Facebook Icon Gifts Between Spouses: When Is A Gift Not Really A Gift?
Gifts Between Spouses: When Is A Gift Not Really A Gift?

Gifts Between Spouses: When Is A Gift Not Really A Gift?

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If I purchase a “gift” for myself with funds from my spouse’s separate bank account, and later on down the road the marriage sours, does my spouse have a right to be reimbursed for his or her generosity? This was the question asked of the Court in a recent case called

 

In re Marriage of Neighbors, 179 Cal. App. 4th 1170 (2009).

 

In this case, Husband’s birthday was coming up and he decided to buy a Porsche 996 with $60,000 he withdrew from Wife’s separate property bank account. 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.” Thus, according to this statute, the Porsche was classified by default as community property and each party had a 50% ownership interest in the automobile.

 

However, Husband claimed that because the Porsche was a birthday “gift” from his wife, it should be classified as his separate property. In other words, Husband contended he had a 100% ownership interest in the vehicle. Generally, and in accordance with Family Code, Section 852 (a), in order to prove that a default community property asset has transmuted or changed its character from community property to separate property, there must be an express declaration in writing made by the spouse who is gifting the asset to the other spouse. In this instance, Husband argued that because the gift was an automobile, it fell into an exception to Section 852 which states that for gifts of “tangible articles of a personal nature” no written declaration is required. Thus, the Porsche could be characterized as Husband’s separate property according to Section 852 (c).

 

The Trial Court agreed with Husband and classified the Porsche as a gift and thus, his separate property. However, Wife was not happy about this result and appealed the Decision.

 

The Appellate Court ruled that the Trial Court had in fact erred in its characterization of the Porsche as Husband’s separate property. The court remarked that the exception to Section 852 was ambiguous as to what constituted a “tangible article of a personal nature” and decided to look at the legislative history to discern the Legislature’s intent. In doing so, it discovered a Commission Report’s Comment which stated that an automobile was actually NOT an “article of a personal nature” within the meaning of Section 852, subsection (c). Thus, the Appellate Court reversed the lower court’s Decision and ruled that the automobile was not Husband’s separate property, but community property.

 

Moreover, under Family Code, Section 2640, a party has a right to reimbursement for any separate property contributions to a community property asset. Since the asset was purchased entirely with funds from Wife’s separate property account, Wife “[had] a substantive right to reimbursement of those separate property funds” (In re Marriage of Neighbors, 1176).

 

In summary, it appears that it doesn’t matter whether Wife intended it to be a “gift” or not. According to the law, if she didn’t sign anything waiving her right to reimbursement and her separate funds were used, she had a right to be reimbursed. However, it does matter what type of “gift” was given. If Husband could have proven that a Porsche was an “article of a personal nature” such as jewelry, for instance, he would have been able to claim the “gift” as his separate property after all.

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