When your STBX files bankruptcy
Image courtesy of John Getchel under a Creative Commons license.