In California community property rules control the division of assets and liabilities in divorce. Community property is any property, regardless of where it is situated, which is acquired during the marriage. Unless there is an exception for characterizing property as separate property, all community property is divided equally. Most people are aware of the typical assets and liabilities to be divided, such as the house, cars, bank accounts, a business and credit card debt. But, what about the oft forgotten assets which should be considered?
Here is a list, which is certainly not exhaustive, of assets which might exist in a marriage that is being dissolved:
- The Family Pet. While I am a believer in custody rights associated with the family pet, the law still refuses to recognize such rights. So, for now, Fido and Whiskers are property and subjected to the laws of property division. I wish the legislature could tell us how to value these members of the family.
- Cemetery Plots. While it might have been romantic to think of side-by-side burials in a cemetery plot as a good idea, trust me, no one thinks this is a good idea when there is a divorce. Cemetery plots these days are often valuable pieces of real estate to which a price can be assigned, but sad to say, sometimes the value is not the issue – often the disagreement is over who gets the plot because of its location!
- Capital Loss Carryover. When capital losses exceed capital gains, the loss may be carried over to future years if the loss exceeds the allowable deduction in a single year. If the capital loss occurred during the marriage and can be carried over after separation of the married couple, this capital loss is an asset to be addressed in the divorce because it can be used to reduce tax liability. Check the tax return!
- Retained Earnings. Corporate earnings which were retained from a period prior to the separation of the parties may very well be an asset to be divided and/or taken into account in the valuation of the business. Again, check the tax return and financial statements.
- Accounts Receivable. If someone or an entity owes money to the community’s business or either of the spouses, this is an asset of the marriage to be divided. Beware – if the statute of limitations has expired on collecting this receivable, it may be a worthless “asset.”
- Life Insurance Policies. No doubt, a policy which has a cash value is an asset to be divided – these are typically referred to as whole life or universal life insurance policies. What about term insurance policies? These policies by their provisions have no cash value, but they may be a valuable asset in the divorce if one spouse is ill or if the owner of the policy is aging (probably 60-plus years of age). The potential value of a term life insurance policy is critical in those divorces of older spouses often referred to as “grey divorce.” A paid-up long-term care policy may also be a valuable asset to consider in divorce.
- Airline or Other Credit Card Rewards. The airline, hotel or other similar “frequent user” reward points accrued during the marriage are community property and subject to division in the divorce. These can be valued and purchased by one spouse from the other, or half of the total can be transferred per the rules and regulations of the rewards program. Maybe there will be free trip after the divorce.
- Family Photos. There are often thousands of photos taken during a marriage and, yes, they are all community property. There is no value to be placed on such items – they are truly priceless – and any given photo would be destroyed if it is physically divided. Therefore, what typically occurs is that all photos – or selected photos – are copied for one spouse while the originals are retained by the other. The cost of duplication is typically shared by the parties. While most people use digital cameras these days, many of us still have a stockpile of photographs and negatives hidden in drawers. These are still the subject of property division in modern-day divorces.
- Trademarks and Patents. I am amazed at the number of people who have such intellectual property but forget about them because “nothing has happened” with them. Whether or not intellectual property has been exploited, it should be addressed in the divorce. It is an asset and while it may or may not have value at the time of the divorce, the property should be explicitly addressed in the final property division.
- Lottery Ticket. If a ticket was purchased during the marriage, check the numbers; a winning lottery ticket is community property and failure to disclose it could cost you your entire winnings.
If you can think of other unusual assets, please email me at firstname.lastname@example.org. I will happily post another “top 10” list of unusual or often forgotten assets to be divided in a divorce.