When a Community Property asset was initially purchased with the Separate Property of one spouse, the contributing spouse is deemed to have made a contribution to the acquisition of a Community Property asset. The contributing spouse may be entitled to a Reimbursement for his/her separate property contribution. (Family Code section 2640).
What does this all mean? Example: Prior to marrying your spouse you contribute $10,000 from your savings account to make a down payment on the residence where you and your soon-to-be spouse will reside. You and your fiancé are married and you add his/her name as a joint owner on the residence. Now, let us presume that there is trouble in paradise and you and your spouse decide you want to go your own separate ways. Many years have passed but you kept excellent records to reflect that the $10,000 you contributed to the down payment of your residence was from your own savings, prior to marriage (the ability to set forth, with supporting documents (i.e. statements from the relevant time period, cancelled checks, etc.), the source of the funds used to acquire an asset is termed “Tracing“). Then, you are technically entitled to a Reimbursement for your $10,000 contribution to the acquisition of that community property residence. Your right to Reimbursement is automatic, meaning, unless you have waived your right to Reimbursement, in writing, and provided there is enough equity in the residence once it has been sold, you are entitled to the full $10,000 “off the top.” Any remaining balance in the equity of the residence is then divided equally between you and your ex-spouse.
The issue of Reimbursements is overly simplified here and the case law on this issue is replete. The main point to remember, even if you think you and your spouse will make it to the very end (i.e. “’til death do us part”), it would behoove you to keep detailed records of any contribution you make from your separate property (assets earned prior to marriage or by way of gift, inheritance or devise during the marriage) to a community property asset, that way, if all else fails, meaning your marriage, you could at least obtain a Reimbursement for your trouble.