04 August 2025
Divorce can bring many legal questions to the surface—especially when it comes to property division. One of the most common concerns among individuals who owned investment property before getting married is whether that property will have to be divided during divorce. In California, where community property laws govern the division of assets, the answer depends on several important factors.
At Enright Family Law, we help modern families in San Diego navigate these complex issues with clarity. Here’s what you need to know if you or your spouse owned investment property before the marriage and you’re now facing divorce.
Community Property vs. Separate Property in California
California is a community property state, which means that most assets and debts acquired during the marriage are considered equally owned by both spouses. However, separate property is generally not subject to division. Separate property includes:
- Property owned by either spouse before the marriage
- Inheritances and gifts received by one spouse, even during marriage
- Assets designated as separate property by agreement, such as a prenuptial or postnuptial agreement
So, if you purchased an investment property before you got married, the starting point is that this property is separate property. But that doesn’t mean it stays 100% separate in all situations.
When Separate Property Becomes Partially Community Property
Over the course of a marriage, separate property can become commingled with community property. This commonly happens when:
- Mortgage payments were made using community income (such as earnings during the marriage)
- One spouse invests time, labor, or improvements into the property during the marriage
- The title of the property is changed to joint ownership
- A refinance is done using community credit or both spouses’ income
Let’s break this down further.
Mortgage Payments and Appreciation
If you bought a property before marriage and continued to pay the mortgage during the marriage using your wages (which are community property), your spouse may gain an interest in the property’s appreciation during that time. California courts often apply the Moore/Marsden formula to calculate what portion of the property’s value belongs to the community estate.
This doesn’t mean your spouse owns half—but it could mean they are entitled to a share of the increase in value due to the community’s contributions.
Improvements and Active Management
Did your spouse help renovate or manage the investment property during the marriage? If those efforts significantly increased the property’s value, they may be entitled to a reimbursement or credit for their efforts—even if the property was never titled in their name.
For example, if your spouse managed tenants, oversaw repairs, or performed maintenance that added value to the property, courts may view their contributions as creating a partial community interest.
Title Changes and Transmutation
If you added your spouse’s name to the deed of your investment property during the marriage, this is a strong signal to the court that you intended to share ownership. Under California law, this is known as transmutation—changing the nature of the property from separate to community.
This change must typically be in writing, but if you made such a transfer voluntarily, courts may consider the property to be jointly owned and subject to equal division in a divorce.
How a Prenuptial or Postnuptial Agreement Affects Property Ownership
If you signed a prenuptial agreement before the marriage or a postnuptial agreement during the marriage, it may protect your separate property—including investment property—from division. A valid agreement can override the default rules of community property.
These agreements are especially important for modern families where financial dynamics may be complex, and one or both partners bring substantial assets into the relationship.
Tracing the Source of Funds
To maintain your investment property’s separate status, it’s critical to maintain clear documentation. You’ll need to prove:
- When you acquired the property
- That mortgage payments were made from a separate account
- That no community funds were used for upgrades or major repairs
This process is known as tracing, and it’s one of the most important tools in a divorce involving pre-marital property. Without good records, the court may presume that commingling occurred, which can complicate your case.
What If You Sold the Property During the Marriage?
Even if you sold the investment property and used the proceeds to buy something else—such as another property or investment—those new assets might still be considered separate if the original funds can be traced and were never mixed with community funds.
However, using those proceeds for joint purchases, shared bank accounts, or marital expenses may create community interest, depending on how the money was handled.
Why Modern Families Need Modern Legal Guidance
The legal definition of relationships and families is evolving. Many couples now marry later in life, often bringing substantial assets—like real estate or investments—into the marriage. Understanding how to protect your financial interests in these situations is essential.
At Enright Family Law, we serve clients who don’t always fit into the traditional mold. Whether you’re in a second marriage, a cohabiting couple, a blended family, or a modern partnership, our team is here to help you understand how property rights affect your future.
How We Can Help
If you owned an investment property before your marriage and you’re unsure whether it will be considered community or separate property, the team at Enright Family Law in San Diego is here to guide you. We specialize in helping modern families understand their rights, protect their assets, and navigate divorce with clarity and care.
Our attorneys can review your financial history, help trace the origin of your assets, and advocate for your property interests throughout the divorce process. Whether you’re preparing for divorce or planning for your future, we’re here to support you every step of the way.
Contact us today for a confidential consultation and take the first step toward clarity and peace of mind.
