California law specifies that property inherited by one spouse is their separate property, even if
they inherited it during the marriage. This means that inherited property is not subject to the
rule of “community property” division. That means that if you receive an inheritance from a
deceased friend or family member, whether it is $10.00 or $10,000,000 worth of gold,
diamonds and real estate, that property is 100% your separate property. However, if the Trust
or the Will reads that the inheritance is a gift to you and your wife/husband, then the property
belongs to everyone named and therefore needs to be divided by the court. For example, if one
of your distant relatives left you and your spouse a house in their Will or Trust, your spouse has
an absolute right to make a claim for their portion of the real estate in the divorce.
Also, if you inherited an asset and co-mingled it with your combined marital assets, the
ownership of the inherited property can become “cloudy” and confusing. For example, if you
inherited $70,000 in cash and you put that cash into a joint bank account, that can be considered
a “gift” to the community, and it may become community property. One exception to this
general rule is you may be able to argue that it is still your separate property if there was some
important reason you put that separate property inheritance money in the joint account and you
can “trace” that money going into the joint account very clearly by use of banking
documentation. Similarly, if you inherit a home or other real property and you later place title
to that property in both of your names, it will very likely become community property.
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 you 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 title.
Another example, if your spouse gave you a car for Christmas or 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 mentioned the
gift…and keep the card! I know, not very romantic.