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

Dividing property in a divorce in California can be challenging. Understanding how the process works will help you keep your own property separate.

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

Dividing property in a divorce in California can be challenging. Understanding how the process works will help you keep your own property separate.

Inherited Property

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.

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 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.
If you or your spouse received any gifts from a third-party such as a family member, friend or a 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.

Schedule A Consultation With 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 in Orange County, California, we can help you better understand your marital property and possible division of that property in a divorce so you come out on the other side in the most financially secure position possible.
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