When individuals are happily married, few of them act under the question of “What would happen to this property if we got divorced?” Thus they happily contribute their separate property funds (inheritance, earnings saved before marriage, etc.) to the acquisition of property during marriage, such as a home.
When these same individuals get divorced – whether in Yolo County, Sacramento County, or Placer County – one of the first questions they have is, “Can I get my money back?”
There’s no question the house itself, acquired during the marriage in the names of both spouses, is community property.
Under California Family Code section 2581, property acquired by the parties during marriage in joint form, including tenancy in common, joint tenancy, or tenancy by the entirety, or as community property, is presumed to be community property. This presumption can be rebutted by:
- a clear statement in the deed or other documentary evidence of title by which the property is acquired that the property is separate property and not community property, or
- proof that the parties have made a written agreement that the property is separate property.
Thus, even if one spouse pays for the entire house out of funds he or she earned or inherited long before the marriage, the house is still presumed to be community property if the two spouses took the property in joint form, unless the contributing spouse can prove otherwise using the methods described in the statute.
In that case, upon divorce, whatever equity there is in the home will be split among the couple.
Contributions to Community Property
But that is not the end of the story. Even if the house is deemed community property, that does not mean the contributing spouse loses her investment. Instead, she is entitled to a pre-division “reimbursement.” of that investment.
Under California Family Code section 2640(b), the contributing spouse shall be reimbursed for his or her contribution to the acquisition of community property “to the extent the party traces the contributions to a separate property source.”
In other words, the burden is on the party requesting reimbursement to “trace” the contribution for which he or she is asking to be reimbursed. This might be a check drawn on a trust account the spouse had established before marriage. This might be the sale of a previous home the spouse owned, the funds for which were used to purchase the home. In any case, the reimbursement depends upon that spouse showing by evidence that the funds used to purchase the community property were that spouse’s separate property before they were invested in the community property.
The spouse who did not contribute may still fight the reimbursement if the contributing spouse signed a written waiver of the right to reimbursement, or signed a writing that has the same effect as a waiver.
How is the Reimbursement Calculated?
Not all contributions to community property are reimbursed. Under California Family Code section 2640(a), only “down payments, payments for improvements, and payments that reduce the principal of a loan used to finance the purchase or improvement of the property” will be reimbursed. The contributing spouse will not be reimbursed for payments of interest on the loan, or payments made for maintenance, insurance, or property taxes.
Furthermore, the amount reimbursed comes without interest or adjustment for change in monetary values, and cannot exceed the net value of the property at the time it is divided. (See FC 2640(b)).
Separate property contributions to community property are reimbursable. But that is by no means certain.