Yours , Mine and Ours

improvement of a property , it does not include payments of interest on a loan or payments made for maintenance , insurance or tax .

When community property is used to improve separate property ( or pay down a separate property liability ) and the separate property asset is not easily divisible , the allocation between separate and community property is referred to as “ apportionment ” as it includes appreciation .

Consider dividing a pie : what portion is community and what portion is separate ? California family law generally “ apportions ” assets differently depending on the type of asset . The party asserting a community interest in the separate property bears the burden of proof to support the community property claim . Here are three examples :

1 . Separate Property Residence : First , you must show community property funds were used to acquire or improve the residence . Second , consider the increase in equity value from the time of the community property contribution to the date of trial . Lastly , apportion the balances based on the funds contributed by the community and the separate property . This analysis is commonly referred to as a “ Moore / Marsden ” apportionment based on the Marriage of Moore ( In re Marriage of Moore ( 1980 ) 28 Cal . 3d 366 , 168 Cal . Rptr . 662 , 618 P . 2d 208 ) and the Marriage of Marsden ( In re Marriage of Marsden ( 1982 ) 130 Cal . App . 3d 426 , 181 Cal . Rptr . 910 ).

2 . Wholly Owned Businesses : Another form of allocation related to a separate property claim can come from the contribution of community efforts in connection with separate property ( business ). The common approach for such an analysis is referred to as a “ Pereira / Van Camp ” apportionment based on the Marriage of Pereira ( Pereira v . Pereira ( 1909 ) 156 Cal . 1 , 103 P . 488 ) and the Marriage of Van Camp ( Van Camp v . Van Camp

( 1921 ) 53 Cal . App . 17 , 199 P . 885 ).

3 . Retirement or Investment Accounts : If contributions are made to a retirement or investment account during the marriage and after separation , then the portion

contributed during marriage and the appreciation related to it would be community property . The portion contributed after separation and the appreciation related to it would be separate property Recordkeeping is often a critical part of any of the situations noted above . For the most part , the days of receiving your bank statements in the mail and storing them in a filing cabinet or boxes for many years are gone . Today , most of us access our account information online . While this is convenient , people are less likely to store such information as it is generally available for several months , which is sufficient for current needs .

However , banks will typically only maintain the records in their system for seven years ; going back further may be difficult or impossible . While maintaining supporting documentation and record retention should be important for everyone , it is critical to the person holding separate property .

It is important to advise your married ( or engaged ) clients who either entered marriage with assets or inherited assets during marriage , to keep all bank statements , account

If you ’ re looking for more info on family law , be sure to claim your spot at our Oct . 17 Family Law Conference , where we ’ ll review the latest issues impacting practitioners and their clients . Topics include case law updates , a judges ’ panel , property apportionment and more . Sign up at calcpa . org / conferences . And for more on our Forensic Services Section ’ s four sections — Business Valuation , Family Law , Economic Damages and Fraud and Financial Investigations — visit calcpa . org / fss . statements , tax returns and other relevant financial records themselves ( not relying on institutions ’ record-keeping policies ), regardless of whether a prenuptial agreement is in place . In many situations , if a party making separate property claims in divorce does not have documentation to support their claim , such a claim is lost .

The objective of this article is not to provide a detailed analysis related to the methods available to support a separate property claim and the applicable case law in such situations , but to bring awareness to these situations and highlight the importance of maintaining adequate records to support a separate property claim .

Christopher D . Hays , CPA / ABV , ASA , CVA , CFE is a partner with Kemper CPA Group LLP and chair of the Family Law Section of the CalCPA Forensic Services Section . You can reach him at chays @ kempercpa . com .

16 CALIFORNIA CPA SEPTEMBER 2024 www . calcpa . org