if one spouse has a business before they get married, then run up a lot of business debts and incur payroll taxes for the business, when they get divorced, does the other spouse have to help pay those business taxes and debts under California law?
Hello,Thank you for your question. In California, the business debt would be presumed to be community property and would be equally divided. This is because the debt itself arose during the marriage although the business preceded the marriage.Here are the basics of property distribution and spousal support in California.The goal of the court is to confirm separate property to the owner of that property and to evenly divide community property. Fault is not considered. Debt is divided according to the same principles.All property acquired during marriage and before separation, other than by gift or inheritance (Ca Fam § 770(a)(2)), is presumptively community property. [Ca Fam §§ 760, 771(a)].
Property acquired during marriage by gift or inheritance is the acquiring spouse's separate property. [Ca Const. Art. I § 21; Ca Fam § 770(a)(2)]
A spouse's "earnings and accumulations" after a judgment of Legal Separation (Ca Fam § 772) or while living separate and apart from the other spouse (Ca Fam § 771(a)) are his or her separate property.
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didn't help very much - if there is a presumption - how do you get around the presumption that the business debts and payroll taxes are community debt - does your answer mean that the business the spouse had before marriage then became acommunity property?
Hello,All property acquired during marriage and before separation is presumptively community property. The presumption can be overcome by a showing that the property was acquired by gift or inheritance. In the case of the business, any income that the business generated during the marriage would be a community asset since it was generated by the efforts of the spouse during the marriage. Community debt is determined in the same manner. The asset itself, the business, would remain separate.
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