Is my wife's income and capital gain in her stocks community property?

Asked over 4 years ago - Torrance, CA

My wife received dividends and had capital gains during our marriage. Also for the last year before that I was doing trading on her account, and her account is now worth 2x the value. She used her own seperate money to buy these. But from what I read income gained during marriage is community property. Are the dividends and capital gains she accrued to her marriage community property?

Also is the gain in her portfolio that I basically designed and bought part of community property... At this time it is 3x the value. At seperation it was about 2x.

My lawyer says it is not community property but from what I have read it should be? Is my lawyer incorrect? Please respond asap as I have an OSC hearing on Monday Feb 1st.

Attorney answers (2)

  1. Mark Brian Baer

    Contributor Level 14

    1

    Best Answer
    chosen by asker

    Answered . Let’s discuss how the community gains an interest in a separate property asset, where no community funds are used. Instead of cash we will be dividing what I call sweat equity.
    The Court may determine that one spouse's use of community property assets (namely their own time, energy, skill and labor) for the improvement of a separate property asset creates a necessity to determine to what extent, if any, the community obtains an interest in that asset as a result of that use. The "more effort" on the part of the spouse that goes into an asset, "the more" that asset belongs to the community arising out of the owner spouse's labor and efforts.
    For assets increasing primarily due to labor and efforts of the owner spouse, then the method employed by the court in the Pereira case will be used. I call this the active participation method. In the Pereira case, the court found that the principal source of gains was the result of the skill and labor of the spouse. Therefore most of the gain is community property.
    Using the Pereira formula, the Court must first allocate a "fair rate of return" on the separate property investment and call that "separate property". The Court next presumes that any amount in excess of this amount must, by the process of elimination, belong to the community as a result of the owner party's community labor and efforts.

    The response given is not intended to create, nor does it create an ongoing duty to respond to questions. The response does not form an attorney-client relationship, nor is it intended to be anything other than the educated opinion of the author. It should not be relied upon as legal advice. The response given is based upon the limited facts provided by the person asking the question. To the extent additional or different facts exist, the response might possibly change.

  2. Steven Alan Fink

    Contributor Level 20

    Answered . Your lawyer is correct. Income and gains generated solely from separate property remain separate property. It would be different if your wife had a separate property business that she worked for without salary during the marriage. Some gains might be considered community property. If she put the dividends into a joint account they were commingled and may become community property if they cannot be traced.

    The response given is not intended to create, nor does it create an ongoing duty to respond to questions. The response does not form an attorney-client relationship, nor is it intended to be anything other than the educated opinion of the author. It should not be relied upon as legal advice. The response given is based upon the limited facts provided by the person asking the question. To the extent additional or different facts exist, the response might possibly change.

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