When Separate Property is Used for the Community in CA

One of the many prevalent issues that arises during divorce is when one spouse regrets having used separate property for the acquisition or improvement of a real asset or for the enjoyment of the spouse or family throughout the marriage. 

But in California, that is not considered a reimbursable claim unless prior written notice was given that the expenditure of separate funds was a loan and not a gift to the community. If the note was written and delivered contemporaneously, then there could be a 2640 claim of reimbursement from the community for the funds.

Without the written notice, the use of funds would be deemed a “gift to the community” and would not be reimbursable.  This is not legal advice, but experience has shown that such an expense typically defaults to a gift status.

However, in mediation, if both parties agree, the expense could be reimbursable in entirety to the holder of the separate property funds.

This situation frequently arises with real property such as a residence, vacation home or rental property purchased or updated during the marriage. If the property existed prior to the marriage, and additional separate property funds were used to upgrade, repair, or sell and repurchase another property, then the claim would be strong for maintaining that the property is separate in entirety. 

It is when the property is a community property and separate funds are used to enhance it or repair it that this becomes an issue of whether it is to be considered a gift to the community vs. separate property isolation of funds and the written intention of the funds is paramount.

Note:  This article is for informational purposes only and is not intended to provide either tax or legal advice.  Please contact your attorney or accountant and rely on their independent research and advice for these matters.