How Do You Get Your Separate Property Down Payment Back? Family Code 2640!
Family Code §2640 is critical when a spouse uses separate property funds (such as premarital savings, inheritance, or a family gift) to make a down payment on community property. This issue arises often in California divorces, and understanding your rights is essential.
Common Scenario in California Property Division
A typical 2640 situation looks like this:
Spouses purchase a home during the marriage.
One spouse uses separate property funds for the down payment.
Spouses later file for divorce.
Overview of Reimbursement Rights
California Family Code §2640 establishes two distinct reimbursement scenarios for separate property contributions made during marriage. The statute provides that a party shall be reimbursed for separate property contributions to the acquisition of property of the community property estate to the extent the party traces the contributions to a separate property source unless there has been a written waiver of the right to reimbursement.
Additionally, the statute provides for reimbursement of a party's separate property contributions to the acquisition of the other spouse's separate property during marriage, unless there has been a transmutation in writing or a written waiver of the right to reimbursement.
What is A Qualifying Contribution to Community Property
Contributions to the acquisition of property include downpayments, payments for improvements, and payments that reduce the principal of a loan used to finance the purchase or improvement of the property. This does not include payments of interest on the loan or payments made for maintenance, insurance, or taxation of the property.
How We Prove a 2640 Claim at Livingstone Law, APC
Our firm follows a strategic threepart process:
Identify the Down Payment Amount and the Source of the Down Payment.
We gather escrow statements, loan documents, and purchase records.
Determine whether a financial tracing expert is required to testify regarding the source of separate funds and how the money was used to pay for a community asset.
Trace the Funds Clearly
Courts require clear tracing. We examine:
Bank statements
Sale documents
Wire transfers
Gift letters or declarations
What If I Contributed to The Separate Property of My Spouse?
Section 2640 applies to contributions made toward the acquisition of the other spouse's separate property during marriage. The statute provides that a party shall be reimbursed for the party's separate property contributions to the acquisition of property of the other spouse's separate property estate during the marriage unless there has been a transmutation in writing or a written waiver of the right to reimbursement. This provision protects spouses who use their separate funds to enhance or acquire property that remains characterized as the other spouse's separate property.
In Addition to Real Property, What Assets Subject to Section 2640?
Section 2640 has been applied to business under certain circumstances. The application of depends on whether the business was acquired as community property during the marriage and whether transmutation provisions were met. Sectio 2640 applies to contributions to the acquisition of community property, which can include payments for improvements or reductions in the principal of loans used to finance the purchase or improvement of property. These contributions are not limited to real property but can extend to other community property assets, provided they meet the statutory definition of "contributions to the acquisition of property" Some examples where the Court Found that a spouse should receive reimbursement of their separate property contribution under §2640:
Bank Accounts and Financial Assets
Home Improvement and Loan Payments
Vehicles
What Assets Are Not Protected by Section 2640?
The statute also contains specific exclusions for certain types of property transfers. Section 2640 does not apply to a gift between the spouses of clothing, wearing apparel, jewelry, or other tangible articles of a personal nature that is used solely or principally by the spouse to whom the gift is made and that is not substantial in value taking into account the circumstances of the marriage. The statute specifically does not apply to payments made for interest on loans, maintenance, insurance, or taxes. Additionally, the statute does not apply to or affect a transmutation of property made before January 1, 1985.
Tracing Requirements
For Section 2640 to apply, the contributing party must be able to trace their contributions to a separate property source. Courts have established that parties shall be reimbursed for their contributions to the acquisition of property of the community property estate to the extent the party traces the contributions to a separate property source. This tracing requirement ensures that only legitimate separate property contributions receive reimbursement protection.
Are there Limitations on 2640 Reimbursement?
The statute imposes significant limitations on the amount and nature of reimbursement available. The amount reimbursed shall be without interest or adjustment for change in monetary values and may not exceed the net value of the property at the time of the division. This limitation means that contributing spouses cannot recover appreciation or interest on their separate property contributions, and their recovery is capped at the property's net value at dissolution.
What if I Waived My Right to Reimbursement?
Section 2640 rights can be waived through written agreements. The statute provides that reimbursement is not available when a party has made a written waiver of the right to reimbursement or has signed a writing that has the effect of a waiver. This waiver provision allows spouses to voluntarily relinquish their reimbursement rights through proper documentation.
CONCLUSION
At Livingstone Law, APC, our attorneys Vera Livingstone and Bryanna Brandalesi frequently litigate issues involving California Family Code §2640, especially when clients seek to recover a separate property reimbursement on a home or other community property purchased during the marriage. As one of the best family law firms in San Diego, we are known for our strong client relationships, diligence, and strategic handling of complex California divorce and property division matters. Contact us for more information
