How Are Gifts and Inherited Property Divided in a California Divorce?

Divorce can be emotionally and financially complex, and the division of property is often an especially fraught process. Before your divorce progresses to this stage, it can be helpful to understand how the court divides different kinds of property.

How are gifts and inherited property divided in a California divorce? Here’s a closer look.

Gifts

According to California law, gifts received during the marriage are the separate property of the person who received the gift. This would include a gift from friends, family, or even your spouse. For example, if your uncle gives ONLY you a Cabin in the mountains during your marriage, that cabin is your separate property unless you later put your spouse’s name on the title. Another example is if your spouse gave you a car for Christmas, a diamond necklace for your birthday, or a Harley Davidson motorcycle as a Father’s Day gift; these are all examples of gifts that would be considered separate property of the party receiving the gift. Since it is separate property. It would automatically be disbursed to the separate property holder during a divorce.

However, problems can arise if the intent is less clear that the property/asset was actually a gift. For example, if your spouse bought a new car for Christmas, but it was intended for both to use in your lives together, it becomes difficult to decide whether or not the car was a gift. Also, California law says you cannot buy yourself a separate property gift. For example, if your husband told you to feel free to go spend $5,000 on anything you want for your birthday and you go out and buy an expensive watch. That watch is community property because you cannot buy yourself a separate property gift. One more glitch in this theory, California law suggests that based on your respective incomes, lifestyle, and history of gift-giving, if your spouse buys you a very expensive gift, such as a $70,000 diamond pendant, that “gift” may be considered a community property “investment”.

Bottom line, if you receive an expensive gift during your marriage, make sure that gift comes with a birthday or Mother’s Day card that mentions the gift…and keep the card! I know, not very romantic.

If you or your spouse received any gifts from a third party such as a family member, friend, or boss, those are almost always considered your separate property. Again though, you may want some kind of “writing” to document the gift was exactly that, a gift to ONLY you. You could also think about getting a text or email between you and your spouse to confirm everyone’s understanding of the nature of the gift, just in case there is any misunderstanding later.

Who Gets the House in a Divorce in California?

Deciding who gets the home in a divorce can be complicated. First, the court will need to determine whether the house is community property or separate property:

• Community Property: The house belongs to both spouses
• Separate Property: The house is exclusively owned by one spouse

In California, most property acquired during the marriage is considered “community property,” meaning both spouses are entitled to an equal share of it. However, the home might be the separate property of one spouse if one or more of the following conditions apply:

• One spouse obtained the house before the marriage
• The home was a gift to one spouse
• One spouse inherited the house or purchased it as part of an inheritance

Exceptions

There are some exceptions. For example, if one spouse technically owns the home but the other pays toward the mortgage or helps with renovations, a court might consider the home community property. Because community property is divided equally, one of the following typically happens:

• The house is sold, and the profits are split between the spouses
• One spouse “buys out” the other spouse’s share in the house

As you can see, there isn’t always a clear answer to the question, “How are gifts and inherited property divided in a California divorce?” A divorce lawyer in Orange County can evaluate your situation and help you determine whether you’re entitled to keep your home.

What Is a Wife Entitled to in a Divorce in California?

If a wife receives sole custody of the couple’s children in a divorce, she may be entitled to child support. If she was the lower earner in the marriage, she may also be eligible to receive spousal support for a certain period. An Orange County, CA, divorce lawyer may be able to help you secure the support you need.

In divorces involving multiple businesses or other complex property situations, determining what a wife is entitled to can be more difficult. After a thorough business valuation, divorce lawyers may be able to give you a clearer idea of what you stand to claim.

What Is a Husband Entitled to in a Divorce in California?

The husband is entitled to half of all community property in a divorce. This means that if the couple has $500,000 in community property, each spouse should receive property worth $250,000.

Divorce for business owners and those with many assets can quickly become complicated. The best way to ensure that you receive all you have coming to you is to consult an Orange County high-asset-divorce lawyer.

Is a Spouse Entitled to Inheritance Money in California?

When couples divorce, gifts can be confusing to divide, as can inheritances. Most of the time, property acquired during the marriage is considered community property. However, if you receive an inheritance while you’re still married and later get divorced, the inheritance will typically stay with you.

When Does an Inheritance Become Marital Property in California?

There are a couple of situations where an inheritance might become community (marital) property instead of separate property:

• Transmutation: The owner of the inheritance intentionally makes it community property
• Commingling: The inheritance is mixed with marital assets to the point that it’s untraceable

An example of transmutation is if you use your inheritance to purchase a home for you and your spouse. Similarly, if you deposit your inheritance into a joint bank account and use it to cover marital expenses, the court might consider the inheritance to be commingled.

Is My Spouse Entitled to My Inheritance When We Get Divorced?

Under normal circumstances, your spouse will have no claim to your inheritance if you get divorced. However, California inheritance law states that if an inheritance is transmuted or commingled with marital assets, your spouse may have a right to half of it.

The best way to protect your inheritance is to make sure it’s kept separate from marital assets. If you’re going through a divorce and are concerned about holding on to your inheritance, contact an Orange County divorce lawyer. If you used your inheritance to start a business, a lawyer experienced in divorce for business owners may be able to improve your chances of retaining your inheritance in a divorce.

Is Inheritance Community Property in California?

Under California inheritance laws, your inheritance is separate property unless you transmute it or commingle it with marital assets. If you receive an inheritance and want to make sure it remains separate property, it’s important to do the following:

• Keep the inheritance in a separate account.
• Keep all documents connected to the inheritance.
• Don’t use inheritance money to pay off shared debts.
• Don’t use inheritance money to buy a family home or shared vehicles.
• If you inherit a property, don’t allow your spouse to invest in it.

Using your inheritance in a shared business or other shared property can complicate things even further. To maximize your chances of preserving separate property, it’s wise to consult a lawyer who has experience with both business owners and divorce.

Inheriting a House in a Trust in California

Inheriting a house in a trust is usually less complex than having the home left to you in a will. A trust lets you avoid the probate process and makes the transfer of ownership smoother. In general, if you inherit the home in a trust (and it’s left only to you, not to your spouse), it’s your separate property.

However, if your spouse contributes to renovations, the home may become community property. If you inherit a house in a trust while married and want to keep it after divorce, a divorce attorney for business owner​s and homeowners may be able to help you keep it.

Is It Better to Inherit a House or Receive It as a Gift?

From a tax standpoint, it’s better to inherit a home than receive it as a gift. That’s because when you inherit a home, you can take advantage of a “step-up in basis.” This adjusts the value of the house to its fair market value at the time of the giver’s death, and it can substantially reduce any capital gains tax you have to pay.

By contrast, there’s usually no step-up basis if you receive the home as a gift. In a divorce, business owners and homeowners may ultimately sell homes or businesses and end up paying more taxes than anticipated. If you want to minimize the taxes associated with your divorce, a divorce lawyer in Orange County may be able to help.

Are Gifts to One Spouse Considered Marital Property?

The short answer is no. Gifts, inheritances, and other property you didn’t earn are separate property, not community property. If you receive a gift and want to avoid accidentally making it community property, an Orange County family divorce lawyer can assist you in taking the proper steps.

If you’re preparing for a divorce (or are already in the process), turn to a qualified divorce lawyer in Orange County, CA. Divorce lawyers for business owners and homeowners can assess your situation and make sure you keep more of what’s yours.

Schedule a Consultation with a California Divorce Attorney

If you and your spouse have decided to divorce and you want to make sure that particular property or assets go to you, give us a call to set up a free consultation. At Pinkham & Associates, we can help you better understand your marital property and the possible division of that property in a divorce so you come out on the other side in the most financially secure position possible. Consulting a high-net-worth divorce lawyer ensures that property division is handled fairly, especially when valuable gifts and inheritances are involved.