You received a significant gift or inheritance while married and living in California post-1975. Now you want to know, is the gift or inheritance separate property under California law?
Property acquired during marriage by gift, will, or inheritance is separate property. (Section 21 of the California Constitution, California Family Code Section 752)
Except as otherwise provided by law, neither spouse has any interest in the separate property of the other. (California Family Code Section 770)
A separate property gift or inheritance remains separate property provided the following are true.
- The gift or inheritance was not commingled
If separate and community property are commingled in such a manner that “the respective contributions cannot be traced and identified, the entire fund or property—including property acquired in exchange therefor—will be treated as community property. (California Family Code Section 760)
California Family Code Section 852 transmutation requirements don’t affect the law governing characterization of commingled separate and community property. (California Family Code Section 852(d))
2. The spouse who received the inheritance or gift (or has other separate property) did not sign any documents explicitly declaring that he/she was changing the legal character of the gift or inheritance from separate to community property.
The legal characterization of separate property changes only if the intended heir or recipient expressly declares, joins in, consents to, or accepts the change of character in a signed writing. (California Family Code section 852(a))
3. No community property funds were used to pay the principal of a loan on, or to make improvements that increase the equity in the separate property (Marriage of Marsden (1982) 130 CA3d 426, Marriage of Moore (1980) 28 C3d 366, Marriage of Weaver (2005) 127 CA4th 858, 871) If community property funds were used, the community may have acquired an interest in the separate property. The method for calculating a community property interest is referred to as the Moore-Marsden formula.
Use these facts to determine if a gift or inheritance is a separate property asset:
- The date the inheritance or gift was received
- The date of marriage
- The date of separation
- Documents that include an express declaration changing the legal character of the gift or inheritance from separate to community property
- Evidence that community property funds were used to pay the principal of a mortgage on the separate property or to make improvements that increased the equity in the separate property
Evidence to prove a gift or inheritance is separate property includes, but isn’t limited to:
- Income tax returns
- Gift receipts
- Estate planning documents
- Financial statements
- Prenuptial or post-nuptial agreements
If you’d like my help determining if a gift or inheritance is separate property in California, please schedule a consulting session now.