California is a community property state. Community property states follow the assumption that all property acquired during marriage is community or shared property. Shared property will be distributed equally between the partners upon divorce.
Any property acquired before marriage or by gift or inheritance, is considered to be separate property. Upon divorce, separate property will be distributed in full.
What Are “Capital Improvements” Made to a Property Such as a Home?
Capital improvements are basically any changes or upgrades that are made to a house which positively increase its value. These can include such changes as remodeling a kitchen or room, adding a bedroom, or completing an attic. Other types of improvements include the addition of a swimming pool, installing new windows, and building a new wall or fence around the property.
Capital improvements are generally those which are attached to the property and will remain with it after the house is sold. Therefore, items such as removable furniture, appliances, and electronics are generally not considered to be improvements for marital property purposes.
How Are Capital Improvements Treated Upon Divorce?
In California, community property rules regarding the characterization of improvements are very specific. In order to determine whether one spouse is entitled to reimbursements for home improvements, a court will consider several factors.
The most important factor is whether community funds or separate funds were used to purchase the improvements. Also, distribution will depend on whether it was a marital home or separate property that was improved. Courts will generally apply the following rules:
- If one spouse used community funds to improve their own separate property, then:
- The community is entitled to reimbursement of the cost of improvement, or the amount by which the value of the home was increased, whichever is greater
- If one spouse used community funds to improve the other spouse’s separate property, then:
- It is assumed that the person was making a gift to the other spouse, and only the community will be entitled to reimbursement (i.e., each will receive half of the costs)
- If either spouse used their own funds to improve a shared piece of property, then:
- They will not be entitled to reimbursement as it will be assumed that they intended to benefit the community estate
Thus, in California, there is a strong presumption in favor characterizing improvements as a shared expense rather than a separate expense. The court will then distribute the cost of improvement equally between the partners, unless one party can prove that they intended to be reimbursed separately. This is usually done through a writing indicating the party’s intent.
What Can I Do to Improve My Case?
It is important to keep well-documented accounts of any expenditures made for improvements to property, whether it be a shared marital home or separate property acquired before marriage or as a gift. This includes keeping receipts, dates, and descriptions of the improvements made.
Most of the greatest difficulties in property improvement issues lie in calculating how much was spent for the improvement, and how much the property has increased in value as a result of the improvement. In some cases an expert appraiser may be hired in order to determine the new value of a particular piece of property.
Should I Contact a California Lawyer?
Any dispute that is related to a divorce is important and demands the attention of an attorney. This is especially true for improvements to property, which may often involve large expenditures in terms of time and finances. An experienced California divorce attorney can help determine whether you are entitled to reimbursements for your efforts at improving properties.