- posted: Jul. 20, 2022
In California, property acquired during a marriage is considered community property and is therefore subject to being divided equally in a divorce. So, what happens if a spouse used money from a premarital source as a down payment to acquire property during the marriage?
Section 2640 of California’s Family Code allows a divorcing spouse to be reimbursed for contributions of separate property to the marital estate, including down payments on a property, payments for improvements to the property and payments that reduce the principal on loans used to acquire property during the marriage. Contributions that are not reimbursed under this section are things like interest on the loan, payments for maintenance, taxation or insurance of the property. Moreover, the amount to be reimbursed cannot include interest, cannot be increased to adjust for inflation and cannot exceed the net value of the property at the time of the divorce.
The right to reimbursement for contributing separate property is not automatic. First, the court deciding the issue must determine whether or not the separate property in question has been “transmuted” into community property. In California, transmutation occurs only if there is a written declaration signed by the spouse who would lose part of their interest in the property. Otherwise, the property retains its separate character.
The court must also consider a provision of the California Evidence Code that presumes ownership of a property is as stated in the title document, such as a deed to a home in only one spouse’s name. If the other spouse seeks to overcome that presumption, he or she must present clear and convincing evidence that the home was purchased in part by use of contributed separate property.
To resolve a claim for reimbursement, a court will look at the following three-part test to determine a spouse’s eligibility:
The amount of the contribution sought can be traced and identified. This is usually proved by escrow documents if a property was sold or, if the money was a gift, any documents, signed declarations or affidavits from the person who made the gift can be shown to the court as evidence.
The amount of the contribution for a separate property down payment, payment for improvement or a reduction of principal was made during the marriage. Escrow documents and bank statements are good sources to prove the amount of the contribution.
There is no valid written document waiving the right to reimbursement. A prenuptial agreement or a written document made during the marriage might purport to waive the right for reimbursement of contributions from non-community property. However, such an agreement or other document must be found legally enforceable.
If you are a divorcing spouse seeking reimbursement for contributions made from separate property, the family law attorneys at Strategic Law Command work to ensure your best interests are accounted for and can help you navigate your divorce. For a consultation, call 916-787-1234 or contact us online.