When you have decided to get a divorce, then many agreements with your spouse will need to be made in the coming months. The critical issues include child support, child custody, spousal support, and property division. However, the most crucial decisions involve what is in the best interest of your children.
In the middle of all these decisions, we are sometimes asked about making major purchases before a divorce has been finalized. There is no argument that the divorce process usually is stressful. Your life is changing. You will have to adjust to a new way of living. You are rightly concerned about the impact on your kids.
Everyone deals with stress in different ways. Some spouses are tempted to treat themselves to a brand new car to feel better and start a new life. In some cases, they don't want to drive around in the exact vehicle while they were married, as it's a daily reminder of a failed marriage.
Before you decide to buy a new car, you need to stop and consider some essential facts. If you make a significant purchase before your divorce has been finalized, you have just made the divorce more complex. Why? You are still legally married, and your ex-spouse is entitled to a 50% split of all the community property. In other words, they can get half of whatever you just purchased, including a new vehicle.
To keep your California divorce as simple as possible, you should refrain from making any major purchases while you are in the middle of getting the divorce finalized. You need to understand the difference between community and separate property laws. Our California divorce and family law attorneys will explain this topic in more detail below.
What Are the Community Property Divorce Laws in California?
California is a community property state, meaning the family law court will consider all income, assets, and debts of each spouse during the marriage to be part of the community.
Community property should not be confused with separate property, which includes gifts or inheritances of one spouse and any property each spouse owned separately before the marriage. Community property laws apply regardless of which spouse's name is on a title.
Unless spouse's signed a prenuptial agreement or another written agreement that modifies the traditional rules of community property division, the California family law courts will split community property right down the middle. Simply put, 50% will go to one spouse and 50% to the other. This equal split not only includes a new car but also assets within a:
- bank account,
- retirement account,
- investment account,
- savings account,
- property,
- stocks and bonds, and
- anything else that belongs to both spouses.
What is community or separate property can get confusing in certain situations. This is especially true when one spouse makes a large purchase after separation but before divorce finalization.
What About That New Car?
Sometimes in the middle of a divorce, your car might break down, or you are just sick of looking at it because it reminds you of your ex-spouse. You want to start over. You have a burning desire to go out and buy a new vehicle. You want this car badly, so you ask yourself:
- Can you do that in the middle of a divorce?
- Can you take out a car loan before the divorce is legally over?
- If I do this, then is it considered marital property?
- Do I have to tell my spouse I bought a new car?
While seeking an answer to these questions, you need to go back and gain a better understanding of California's divorce laws, specifically on community property that was discussed above. In other words, until you are legally divorced, you are still legally married.
Anything acquired during the marriage is deemed marital property that has to be divided 50/50 at the time of the divorce. But, I like that new car and want it now. Can't I buy it and not let my spouse know about it? Sure, but you are risking having the split the value of the new vehicle with your spouse if they find out, especially if you are not on friendly terms and have a vindictive spouse.
So, while technically, you could buy a new car or a much better-used car in the middle of the divorce, your spouse has a legal 50% claim on the car's total value if there is any equity in the vehicle. Further, you can't incur new debt against your spouse's credit without their consent.
There is no law prohibiting you from getting a new car loan or applying for credit during a divorce under your name only, but you can't make your soon-to-be ex-spouse responsible for the loan unless there was consent. This means any new auto loan will be entirely your responsibility.
The total equity in the vehicle will be determined by the fair market value when you get divorced against the total loan still owed on the car. A better way to obtain a new car would be to take out a lease in your name only because it's like renting it, and there is no ownership value to the car.
Why Should You Avoid Making Major Purchases Before Your Divorce Has Been Finalized?
Making an expensive purchase after you have separated from your spouse will often complicate your divorce and the division of community property. Further, you could create a more hostile environment in an already tense situation with your spouse.
This means you could be accused of inadequate disclosure while attempting to negotiate a marital settlement agreement. If you failed to list the new car in your divorce paperwork, you might be facing some legal issues with the family court.
If you were separated when you bought the new car, it might be considered separate property, but the date of separation is a crucial detail and often debated. Readers should note that physical separation is not a requirement.
The California family courts will consider any relevant evidence when deciding the date of separation. There have been cases where an expensive purchase made while “separated” fell under the umbrella of community property due to a miscalculation of the separation date.
In other words, as noted, if you were not separated, your major purchase, such as a car, will get divided right down the middle during the divorce. As you can see from this information, it only makes sense to avoid making any significant purchases before your divorce has been finalized.
Consult with California Divorce Professionals
If you and your spouse cannot settle your divorce with civility, you should get legal advice from an experienced family law attorney. Our Certified Family Law Specialist can review the details of your divorce and provide legal guidance and representation moving forward.
Readers should note that all family courts are primarily concerned with the best interest of your children. Arguments over buying a new card during a divorce are not typically an issue that would fall in a child's best interest. Thus, a spouse should not expect too much from the judge.
Resolving these issues with your spouse is usually the best option. In other words, keep the court out of it. Further, you don't want them making property division decisions in the first place. Reaching a peaceful mutual agreement with your spouse is almost always the best option to resolve divorce issues.
Furman & Zavatsky are California divorce and family law lawyers based in Los Angeles County. We serve people throughout Southern California. You can contact us for a free initial case review at (818) 528-3471 or fill out our contact form.