Can you sell community or separate property assets once a divorce has started?

Can you sell community or separate property assets once a divorce has started?

More often than not, you will find that you cannot sell community or separate assets in California once a divorce, legal separation or nullity suit has commenced. Once a Petitioner spouse has filed a divorce petition and the Respondent spouse has been served with the divorce petition and summons, there are four automatic temporary restraining orders (ATRO) that take effect. Essentially, both spouses are restrained from selling, transferring, disposing etc. any property or assets without the other parties written consent or a court order. Family Code 2040(a)(2).

The ATROs remain in effect until there is either a final judgment, the case is dismissed or through further order of the court. Family Code 233(a).

There are limited exceptions to this rule. Although restraining orders may seem negative, the rationale is actually to level the playing field of spouses by putting community and separate property interests on hold while the courts figures out how property and assets will be divided. Violating the ATROs can lead to fines or jail time.

The exceptions to the ATRO's regarding property include:

Usual course of business exception: this is a narrow exception. If selling property is part of a spouse's "usual course of business" then it can fall outside the scope of the ATRO. Some examples might include a spouse who deals in real estate or property management might be able to claim selling a property had no relation to the marriage and was in the usual course of business. It is not enough that a spouse 'always managed' the property and then sells it.

Necessities of life exception: using community or separate assets or property to pay for the necessities of life. For instance, food and rent are generally considered necessities of life and outside the scope of ATRO's. However, this is not automatic. Payment of community obligations are not always protected as 'necessities of life.'

Payment of attorney fees and costs exception: parties may use community funds to pay reasonable attorney fees and costs to retain legal counsel in the family law proceedings. Use of community funds must be accounted for, so you should keep careful records of the money spent.

Each case is different. What may be reasonable to one spouse or party may be unreasonable to the court. Spouses can always play it safe by asking the other spouse for written consent or asking the court for permission to use property or assets.