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I am sorry to hear about this situation. There is no statutory regulation that deals with this. California law only guides the Court in determining what is separate property, what is quasi-community property, what is quasi-marital, and what is community property. See HERE.
The answer would be at the discretion of the Court, and the Judge would very much look at the following like factors to determine how to categorize the remaining business interest of John and whether or not to divide it at a divorce:
1) Whether or not Jane gave her interest to her children in anticipation of the divorce, hoping to get 25% more in the divorce,
2) Whether her children actually control the business, or, it is in their name only and really, Jane still controls 50%,
3) Whether or not the children will likely give Jane back 50% after the divorce,
4) What work Jane has done for the business, and
5) Whose separate capital went into funding the business.
Very likely, the Court will be mistrustful of Jane, and may deny her 25% more, figuring that she may get 50% back from the children and control the business with 75% as was her plan all along.
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