Friday, December 4, 2009

A GIFT TO A SPOUSE MIGHT NOT BE HELD TO BE A GIFT, AFTER ALL.

Donald F. Conviser, a Certified Family Law Specialist in Woodland Hills in the San Fernando Valley, serving Divorce and Family Law Clients in the Courts of Los Angeles and Ventura Counties for over 35 years, writes this article to bring the reader's attention to a property division issue in divorce cases relating to gifts between spouses.

When you are given a gift of substantial value by your spouse, delicately request a writing from your spouse, to ensure that the gift becomes and remains your separate property, that it does not become community property, and that your spouse won't be entitled to reimbursement for the gift in case your marriage does not work out.

On December 1, 2009, in Marriage of BUIE and NEIGHBORS, the appellate court held that a $60,000 Porsche purchased by wife with her separate property funds and gifted to husband was community property, subject to a right of reimbursement to the wife of her separate property funds used to purchase the car, absent a written waiver by wife of her right to reimbursement.

Husband expected that the gift was his separate property, and the trial court ruled that the Porsche was a gift from wife to husband.

Marriage of BUIE and NEIGHBORS reflects that the law regarding gifts between spouses is more complicated than what most people expect.

FAMILY CODE Section 760 provides: "Except as otherwise provided by statute, all property, real or personal, wherever situated, acquired by a married person during the marriage while domiciled in this state is community property." Since the Porsche was acquired during the marriage, the Porsche would be community property unless otherwise provided by statute.

FAMILY CODE Section 850 provides that married persons may transmute separate or community property to the separate property of the other spouse, subject to specific requirements for a valid transmutation.

FAMILY CODE Section 852(a) provides that a transmutation is not valid unless made in writing by an express declaration that is made, joined in, consented to, or accepted by the spouse whose interest in the property is adversely affected.

FAMILY CODE Section 852(c) provides that the specific transmutation requirements of Section 852 do not apply to a gift between the spouses of tangible articles of a personal nature used solely or principally by the spouse to whom the gift is made and that is not substantial in value taking into account the circumstances of the marriage.

In Marriage of BUIE and NEIGHBORS, the trial court ruled that the Porche had been transmuted to husband's separate property, under the exception set forth in Section 852(c) for gifts of tangible articles of a personal nature that are not substantial, taking into account the circumstances of the marriage.

The Appellate Court held the trial court's ruling to be erroneous, and instead, held that the Porsche was community property under Section 760; furthermore,lacking any writing from wife stating that she intended to transmute the Porsche to husband's separate property, the Appellate Court held that the Porsche would be community property unless it is a tangible article of a personal nature, not substantial in value taking into account the circumstances of the marriage, under Section 852(c).

The Appellate Court examined the legislative history of Section 852(c) and observed the Law Revision Commission Report relating to that section stated that interspousal gifts are presumed to be separate or community depending on the nature of the property given, noting that the gift of an automobile would NOT create a presumption that the property is separate, since an automobile is not an article of a personal nature within the meaning of the applicable section. The Appellate Court concluded that the gift of the Porsche did not fall within the exception set forth in Section 852(c).

Furthermore, the Appellate Court found that the wife is entitled to reimbursement for the contribution of her separate funds to buy the Porsche, as is discussed hereinafter:

FAMILY CODE Section 2640(b) provides that in the division of community property, 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, that party shall be reimbursed for his/her contributions to the acquisition of community property to the extent the party traces the contributions to a separate property source. Citing Marriage of CARPENTER (2002), 100 Cal.App.4th 424, 427, the Appellate Court held that in the absence of such a written waiver, the donative intent of the contributing spouse (the wife in this case) does not bar reimbursement.

Because the $60,000 in funds used to purchase the Porsche for husband were traced entirely to wife's separate property funds, the Appellate Court held that wife has a substantive right to reimbursement of her separate property funds under Section 2640(b).

What lesson does this teach? Save gift cards. If you receive a gift of value from your spouse, delicately request a memo, card or letter reflecting that it is a gift and that he/she shall not be entitled to any reimbursement, and put it into safekeeping. Given the fact that well over 50% of marriages in California do not last, an ounce of prevention is worth a pound of cure.

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