How Gifts Are Treated Through Divorce Within A Community Property State
How Gifts Are Treated Through Divorce Within A Community Property State
When a gift is not a gift
Valentine's Day is upon us. Some of us will receive flowers, others jewelry and others may receive more expensive gifts such as a new car. Wouldn't that be nice? You would think that a gift is a gift but in California that is not always the case. As a divorce lawyer practicing in California, I hate to rain on your parade but if you receive a diamond necklace from your husband as a gift, the law may not treat it as a gift if you ever get divorced.
This is very common where a divorce turns nasty. Suddenly the gift giver and their lawyer decide that all the gifts of jewelry etc. during the marriage were not gifts at all but property of the marriage.
The reason for this is that in a community property state like California there is a presumption that all property acquired during marriage is community property and must be divided equally in the event of a divorce. Certain types of gift are an exception to this rule but the exception is narrowly defined.
In California, gifts of jewelry and other items of a personal nature are separate property if they are not substantial in nature taking into consideration the circumstances of the marriage. In other words, a $10,000 diamond ring from a millionaire is probably a gift of separate property. The same diamond ring from a spouse making an average income with no other valuable assets in the marriage is probably not. In one California divorce case, In re Marriage of Buie & Neighbors, the court found that a gift of a Porsche was not an article of a personal nature as contemplated by the law.
Another exception if where there is something in writing indicating that a gift was intended. In California, a gift is separate property if there is a writing which expressly declares that giver intends the nature of the property to be changed from separate to community property. The legal term for such a declaration is a "transmutation." It is difficult to say whether your typical gift card would meet this standard. A hopelessly unromantic divorce lawyer receiving such a gift would therefore ask their spouse to append a declaration of transmutation under the declaration of love at the bottom of the card, "Please honey, just underneath where you say, "I love you, xxxx" do you mind writing “I give to you all and any interest I have in this diamond ring.”"
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