Is the House Mine, Yours, or Ours?

Scenario: Husband, Mark, buys the house before he married his wife, annie. Annie helps to pay the mortgage during the marriage and there is no prenuptial or post-nuptial agreement regarding the house.

Is the house community property or separate property?

In California, there is a presumption under the law that property acquired during a marriage is considered “community property.”

What is community property? Community property is usually owned by both spouses equally. In terms of real estate, the following situations can be considered as community property:

• The title to a purchased home was bought during the marriage;

• The title to a purchased home has both spouses’ names; or

• The title to a purchase home has only one spouse’s name, but the other spouse can prove that they had an initial agreement that the house belonged to both of them, regardless of hen the house was purchased. This would require strong evidence that the intent was for the house to belong to both spouses.

However, when a spouse buys a home before the marriage, that home is generally considered that spouse’s separate property and not community property. Even though this seems straightforward, there are always complications. For example, what happens if the spouse who is not on the title contributes money during the marriage to pay for the mortgage? Who gets the house in the divorce?

If the house is deemed separately property, the spouse who owned it originally would get the house. However, if the house is considered community property, it can be separated by either agreement or court order.

 But what happens if Annie, the wife, who is not the owner of the home pays for the mortgage during the marriage? can she be reimbursed during divorce proceedings? Here are three different scenarios to consider:

1. If community funds were used to pay for the separate party.

   If community funds were used on a separate property, the community would get reimbursed (and Annie would be entitled to half of that reimbursement).

2. If separate property was used to benefit the other’s separate property.

   If one person’s (in this situation, the wife’s) separate property is used to benefit the other’s (the husband’s) separate property, it is unlikely for the paying spouse to be reimbursed. In our scenario, Annie would probably not get reimbursed unless there is a prior agreement addressing this issue, such as in a prenup or post-nup. This is because there is a presumption under the law that payment using separate property funds is a “gift” to the other spouse or the community. This is called the gift presumption.

3. If separate property is used to benefit the community property.

   If the separate property contribution was used to acquire the community property, which includes paying for down payments, payments for improvements, and payments that reduce the principal of a loan used to finance the purchase or improvement of the property, the paying spouse (or Annie in this case) can be reimbursed for her contributions as long as she can definitively trace her contributions to a separate property source. Also, if Annie contributed to the community property after separation, she can be reimbursed.  

One final warning.

While a reimbursement can be possible for certain situations, it is the party’s job to alert the court that they are requesting reimbursement. The court is not required to reimburse the parties and will only determine whether to do so after it has been brought up by one or both parties.

Don’t be confused about what you are entitled to after you separate. Schedule a free consultation to get started. Contact us at info@cordiallaw.com.