California is one of nine states that distribute property in accordance with community property standards. States that follow community property standards operate on the assumption that all property acquired during a marriage is considered communal or shared property. Thus, any property deemed as shared or communal property will be distributed equally to both spouses in the event of a divorce.
In contrast, any property acquired before the marriage or by gift or inheritance, will be treated as separate property. In a divorce, the spouse who owns the separate property will typically be allowed to retain it in full.
For example, if you inherited a valuable piece of jewelry from a deceased relative, that jewelry is considered separate property and will belong to you in a divorce. However, if you and your spouse bought a beach house while you were married and the deed has both your names on it, then that beach house will be viewed as community property. As a result, you will have to share it if you get divorced.
What Are “Capital Improvements” Made to a Property Such as a Home in California?
The term “capital improvements” refers to any changes or upgrades made to real property that may either boost its overall value or enhance its condition. This may include changes, such as renovating an entire house, remodeling a specific room, building and attaching a separate wing to a house, or finishing a basement.
Other upgrades that may qualify as capital improvements include installing an inground swimming pool, replacing old windows with newer models, and/or constructing a brand new wall or fence on the property.
In addition, capital improvements typically involve changing or upgrading items that are directly attached to a property and thus will remain on that property after the land or a house is sold. As such, things like removable furniture, electronics, and/or appliances are generally not considered to be improvements for the purposes of distributing marital property in a divorce.
How Are Capital Improvements Treated Upon Divorce in California?
In California, the rules governing community property and capital improvements are very specific. In order to determine whether a spouse is entitled to reimbursements for contributions made towards capital improvements and/or California home repairs during divorce, a family court will look at several factors.
For instance, the most important factor that a court uses to make its decision is whether marital funds (e.g., money in a joint bank account) or separate funds were used to pay for the improvements. If separate funds were used, then the spouse who spent the money will most likely be reimbursed. As for distributing improved property, the court will also examine whether the property or home is considered communal or separate property.
California courts will typically apply the following community property rules when making their decisions:
- If one spouse used community funds to make capital improvements or repairs on their own separate property, then the other spouse will be entitled to reimbursement of the cost of the improvements, or alternatively, the amount of how much that property’s value has increased as a result of the improvements; whichever is greater.
- In contrast, if the spouse used their own money to make improvements on their separate property, then the property will remain separate property and the other spouse will not be entitled to any reimbursements.
- If one of the spouses used community funds to improve the other spouse’s separate property, however, then it is assumed that the spouse spending the money was doing it as a gift for the other spouse. Thus, since it is a gift, the spending spouse will not be entitled to reimbursement.
- If for some reason the court finds or the other spouse supplies evidence that demonstrates they were not contributing funds for the purposes of a gift, then they may be entitled to reimbursement. In this scenario, both spouses will be entitled to receive an equal amount of the costs.
- Finally, if either spouse used their own separate funds to improve a marital piece of property, then neither spouse will be entitled to reimbursement because the court will assume that both spouses intended to benefit from the improvements made to their communal estate. Additionally, the communal property will be distributed equally between the parties.
- However, if a party can prove that they are entitled to some portion of the expenses or that they did not intend to benefit from the improvement or repairs, then the court may allow them to collect a certain portion of funds.
As is evident from the above information, there is a strong presumption among California courts that favors labeling capital improvements as a shared expense over characterizing them as a separate expense. Thus, unless one spouse can prove that they should be reimbursed separately or for a higher amount, a court will equally distribute the cost of improvements between both spouses.
What Can I Do to Improve My Case?
It is very important that individuals remember to keep detailed records of payments made towards capital improvements on a property. This tip applies regardless of whether the capital improvements were made on a shared marital home or on separate property that was acquired before the marriage, given as a gift, or was part of an inheritance.
Well-documented records usually contain the date capital improvements occurred, the date payments were made and received, receipts displaying the costs of improvements, and descriptions of the work that was done (e.g., remodeled the kitchen).
Divorce cases in which there are disputes over capital improvements are typically the result of keeping inadequate records. Moreover, most capital improvement issues could easily be resolved had the couple maintained clear accounting records.
Aside from not knowing how much was spent on an improvement, the other reason as to why capital improvement issues end up being so difficult is because the parties must calculate how much a property has increased in value due to an improvement. Thus, in order to improve one’s case, an expert appraiser should be hired to determine the current value of the improved upon property.
Should I Contact a California Lawyer?
One of the most difficult aspects of divorce cases is having to identify and distribute property and/or assets to each spouse. Not only does distribution have to be done in accordance with the law and community property standards, but it also requires accurate calculations and sometimes expert property appraisals. This process can become exponentially harder when capital improvements are involved in a matter.
Thus, if you are getting a divorce in California and have questions about property distributions, you may want to hire a California divorce lawyer for further legal guidance.
Your attorney can answer any questions or concerns you may have, and can predict how certain items of property will most likely be distributed in your divorce. They will also be able to determine whether you are entitled to reimbursement for any contributions or capital improvements you made to your property.
In addition, if you need assistance with hiring an expert appraiser, a local divorce attorney will likely have a list of experts that they can recommend for such situations. Lastly, if you need to attend a hearing for either your general divorce matter or in regard to a more specific capital improvement dispute, your attorney can also represent you in court.