What happens when separate property is used to purchase or improve a community asset in divorce?

Married couples often mix their separate and community property together in one asset.  The legal term for this is “commingling.”  When separate and community property are commingled in one asset, the property division can get complicated and help from a family lawyer can be essential. In some cases, the entire asset becomes community property, while in others, the separate and community contributions can be separated.

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Reimbursement for home down payment

One extremely common commingling situation is the purchase of a home.  One spouse provides the down payment from pre-marriage savings or the sale of a prior home that was separate property.  Then the couple pays the mortgage with the earnings of either or both of them.

How is the home treated when they decide to divorce?  The spouse who contributed the down payment may be entitled to reimbursement if:

  • The down payment is traceable to separate funds.  This means the spouse needs to keep good records showing where the down payment came from.  If the spouse cannot prove the source of the down payment, then the entire home will be treated as community property.
  • The spouse has not signed a written waiver of reimbursement.

There are limits on the amount of the reimbursement.  The spouse making the down payment will not be able to get more than the down payment and, in some cases, may get less.  The amount of the reimbursement cannot exceed the equity that the couple has in the home and the spouse is not entitled to interest on the reimbursement or additional amounts due to appreciation of the property.

Reimbursement for improvements or loan repayment

These same rules apply when separate property is used to pay for improvements on community property or to pay down a loan on community property.

Contact a Ventura family attorney

If you are seeking a cost-effective resolution to your divorce, call Family Lawyer, Lisa Zonder at 818-309-7059.  At Zonder Family Law, we offer a variety of solutions including traditional divorce, divorce mediation, and collaborative divorce.