IS MY WIFE ENTITLED TO REIMBURSEMENT FOR HER DOWN PAYMENT ON OUR HOME?

QUESTION: Is the down payment on a home considered equal property in a divorce? In 1993, before my wife and I were married, we purchased a house together. She put in the $30K down payment. We got married in 1996. I've paid the mortgage the majority of the time during the marriage. Now we're getting divorced. My wife wants to know if the $30K she put in counts as something that was hers before the marriage and should still be hers. I'm thinking it's equal property because it was put into the house, which is mutual.

MY ANSWER: If the down payment on a community property home came from a party's traceable separate property, in a divorce, that party is entitled to reimbursement of the down payment.

There are complications due to your particular facts, but it is still likely that your wife would be entitled to reimbursement of her down payment.

Because the house was purchased before the marriage, it did not start out as community property. It started out as property of a partnership of you and your wife. The grant deed should reflect the way that you and your wife took title to the property.

If the Court were to treat the house as partnership property (of the partnership of you and your wife, since it was acquired prior to the marriage), the partnership agreement (if any there was) could affect how the Court divides the house ownership.

If there wasn't any written or oral partnership agreement, the Court may determine that there was an implied partnership agreement to equally own the home subject to reimbursement for separate property contributions, and reimburse each party for his/her contributions to the acquisition of the house, likely considering only principal amounts paid by each party on the mortgage and for improvements in determining the parties' respective reimbursement, and divide the balance 50/50.

Alternatively under that situation, if the Court were to find an implied agreement for proportional ownership, the Court might apportion ownership based on the percentage of each party's separate property contributions, but the contributions from either party's earnings to the paydown during the marriage would be allocated 50/50 to the parties, since both of their incomes were community property during the marriage absent a Premarital Agreement providing otherwise.

Unless you and your wife had a valid and enforceable Prenuptial Agreement making your respective earnings separate property of the earner, the income of either party during the marriage was community property, so the payments made on the mortgage (or at least the principal payments on the mortgage) diring the marriage would be credited 50/50 to each party.

If the Court treats the house as community property, if your wife's down payment is traceable to a separate property source (i.e., premarital funds of hers), Family Code Section 2640 provides that she is entitled to reimbursement from the house equity (or from the first sales proceeds of the house sale) before the balance is apportioned or divided (considering separate property and community property contributions to the acquisition and improvement of the house). Traceable paydown of principal by each party prior to the marriage would be subject to Section 2640 reimbursement.

Your payments on the mortgage during the marriage were made with community property earnings, so the fact that you made those payments is immaterial to your wife's Family Code Section 2640 reimbursement rights, and those payments would be credited to each party 50/50. Your wife and you would be entitled to Section 2640 reimbursement for her and your respective paydowns of principal before the balance of the property is divided 50/50.

If the house were refinanced during the marriage, the proceeds of the refinance loan would likely be held to be community property pursuant to the "GRINIUS" test, which looks to the intent of the lender as to whose credit the lender relied upon in granting the refinance loan (which in your case, would likely be community credit, to wit, income of either party).

This educational blog is brought to you by DONALD F. CONVISER, an effective and aggressive Los Angeles Divorce Lawyer and Family Law Attorney serving clients in the courts of Los Angeles and Ventura County for over 35 years,owner of Warner Center Law Offices, with offices in Woodland Hills and Century City. Call 888.632.4447 or 818.880.8990 for a free confidential consultation with a Certified Family Law Specialist to discuss your divorce or family law issues. | www.conviser.net | www.conviserfamilylaw.com |