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The Impact Of Passive Income On A California Divorce

On Behalf of | May 4, 2023 | Divorce

Establishing a reliable stream of passive income is frequently ideal for modern professionals. They can live their lives without being beholden to an employer or constantly chasing the next client.

Passive income may result from invested resources, peer-to-peer lending or even rental real estate holdings. The lifestyle permitted by those with passive income is something that people often want to protect when preparing for divorce.

Passive income can affect property division and support matters

Whether the people divorcing find a way to settle outside of court or ask a judge to make the key decisions in their case, they need to disclose all sources of income and major assets. That will include sources of passive income, including rental properties and investment accounts.

When people decide how they want to divide community property or how much support one spouse may need to pay the other or for their children, passive income can actually have a profound impact on the final determination. The totality of someone’s financial resources, including their passive income, plays a major role in what obligations they have in a divorce.

People generally have to account for all assets and sources of income for any formal financial disclosures made to the courts. Failing to do so could leave them open to penalties later due to the misrepresentation of their circumstances. Therefore, passive income can increase the risk of complications during divorce if someone doesn’t address it properly.

A divorce could reduce someone’s passive income

The property division process in a California divorce could potentially diminish the assets that generate passive income. Spouses may need to divide their investment accounts or liquidate investment real property holdings to properly and fairly divide their marital property with their spouse.

For those who hope to retain the assets that generate their passive income, settling outside of court may be the best approach to divorce. They can negotiate to preserve specific assets by compromising in other areas. Seeking legal guidance and recognizing that passive income can change both someone’s priorities as they prepare for high-asset divorce can help people better advocate for themselves during the property division process.