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Yes. Marriage is a CONTRACT! Probably the most important contract people ever enter into in their lives. Yet, when buying a refrigerator or a car, you receive more information about that transaction and your sales contract than when you get married. When asked what the terms and conditions of marriage are, most people have no idea.

Presently, there is no one easy place for couples to go in order to learn about the marriage contract.

Unfortunately, most people do not discover what their marriage contract means until they are
considering a divorce.

This is the first in a series of articles which will offer a practical guide to understanding the marriage contract in California. These articles are not meant to be legal advice, but are presented to inform, clearly and plainly, what entering into marriage legally means and the affect it has on day-to-day lives.

First and foremost, it is important to understand that the terms and conditions of a marriage contract are determined and mandated by the state in which a person lives, not where they were married. So, when you move your residence, the legal terms of your marriage contract changes.

Our series will begin by addressing “COMMUNITY PROPERTY” in California. Community Property, which commences at the date of marriage, consists of any and all property, assets, monies and consideration produced, earned and/or made during marriage by the energy, creativity, blood, sweat and tears of both spouses. California is a community property state.

Therefore, unless a couple enters into a written Premarital Agreement or a Post Nuptial Agreement that alters their community property rights, the COMMUNITY PROPERTY laws control.

Both spouse’s energy, creativity ,blood, sweat and tears, and/or the products and fruits of same,
become jointly and equally owned as community property of the couple, regardless of who actually earns or receives the money and/or the fruits of one’s labor. This concept of community property rests upon the notion that both spouses assist and help support and nurture the community and each other in order to benefit and provide income and support for the community during marriage. Consequently, both spouses are entitled to and deserve compensation and recognition for their energy and time expended assisting and helping one another in life, regardless of whether or not actually working for compensation.

For example, if one spouse is primarily responsible for child rearing and stays at home, both to parent and work as an artist, while the other spouse goes to work in an office and earns a salary, both spouses are entitled to share equally the salary earned and the monies received from the art produced.

It doesn’t matter how much each spouse receives or how much time is expended.
Community property terminates upon the first of the following:
• The date of separation (which is specifically defined by California law). This date traditionally precedes a Legal Separation or Dissolution of Marriage (divorce).

• Death of either spouse.

• Nullity of marriage (which is very rarely granted and only in specific circumstances such as bigamy or mental incapacity).

• Post Nuptial or other transmutation agreements that specifically alter community property. Community property includes, but is not limited to many and various assets, including but not limited to the following:

• Pension, IRA, and retirement earned during marriage, even if not received or used until a future retirement age.

• Royalties, residuals and dividends earned during marriage, including future and/or ongoing consideration for projects created during marriage by either party.

• Interest in third party projects when a spouse invests community property time in those projects and is, therefore, entitled to receive compensation.

• Businesses created during marriage with community property, including but not limited to the hard assets, receivables, liabilities, etc. of the business.

• Business goodwill, which is a difficult concept to understand. It goes something like this: When a community property business has achieved “goodwill”, as defined by the laws of the State of California, that “goodwill” has a monetary value which becomes an asset of the marriage. A community property business can have “goodwill” even if the business is not actually sellable in the marketplace. This concept of “goodwill” is almost always difficult to assess and value, especially during divorce. Traditionally, a forensic accountant is hired to determine “goodwill”, when and if necessary.

• The family residence purchased during marriage with community property funds, along with any appreciation or increase in value.

• Real estate acquired during marriage with community property funds and/or community property sweat equity or labor.

• Furniture, furnishings, collections (art, coins, jewelry, musical instruments etc.) acquired during marriage with community property.

• Vehicles purchased during marriage with community property funds, including automobiles, motorcycles, boats, etc.

• Artistic and creative projects produced during marriage, including books, films, television and radio programs, websites, etc.

• Stocks, bonds and other investments acquired during marriage with community property.

As you can see, this list is quite comprehensive.

As community property is equally and jointly owned by both spouses, each has the right by law to control community property. Each spouse, by law, has an obligation to act as a fiduciary for the highest and best good of the community, much like the Trustee of a bank. Therefore, it is important and necessary for both spouses to remain informed and to have knowledge and control over their community property.

In the event a spouse acts outside of the best interests of the community, that spouse can be held responsible and liable to the community for breach of the inappropriate activity.

In the unfortunate event of a dissolution of marriage (divorce), community property is divided equally and equitably between spouses. This does not necessarily mean that each spouse actually has to receive a one-half interest in every asset. Rather, it means that each spouse has an equal share of the total community property.

We hope that this information assists you in understanding Community Property.

If you have any questions or we can assist you in any way regarding this issue, please feel free to email us using the “Contact Us” option on our home page.

The next in this series of articles will address SEPARATE PROPERTY.

You can also check out Howard Levitt’s noteworthy article called:
General Parenting Concepts and Warning Signs of Distress in Children

For more information, please contact us online or give us a call..