Legal Question in Real Estate Law in California
My mom gifted a house to me several years ago (parent / child transfer). Having gone through a divorce before, my mom liked that this house would always be mine (not community property), should anything unfortunate happen with my marriage. With a family of four now, this gifted house is no longer big enough for my family. We wish to sell and use the proceeds toward the purchase of a new home, in the form of a down payment.
I realize of course that this new home would be community property. The down payment for this new home (proceeds of the gifted house) is expected to be fairly substantial, at least 40%. My mom, as a concerned parent, now has me wondering if there is a way to maintain this gift to me, her son, as these funds now get used to purchase a new home.
Is this possible?
In a similar scenario, if my mom were to gift to me the down payment for a new home, is there a way to have that gift maintained in such a purchase of community property?
Logic would seem to dictate that if let�s say 50% of the purchase price was funded directly from a personal gift (and documented as such), that only the remaining 50% would be community property. If in the unfortunate situation the marriage needed to be dissolved, and the house liquidated, the split would be 75 / 25, seemingly.
Where does the law stand on this matter and is there any meaningful precedent here?
Thanks much.
2 Answers from Attorneys
This is really a family law question. This issue is very common is family law. The rule is that you would receive the amount of your separate property investment. That is if you use $100,000 of separate property to purchase a home for $200,000. Later the house is sold for $400,000, you would receive your $100,000 plus 1/2 of the $300,000 equity over your separate property investment. On the other hand if the value of the house dropped to $75,000 you would receive only $75,000 in return. You could consult with an attorney and enter into a post nuptial agreement that 1/2 of the house would be your separate property. Such an agreement would have to be properly drafted to be valid.
Mr. Johnson is basically correct. Unless you structure the transaction such that the new house is held 40% as your sole and separate property and 60% to you and your wife as community property, you only get back your original investment of separate property funds, as opposed to a separate property share of the house. Furthermore, that transaction would have to be structured very carefully such that it addresses the inevitable future community property contributions to the value of the house. Consulting with a family law attorney who is well versed in real property law would be a valuable investment at this point, because even if you never split up, it will have estate planning and tax consequences as well.
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