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?”
California Family Code 2640: What to Know About Reimbursement Claims
Under California Family Code 2640, a spouse may be repaid for separate funds that went into community property, but the details decide the outcome. Keep these points in mind.
- Separate funds can be reimbursed: If you can trace separate property money into community property, § 2640(b) generally entitles you to reimbursement when the community estate is divided.
- Only certain payments count: Under § 2640(a), qualifying contributions are down payments, payments for improvements, and loan payments that reduce principal. Interest, maintenance, insurance, and property taxes do not qualify.
- Tracing is your burden: The spouse seeking reimbursement must trace the money to a separate source, which gets harder when funds were mixed into joint accounts or moved through refinances.
- Limits apply: Reimbursement carries no interest and no adjustment for changes in value, it cannot exceed the property’s net value at division, and it can be waived in writing.
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.
Dividing Property in a Divorce?
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Schedule a Free ConsultationContributions 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.
California Property Reimbursement Claims: Common Questions
California Family Code 2640 governs reimbursement for separate property contributions to the acquisition of property. When the community estate is divided, a spouse can generally be repaid for traceable separate funds put into community property, with limits. It also covers contributions made to the other spouse’s separate property during the marriage.
Qualifying contributions include down payments, payments for improvements, and loan payments that reduce principal. Interest, maintenance, insurance, and property taxes are excluded. For example, a roof replacement paid for with traceable inherited money may qualify, while years of property tax payments would not.
Tracing means showing through records that specific separate funds paid for the contribution. Escrow closing documents, bank statements from before the marriage, and sale records for a prior home are common examples. If the money was mixed into joint accounts, tracing gets harder, and a forensic accountant can sometimes help.
Yes. Reimbursement does not apply if the spouse signed a written waiver or a writing with the same effect, and a claim can fail if the money cannot be traced to a separate source. Review anything you signed with a lawyer before assuming a claim is preserved.
No. Section 2640 provides reimbursement without interest and without adjustment for changes in monetary value, and the amount cannot exceed the property’s net value at division. For example, a $100,000 down payment is repaid as $100,000 even if prices rose, and only if enough equity remains.
A home bought during marriage is generally treated as community property, but a traceable separate property down payment may be reimbursed when the home is divided. Remaining equity is typically split equally. The result can change if there was a written waiver or the funds cannot be traced.
Yes, in part. Under subdivision (c), separate funds put into the other spouse’s separate property during the marriage can be reimbursed, unless there was a written transmutation or a written waiver. The same limits apply: no interest, no adjustment for value changes, and a cap at net value.
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.
Brian enters the family law profession with a refreshing approach to these proceedings: heal families; don’t destroy them. In some cases, this means the family is going to look different than it did before. In other cases, this means a new family is created where there was none before. Either way, individuals should leave family court knowing their voices were heard, and with healthy attitudes about themselves and those they love.