The Importance of Tracing the Money in California Divorce Disputes over the Family Home – In re Marriage of Cuk

One of the many issues that often come up in California divorce cases is what to do with the family home. The state’s Fourth District Court of Appeal recently explained that a spouse who uses his or her separate money to help purchase the property is entitled to be compensated before the value of the home is divided between the former couple. To get that compensation, however, the spouse has to clearly show where the separate money originated.

houseHusband and Wife were married for about 18 months before they divorced in the summer of 2004. The former spouses are both Serbian nationals, and they met at a state dinner in which Wife interviewed Husband for a story for the news service where she worked as a journalist. Husband was a successful engineer who held the patents for a number of services and products. The two began living together in Southern California in 2002 and married the following year.

The couple purchased a $2 million home together in Laguna Niguel just two weeks before they separated. A trial court found that the home was community property to be split evenly between the divorcing spouses. The court further concluded, however, that Husband was entitled to a credit for the $545,000 of his own separate money that he used for a down payment on the property. After allocating that amount to Husband, the court said the property was worth less than the outstanding balance on the home’s mortgage. As a result, the court awarded the property to Husband. It also declined Wife’s request to be compensated for Husband’s exclusive use of the home from the time the couple separated until they were actually divorced. It noted that Husband used his own money to cover all of the expenses related to the house.

Affirming the decision on appeal, the Fourth District said there was substantial evidence to support the trial judge’s finding that Husband used his own separate money to pay for the home. “A spouse has a statutory right to reimbursement for contributions to the acquisition or improvement of a community property asset if the spouse traces the contributions to a separate property source,” the Court explained. “The reimbursement must be paid before the court divides any community property interest in the asset.” In this case, Husband showed that the money for the down payment on the house came from a separate retirement account that he cashed out, transferred to the couple’s joint checking account, and then put toward the house. As a result, the Court said he was entitled to be reimbursed for that payment.

Property division is just one of the complicated issues that often come up in California divorce cases. These issues – and much of the stress that often accompanies divorce cases – can be minimized through alternatives to litigation, such as collaborative divorce and mediation. With offices throughout the San Francisco Bay Area, divorce lawyer Lorna Jaynes provides innovative legal tools to resolve many family law disputes without the bitterness and acrimony engendered by the adversarial process.

Related blog posts:

Social Security and Retirement Benefits in California Divorce Cases – In re Marriage of Peterson

The Cost of Characterizing Assets in California Divorce Cases – In re Marriage of Ching

Big Question in California Divorce Cases: Who Gets the Dog?