Since California is a community property state, establishing the date when the marriage is over is crucial in a divorce. It is at that point when the couple stops being a couple, and income earned by either spouse from that point onward is not counted as community property, which is divided equally between the spouses in a divorce. Sometimes there is a significant lag between the time the spouses think the marriage has ended and one party actually files for divorce. How does the court determine, then, at what point the marriage is over for the purpose of dividing marital property? After years of confusion and conflicting rulings, the California Supreme Court has established a clear rule. Although the ruling establishes an easy to follow rule, whether it is good for a particular individual or couple will probably be different from divorce to divorce.
The law, in California Family Code section 771, says that earnings of a spouse “while living separate and apart” from the other spouse count as that spouse’s separate property and not community property, even if the couple are still legally married. What if a couple decides the marriage is over, but because of their financial situation or for the sake of the children, they don’t immediately file for divorce and neither one moves out of the house, yet they sleep in separate bedrooms, maintain separate bank accounts, and become basically strangers living in the same house? Are they “living separate and apart” for the purposes of section 771? This was the sort of situation the courts grappled with for years. Until now.
On July 20, 2015, the Supreme Court of California issued a unanimous decision in the case of In re Marriage of Davis. There the court held that “living separate and apart” means that the couple are actually living in separate homes or residences. While this may seem like an obvious and easy decision, it might not always work out well for a divorcing party. For instance, what if one party refuses to move out of the house, and the other party cannot afford to? It may take months to finalize a divorce, and meanwhile assets continue to accumulate as community property, which may give one party an unfair advantage in the property settlement.
Although the court established what is known as a “bright line rule,” this matter may continue to be litigated by parties who feel it is leading to an unfair result. Also, the court left open the situation where spouses establish separate residences with the intent of living separate and apart, yet continue to literally share one roof. The date of separation is a critical date in many divorces, and disputes may continue to focus on this date for years to come.