High-Asset Divorce in California: Property Division, Business Valuation and Spousal Support

Navigating a high-asset divorce in California requires advance planning, meticulous financial analysis, and strategic advocacy. This article provides a brief overview of the three issues most often at the forefront of high-asset marital dissolutions: asset valuation, property division and support.

California Property Division

What to Know

• California is a community property state. In divorce, community property is generally divided equally. Community property typically includes earnings and assets acquired from the date of marriage through the date of separation.
• Separate property generally includes assets owned before marriage, inheritances, gifts to a spouse, and assets acquired after the date of separation.
• Commingling blurs characterization. Joint accounts, reinvested dividends, mortgage paydowns, and improvements to assets can change asset characterization or create reimbursement claims.
• Tracing of funds. Detailed records and expert analysis can establish the source of funds used to acquire or enhance assets to determine the characterization of the funds (community or separate).

Common High-Asset Property Categories

• Business interests (closely held businesses, professional practices, partnerships, private equity)
• Real estate (primary residence, vacation homes, rentals, commercial properties)
• Compensation assets (stock options, RSUs/PSUs, carried interest, deferred compensation)
• Retirement assets (retirement accounts and pensions)
• Trust and inheritance interests
• Alternative assets (art, collectibles, cryptocurrency, intellectual property/licensing income)
• Tax attributes (net operating losses, capital loss carryforwards, tax basis)

Key Strategies

• Establish the date of separation and preserve records. In California, the date of separation is the date on which a spouse clearly and objectively demonstrates an intent to end the marriage and acts consistently with that intent. This date can be critical because it determines when earnings, debts, and asset acquisitions stop being community property and become separate property.
• Ensure full and accurate financial disclosures. In California parties are required to provide each other with a full and complete list of all assets and debts.
• Engage financial experts or forensic accountants where valuation, tracing, or equity compensation analysis is required.
• Obtain professional appraisals for real estate holdings.
• Evaluate tax consequences before agreeing to any proposed division.

Business Valuation

In high-asset divorces, business valuation often drives the overall settlement structure.

• Engage a seasoned, court-experienced valuation expert early.
• Secure and organize business records promptly.
• Review business/corporate records.
• Consider creative buyout structures (installments, security interests, earn-outs) to preserve business continuity while equitably dividing value.

Spousal Support: Balancing Need, Ability to Pay, and Lifestyle

Spousal support in California involves temporary support during the case and long-term or final support at judgment. High-asset cases often involve additional complexity that benefits from a particularly nuanced, evidence-supported approach.

• Marital standard of living serves as a reference point, balanced against feasibility and fairness.
• Income analysis should include wages, distributions, equity compensation, bonuses, and perquisites across multiple years.
• Duration of marriage significantly impacts the length and structure of support. In California, a short-term marriage is under 10 years, and support is generally half the length of the marriage. A long-term marriage is greater than 10 years and unlike short-term marriages, does not have a defined length. Generally, support lasts the reasonable amount of time it would take for the spouse to become self-supporting. The longer the marriage, the longer it’s assumed this will take. The court considers many factors when determining amount and length of spousal support.
• Vocational factors. In California, the court will evaluate a party’s realistic ability to earn income, including the individual’s age, physical and mental health, existing education and work history, marketable job skills, and the amount of time reasonably required to obtain education, retraining, or licensing necessary to reenter or advance in the workforce, all of which are critical when determining earning capacity for purposes of child support and spousal support. include age, health, education, work history, marketable skills, and retraining needs.
• Spousal Support Buyout: A spousal support buyout is a negotiated arrangement in which one spouse satisfies or resolves future spousal support obligations through a lump-sum payment or unequal property division, typically coupled with a waiver of spousal support in which the supported spouse knowingly and expressly relinquishes any right to seek future support, thereby providing finality and eliminating the possibility of later modification or reinstatement. The lump-sum buyout is typically tax free for the supported spouse.

Common Mistakes to Avoid

• Delaying expert engagement.
• Ignoring tax consequences and liquidity.
• Overlooking reimbursement or credit claims.
• Mixing business income assumptions between valuation and support.
• Underestimating the financial disclosure burden.

Conclusion

High-asset divorces require early strategy, disciplined financial analysis, and experienced legal guidance. With careful attention to valuation, income characterization, and tax implications, parties can protect complex assets and achieve well-reasoned resolutions.

            This document is for general informational purposes only and does not constitute legal advice. For advice regarding your specific situation, consult a qualified California family law attorney.

 Author Traci S. Mason is an attorney at Porter Simon licensed in California. She is the lead attorney for the firm’s Family Law Division where she focuses on all aspects of family law. Ms. Mason can be reached at mason@portersimon.com or http://www.portersimon.com