I was asked recently about whether becoming a partner in a professional company creates community or separate property. The Husband worked for a firm prior to marriage and shortly before the marriage was offered a partnership interest in the firm. He and the firm signed the partnership agreement a few months prior to the marriage. After the marriage, he began receiving the benefits of the partnership agreement. Now, he and his wife are headed for divorce and he wonders if she is going to be entitled to part of his partnership interest.
Starting at the beginning of the analysis, community property is anything that the spouses gathered together during the marriage. It is presumed that everything the spouses own at the time of divorce is community property. Community property is divisible upon divorce.
On the other hand, separate property are those assets that were acquired before the marriage or through gift or inheritance. Separate property assets are not divisible upon divorce.
The inception of title doctrine governs the timing of whether an asset is separate or community property. In other words, when was the first moment that the spouse was entitled to claim ownership of the asset? Was that moment during the marriage (community) or before (separate)? It is the origin of the right to title, not the actual acquisition of final title that determines the character as either community or separate.
Here, the documents securing the interest in the partnership were signed prior to the marriage. Thus, the right to the ownership interest accrued before the marriage, making the partnership interest separate property and not subject to division upon divorce.