If I’ve Used My Separate Property, Can I Get It Back?

Norris Family Law

This is one of the most frequent questions we are asked by our divorce clients.  It comes up in a variety of contexts:  “I used my premarital funds for the down payment on our house—can I be reimbursed in the property settlement?”;  “After we separated I paid our credit card balances from my own earnings—doesn’t my spouse have to reimburse me?”;  “I started our business during marriage with my separate funds—was that a gift to our joint property?”.  These are just a few of the situations where this question comes up.  Here are the answers to the fact patterns we see most often:

Separate funds used to acquire a joint asset during marriage:  The contributor in a divorce will be reimbursed, provided he or she can prove (generally by tracing via financial records) that the funds went into the asset.  A common scenario is when premarital funds (funds owned before the marriage, or acquired during the marriage by gift or inheritance) are used for the down payment on the family home, or to start a family business.  Under Family Code 2640(b), contributions made on or after January 1, 1984 will be reimbursed (again, to the extent he or she can trace) unless the contributor had made a written waiver of the reimbursement right.  The amount reimbursed is the amount contributed, without interest.  This applies not only to down payments, but also to payments for improvements, and payments on the principle (but not interest payments, or payments for taxes or insurance) on a loan that financed the purchase or improvements.  The reimbursement is capped at the amount of the equity in the property at the time of divorce. 

Separate funds used to pay joint debts after the parties have separated:  Generally the payor will be reimbursed.  This most commonly occurs where a person pays from his/her separate income (such as employment income earned after separation) makes payments on an existing community obligation (such as a mortgage on a parcel of real estate, or a balance on credit card).  There are exceptions, however—for example, when the payments are made to discharge a spousal or child support obligation; or when the payments were to preserve an asset (like a house or car) that the person is using, and the amount being paid is not significantly greater than the use value of the asset, such as its rental value.  

Separate funds used for the other spouse to acquire separate property:  There is a right to reimbursement under Family Code 2640(c).  This most commonly occurs when a person owns real estate before marriage, and after marriage the other person uses his/her separate property funds to make payments on the mortgage, or to pay for improvements on the property.  Again, the reimbursement is only to the extent the contributor can trace the funds, the reimbursement is without interest, it is given only if there was no written waiver of the reimbursement right, and it applies to principle payments but not to interest payments or taxes or insurance. 

Separate funds used for living expenses during marriage:  There is no reimbursement for this.  If a spouse uses his/her separate-property funds to pay for such things as medical expenses, vacations, gifts, property insurance, property taxes, clothing, utilities, or other living expenses, the law presumes these were gifts to the community, and there is no right of reimbursement.

The four fact patterns described above are the most frequent ones we see.  Please consult your attorney for further information about the facts of your particular situation, and whether or not they give you a reimbursement right.

And remember that the reimbursement rules are those that apply in the absence of a valid written agreement of the parties that provide for an alternative ordering of their finances.  If they have a premarital or post-marital agreement, that agreement must always be reviewed to see if the parties have contracted differently.