Do I get to keep gifts received during marriage from my spouse when we divorce? California is a community property state. What this means is, with some exception, property acquired during marriage is community property. Community property is not property itself, rather it is a right of equal ownership by the marital partners of property acquired during marriage.
California 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.”
The some of the exceptions to Family Code 760 include:
- Gifts received during marriage from a third party made specifically to one spouse.
- Inheritance from a third party.
- If gifts received during marriage fall under either of the two above categories, they are the separate property of that spouse, provided that the spouse receiving the gift or inheritance does not comingle their separate property with community property. If that happens, there is a presumption to be made that the “character” of the property has been transmuted (changed) from being separate property of the holder spouse to community property of the marital estate. The presumption can be rebutted if the spouse can show an accurate tracing of the separate property.
- The presumption that property acquired during marriage is community property does not apply to any property to which legal or equitable title is held by a person at the time of the person’s death if the marriage during which the property was acquired was terminated by dissolution of marriage more than four years before the death. Family Code Section 802.
- Married persons may by agreement or transfer, with or without consideration, transmute community property to separate property of either spouse. Family Code Section 850(a).
- Transmutation of separate property received during marriage from one form to another such as cash to a new car remains that spouses separate property. The new car purchased with the separate property cash is still the spouses separate property even though it was purchased/acquired during marriage.
- Similarly, income from separate property is separate, and the increase of separate property is separate. For instance, if a spouse receives an inheritance during marriage and places it in an interest-bearing account, the interest earned is also the spouse separate property, even though the income from the interest occurred during marriage.
So What About Gifts Received During Marriage From My Spouse?
No surprise… there is a statute for that.
California Family Code 852(c) provides that the characterization of community property, 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.
What does that mean exactly? First, it is important to understand what is meant by “the circumstances of the marriage.” Another term the law uses for this is the Marital Standard of Living. The Marital Standard of Living is the lifestyle the parties enjoyed during marriage – your station in life. It is based on marital income and expenditures. For example, consider the lifestyle of one of the Beverly Hills Housewives driving her Bentley, shopping on Rodeo Drive and whisking off on a vacation to the Bahamas, versus someone living in a studio apartment, driving a clunker, and shopping at thrift stores. That is station in life.
So, understanding that, whether gifts received during marriage is the separate property of the gifted spouse and not substantial in value taking into account the circumstances of the marriage or not depends on not only what it is, how it is used, but also the value in relationship to the Marital Standard of Living of the parties.
For example, if the Husband of a Beverly Hills Housewife makes 10 million dollars a year and purchases her a Chanel handbag for $8,400, likely that would not be considered of substantial value considering the Marital Standard of Living and would be a separate property gift to Wife. If, however, Husband earns $35,000 per year and purchased the same thing, it would most likely be considered of substantial value regarding the circumstances of the marriage and not a separate property gift to Wife.
What about my wedding ring? He spent $10,000 on that an earns $35,000 per year?!
Wedding rings are usually an entirely different thing. They are not really considered a “gift”, but rather a symbol given to you in consideration for your promise to marry. Most often, they are purchased prior to marriage with Husband-to-be’s separate property money. By the way, if he is in debt for the ring and making payments, that is his separate property debt! After marriage, if community income is used to pay off the ring, the community is entitled to a right of reimbursement. So, as long as you go through with the marriage, the ring belongs to you. If not, then he has a right to ask for it back.