Family Code 2640 Separate Property Reimbursement Claims – What are they?
Family Code Section 2640
(a) “Contributions to the acquisition of property,” as used in this section, include downpayments, payments for improvements, and payments that reduce the principal of a loan used to finance the purchase or improvement of the property but do not include payments of interest on the loan or payments made for maintenance, insurance, or taxation of the property.
(b) In the division of the community estate under this division, unless a party has made a written waiver of the right to reimbursement or has signed a writing that has the effect of a waiver, the party shall be reimbursed for the party’s contributions to the acquisition of property of the community property estate to the extent the party traces the contributions to a separate property source. The amount reimbursed shall be without interest or adjustment for change in monetary values and may not exceed the net value of the property at the time of the division.
(c) A party shall be reimbursed for the party’s separate property contributions to the acquisition of property of the other spouse’s separate property estate during the marriage, unless there has been a transmutation in writing pursuant to Chapter 5 (commencing with Section 850) of Part 2 of Division 4, or a written waiver of the right to reimbursement. The amount reimbursed shall be without interest or adjustment for change in monetary values and may not exceed the net value of the property at the time of the division.
House Prior to Marriage
You own a house prior to marriage, but there is a mortgage when you get married. You know the community acquires a Moore-Marsden interest on it.
House Purchased During Marriage
Let’s say you bought a house during the marriage. It’s community property because it was acquired after the date of marriage. However, your parents gifted you $100,000 downpayment (just to you, not spouse) to buy it. Do you get this back?
Yes. However, YOU have the burden of proof. You must produce the escrow closing documents, and prove the check related to that $100,000 came from your parents straight into the escrow. It must not have gone into a joint bank account and been co-mingled. If so, you have the burden of TRACING its separate character all the way through.
Do you get interest on this $100,000? NO.
Let’s say the house purchase price is $500,000. Your downpayment (gift to you from parent $100,000) will be returned, off the top. If the community paid down the original remaining loan of $400,000 down to say $300,000, here is how the math would work. At time of trial, FMV is $600,000,remaining mortgage is $300,000 = $300,000 equity. You would get your $100,000 back off the top, then equally divide the $200,000.
If it’s a long-term marriage with lots of assets, and lots of purchases and sales, it may be a bit confusing to trace the separate monies without a forensic accountant.