Property Division and Reimbursement
California is a community property state. This means that most property acquired during the marriage is generally considered community property that will be split evenly during a divorce. However, couples sometimes marry later in life and may have acquired a significant amount of separate property before the marriage. When the marriage is long, separate property may become commingled or "transmuted" into community property, and the issue of what is separate or community property is not always clear. A number of complex issues may arise during property division. The divorce lawyers at Lerner Poole have amassed 50 years of combined experience helping San Francisco residents and other individuals in the Bay Area with these matters.Rules of Property Division and Reimbursement
Property that is acquired during a marriage in joint form is presumed to be community property under California Family Code section 2581. This presumption can be rebutted by a clear statement in a deed or documentary evidence of title that the property is separate property, or by a written agreement by the spouses that the property would be separate property.
For example, if a spouse pays for a vacation house using separate property funds and takes title with the other spouse in a joint form, such as a tenancy in common or a joint tenancy, the house is generally presumed to be community property unless the spouse who paid can present a clear statement in a title document to the contrary or present a written agreement between the spouses that the vacation house is a separate property. If the house is community property, the best solution may be to sell the vacation house and split the proceeds of the sale evenly between the spouses.
However, even if the vacation house is community property, the spouse who paid using separate property is entitled to a "reimbursement" of the investment under California Family Code section 2640(b) to the extent the spouse can trace the source of funds to separate property.
Asset tracing requires identifying and proving the amount of the payment to be reimbursed as well as the separate property from which the payment was made. When a couple is wealthy, asset tracing in order to obtain reimbursement becomes quite complex and challenging, particularly in a high net worth divorce. It may be necessary to retain a forensic accountant, an appraiser, and other experts to determine the value of one or more assets.
Under California Family Code section 2640, reimbursement is limited to down payments, payments for improvements, and payments that reduce the loan principal used to finance a purchase or improvement of property. Reimbursement is not available for payments of interest on a loan, maintenance, insurance, or taxation of the property. The reimbursement amount cannot be more than the net value of the property at the time of division.
In general, the court will not consider issues of fault such as adultery when dividing property, but the court can consider economic misappropriation of the marital estate when dividing the property. This means that there may be serious penalties if one spouse fails to disclose a piece of community property to the other and tries to transfer it in order to avoid the asset being properly divided.
Often, one Bay Area spouse attends graduate school during the marriage and obtains a valuable professional license, while the other works to pay all the bills or raise the children. In California, the license is not a community property asset, but the community may have reimbursement rights to a contribution that substantially enhanced one spouse's earning capacity.Explore Your Options with a Family Law Lawyer in Santa Clara County
Although community property may seem like a straightforward concept, many spouses may be concerned about property division and reimbursement. Some Bay Area couples also may have accumulated separate property in other states that is then turned into community property in California through purchases and commingling. At Lerner Poole, our attorneys are Certified Family Law Specialists who are knowledgeable in property division and reimbursement, among other matters. We have assisted many residents of the Bay Area, including those from Santa Clara County communities such as Los Altos, Mountain View, and Los Gatos. Attorney Stacey Poole has a master's degree in tax, which can be particularly helpful to clients with high net worth divorces who are worried about the tax consequences of property division. Contact us at 415-391-6000 or via our online form to schedule an appointment.