The down payment on a home is a huge financial hurdle for nearly any married couple to overcome, so it’s not uncommon for both spouses to contribute to it however they can. In many cases, this involves one or both spouses dipping down into their pre-marital savings, receiving a gift from family, or using assets acquired from the sale of previously held property towards the cost of this payment. But these assets are generally considered “separate property” since they involve wealth or assets that were brought into the marriage after being previously held. Property division law generally states that anything individually held is not subject to division in a marriage, so what happens to the family home?
This scenario is covered by Family Code 2640, which deals with reimbursement of a down payment on a home that is made with separate property. Section (b) reads: “In the division of the community estate under this division, 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, the party shall be reimbursed for the party’s contributions to the acquisition of property of the community property estate to the extent the party traces the contributions to a separate property source.” While the waiver portion of this code can become complex, the code itself is actually quite straightforward in stating that spouses who use separate property to help pay the cost of a home can recover their investment in a divorce.
The Three Step Process
In order to recover what you are entitled to in a divorce case, you must file a Family Code 2640 claim during your divorce process. A claim has a three step process. First, you must identify and prove the amount of the down payment on the home. Second, you must identify the source of the down payment. Finally, you must show evidence to support both the amount of the down payment and that it was drawn from a separately-held source.
How Reimbursement Works
Let’s look at an example of how Family Code 2640 would work in a simple situation. Say you and your spouse buy a home for $500,000. You have received a family gift of $100,000 which you then use as the entire down payment for the home. The home appreciates in value and becomes worth $700,000 at the time of the divorce.
According to Family Code 2640, the division would be as follows:
- The house is sold for its $700,000 value
- The loan is paid off, leaving $300,000 in equity
- The entire value of the down payment ($100,000) is given back to you as part of a Family Code 2640 reimbursement claim
- The remaining equity is divided 50/50 as community property
If you would like to make a Family Code 2640 claim, it’s strongly advised you retain the assistance of a Pasadena divorce attorney. With more than 80 years of experience, Gille Law Group has the knowledge and skill to help you protect what’s most important to you in your divorce case. When you’re facing a difficult family law issue, including property division during a divorce case, trust a legal team to an attorney who has been named a Board Certified Family Law Specialist by the California Board of Legal Specialization, an honor indicating exceptional ability and unwavering client service.
Get the answers to your property division questions now! Call Gille Law Group today at (626) 340-0955 to schedule a consultation!