Can your spouse claim a portion of your practice in a California divorce?

Can your spouse claim a portion of your practice in a California divorce?

If the court determines it to be community property, then yes. California law considers any asset – even professional practices such as a doctor’s private clinic, a lawyer’s law firm or a dentist’s office – as community property if a person establishes it during the marriage. This means you and your spouse jointly own it. However, some factors can affect whether your spouse can claim a portion of it.

Who provided funds to start or grow the practice?

Courts investigate the source of money used for the practice. A spouse’s use of separate property, like inheritance, to start the practice often keeps it separate. For example, if a doctor used their inheritance to open their clinic, courts may view the clinic as their separate property.

However, using community funds can change this status. If the doctor later used their salary – earned during marriage – to expand the clinic, courts might consider that portion community property.

How did the non-professional spouse contribute to the practice’s growth?

Courts examine both spouses’ roles in the practice’s success. As the professional, you likely provided the core services, managed clients and made key business decisions. However, your spouse may have contributed in indirect ways, such as:

• Managing the practice’s bookkeeping without pay
• Working as an unpaid receptionist
• Staying home to care for children, which allowed you to focus on the practice

They may increase your spouse’s claim to the practice, even if you performed all the professional work. Courts recognize that both partners often play crucial roles in an asset’s growth, whether through direct services or supportive actions.

Are there any agreements about the practice’s ownership?

Courts will examine any written agreements between spouses. A valid prenuptial or postnuptial agreement can override standard property division rules. Courts will honor this agreement if a prenuptial agreement clearly states that the practice remains separate property. This holds true regardless of when you established the practice or how it grew during the marriage.

However, courts will only enforce such agreements if they meet legal requirements and appear fair to both parties. Spouses should ensure they draft these agreements properly and review them with individual attorneys to increase the likelihood of enforcement.

Ensure fair valuation of your practice

Your professional practice represents years of hard work, dedication and expertise. If you have concerns about complex valuation and possible division of your practice in your divorce, consider seeking legal counsel.