Gifts From Your Spouse: How Are They Handled in California Divorce?

• What is community property and separate property in California?
• What about loans and down payments?
• Commingling: Are gifts separate property in a divorce in California?
• Tracing community property
• References

When you are given a gift of substantial value from your spouse or registered domestic partner, you might be in for a surprise when you get a divorce in California. Why?

If you do not have a written declaration indicating that the gift was from your spouse, it will likely be considered community property if you separate or divorce.

The California Family Code provides that married couples may "transmute" (change) separate or community property to the separate property of the other spouse only if the following requirements are met: an express declaration, in writing, that is made, joined in, consented to or accepted by the spouse whose interest in the property is adversely affected.

What are community property and separate property in California?

California laws define how property is treated during a divorce. Two key terms to know are community property and separate property.

Community property

Per California Family Code 760, property acquired by a married person during the marriage while living in California is community property. That means it’s shared jointly by both people and should be split accordingly during the divorce. If you bought furniture as a couple, purchased a house, or acquired lawn furniture, these things belong to you both.

Separate property

Separate property is what you owned before you were married. It also includes gifts or inheritance, even if those came to you during the marriage.

California Code 1146 defines a gift as a transfer of personal property that was made voluntarily. No one was required to give this to you, and you don’t do anything or pay anything for it. Something like this is typically yours alone in the divorce.

What about loans and down payments?

If a gift was paid for from your ex's separate property funds (an inheritance, maybe?), your spouse will likely be able to claim a Family Code section 2640 reimbursement for the funds spent on buying you the gift.

California Family Code Section 2640 states that down payments, payments for improvements, and loan repayments are considered contributions to the acquisition of property. That means the person who made the payments can ask to be reimbursed.

Let’s consider an example. Your partner used a credit card to buy you an expensive computer. The gift is yours on divorce, but your partner could ask for reimbursement of the credit card payments made.

Commingling: Are gifts separate property in a divorce in California?

California laws specify that some types of property can begin as individual (separate) property and become shared (communal) through a process called commingling.

During commingling, community and separate property get mixed and become difficult to separate. This issue is common with big purchases, such as cars and appliances. For example, you may have entered a marriage with a refrigerator, but since you both used it every day as part of the household, it might be considered community property.

A retirement plan can also become commingled. For example, you may have entered the marriage with a moderate balance that accrued interest during your time together. In divorce, you might need to split those commingled profits.

Gifts can become communal property in divorce in some situations. For example, if your parents give you a $100 Christmas gift which you place into your joint checking account, it could become a communal asset in divorce.

Tracing community property

Tracing can sometimes help people understand what belongs to them in a divorce.

The process involves investigating receipts, credit card statements, bank account data, and more to determine how much one party paid to acquire or maintain something the other person considers a private asset.

For example, one party might say that a television is private property. The other might hire someone to trace it using receipts from repair shops. That proof could help the second party demonstrate that the asset was jointly owned.

Tracing is a complicated process, and it can cause difficult feelings for both parties. It may be best to think of this as a last resort when the other person just won’t work with you on a fair split of the things you own.

What's the lesson about gifts from your spouse in divorce?

If you receive a gift of substantial value from your spouse, delicately request a card, letter, or memo reflecting that the gift is, in fact, a gift and that your spouse will not be entitled to any reimbursement if you separate – and keep it! Romantic, huh?

Now, suppose the gift is relatively inconsequential compared to the value of your other marital property. In that case, the court will probably find that the gift is the separate property of the person it was given to. But again – absent an explicit, written declaration that the property is intended to be a gift with no right of reimbursement – you may be leaving it up to chance.

Have things to sell? Learn more about what gifts from your marriage (such as your ring) are worth at our partner, Cash for Gold.

References