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While a legal separation is often fruitful, it also warrants caution.

As in all states, in California, the parties to a divorce may negotiate their own arrangement as to property division outside of court. However, coming to an agreement is not always possible – and even when couples can find common ground, the standards a court would use to divide property if it ultimately had to do so underlie negotiations.

California is a community property state. Generally speaking, this means that all property/income acquired during the marriage is subject to a 50-50 division upon divorce. Any property acquired before the marriage or property acquired by either party in certain ways, such as by gift or inheritance, is excluded from division.

Parties to a divorce and their lawyers may present evidence that shows how a particular piece of property belongs exclusively to one spouse or another, or argue as to why property should be divided in a certain way. Yet, that 50-50 split set forth by California law is always a baseline for negotiations and courtroom arguments.

For some couples, a legal separation may be a better idea financially. Religious or personal reasons are often behind long-term legal separations. But significant property benefits may also make separation a worthwhile solution.

So why can legal separation be a good idea financially? Primarily, separated spouses may still share in certain benefits. Healthcare coverage offered by one spouse’s employer, certain military benefits and filing a joint tax return are just some of the financial incentives to remaining married. For some couples, a legal separation is also a temporary solution to getting the Social Security benefits that can come with marriages that last at least 10 years. And, spouses who separate but remain married can still pool some household resources.

While a legal separation is often fruitful, it also warrants caution. If spouses act as though they are divorced when they remain technically married, problems can ensue – for instance, separated spouses remain liable for each other’s debts. To address such potential pitfalls, anyone living apart from their spouse should consider a legal separation agreement. Separation agreements are legally binding documents that pertain to matters like the division of property and debt, spousal support and child custody issues.

Sometime divorce is tough financially. But, by devoting attention to possible value-creating alternatives like legal separation, your pocketbook can come out well in the black.

Source: Forbes, “Legal Separation or Divorce: Which is Better Financially?” Jeff Landers.


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