California is a 50/50 divorce state. What does that mean? Without a prenuptial agreement stating otherwise, your assets and debts acquired during marriage are split down the middle with your spouse if you divorce.
Unfortunately, this law isn’t the best solution for most couples in a divorce.
Let’s uncover what it means to be a 50/50 divorce state and the implications during a divorce.
How 50/50 Divorce Works
Dividing assets during a divorce can be an emotional and arduous process. States following the 50/50 policy seek to alleviate some of this stress with default laws that make this division clear and straightforward – but unfortunately, the process isn’t always that simple..
If you live in a 50/50 divorce state, also known as a community property state, the court divides your assets, property, and debts during marriage evenly between you and your spouse. This can include vehicles, businesses, real estate, bank accounts, credit cards, and loans.
It doesn’t matter if you are the sole breadwinner or make a personal purchase. Any income or assets acquired while you’re married are considered shared property between you and your spouse.
Community Property States
California is one of nine community property states. Community property states follow community property law mandating an even split of assets and debts during a divorce.
Compare this to equitable distribution states, which recognize individual property ownership during marriage.
In an equitable distribution state, you can still retain ownership over an asset if you purchased it yourself. If you divorce without a prenuptial agreement, the court will divide your assets according to each spouse’s contributions, needs, and circumstances, which isn’t necessarily an even split.
Exceptions To The 50/50 Division
While nearly all property is considered equal between spouses in a 50/50 divorce state, some exceptions exist.
First, any property acquired before the marriage is considered separate property. That means any homes, vehicles, or businesses owned before tying the knot are technically your own.
However, you’ll want to be careful about accidentally combining assets. For example, if your spouse contributes funds to your individual bank account, then that account may become joint property.
Additionally, if one spouse receives a gift or inheritance during the marriage, it will be considered separate property. In this case, the gift or inheritance is not subject to the 50/50 division.
Drawbacks to 50/50 Division
Splitting assets down the middle might sound fair on paper, but it rarely reflects a couple’s financial reality.
For example, it’s normal for one spouse to make more money than the other and thus contribute more financially to the marriage. Or it’s possible one spouse starts a business while married and is obligated to split ownership and profits from the business with their ex-partner when they divorce.
It’s not just a matter of profit and income, either. You’ll also take on half of the marital debt, regardless of if it’s yours. That loan your spouse took out for their new business? That’s now partially your responsibility.
Without a prenuptial agreement, you’re at risk of losing a percentage of your property and accruing debt that isn’t technically yours.
How To Bypass The 50/50 Rule
The only way to bypass the 50/50 divorce law is by creating a prenuptial agreement. With a prenuptial or postnuptial agreement, you and your partner have the opportunity to delineate which marital assets you’ll share and which you’ll keep for yourself.
How A Prenup Works In a 50/50 Divorce State
Rather than defaulting to a 50/50 split, the court will reference your prenuptial agreement for direction on dividing your assets and debts. As long as the prenup is fair and valid, you’ll receive your property according to your wishes.
Your prenup can cover everything from how to divide your property to who gets to keep Fido. That’s the beauty of the prenup — it’s highly customizable and can cover a wide range of topics.
The benefits of prenuptial agreements are numerous. One of the biggest perks is creating a prenup is an effective means of discussing important financial and marital goals with your spouse-to-be.
You’ll have a chance to discuss your visions for the future and bring clarity to your individual and collective goals around finances and family planning. Plus, you’ll avoid the drama of a potentially unfair division of assets in a divorce. It’s a win-win.
Plan For Your Future
Whether or not you utilize a prenuptial agreement, you’ll benefit from the conversations around one before marriage.
You’ll create a roadmap for your marriage that encourages healthy communication about financial and family planning. And if you move forward with a prenup, you’ll safeguard your property and assets in the event you divorce.
Book a consultation call with me for more information on how prenups safeguard your assets and help you achieve a successful marriage, especially if you live in a 50/50 divorce state like California.