Irvine, CA family law attorney Marc Garelick talks about the importance of characterization of property in a divorce. He explains that the importance of property in a divorce revolves around several key factors: valuing the property, determining how it is characterized, and deciding how it will ultimately be divided. He typically works with a team of professionals, including forensic accountants, valuation experts, compensation specialists, and sometimes industry-specific experts, to establish an accurate value for any business or asset involved.

The first hurdle is valuation, and the second is characterization. Characterization has two components. First, he determines whether the property is community property or separate property. Community property generally includes assets acquired during the marriage or through the efforts of either spouse during the marriage. Once identified, he evaluates whether it should be divided equally or in another proportion.

If the property is separate, he examines whether the community has gained an interest in it. This can occur through the spouses’ efforts, contributions to increasing the value of a business, refinancing of real estate, or personal guarantees on loans. In such cases, a separate property asset may gain a community interest due to these factors.

Once characterization is established, he then evaluates how to handle the property. Some assets may be awarded to one spouse—such as a law practice where the other spouse cannot operate it—while others may need to be sold or shared in some manner moving forward.