What’s Yours is Mine and What’s Mine is Yours

Those involved in the divorce process often painstakingly comb through financial documents to map out the source of funds used to purchase property in an effort to develop and prepare the necessary evidence to characterize property as either community or separate property. Thus, the focus tends to be on property that has been acquired during the marriage; i.e. property that has been brought into the marriage. But, what about community property that has been gifted or disposed of, during the marriage, i.e. community property that’s been given away during the marriage?

Perplexing Statute

Family Code section 1100(b) states, “A spouse may not make a gift of community personal property, or dispose of community personal property, for less than fair and reasonable value, without the written consent of the other spouse, except for gifts mutually given by both spouses to third parties and to gifts given by one spouse to the other spouse.”    There is case law that even applies special rules to household furnishings and clothing, stating that written consent is always required regardless of whether the consideration received in exchange is adequate.  This broad statute, referring to community personal property as a whole rather than community personal property of a specific value, is perplexing.

Ostensibly, a spouse who has not provided written consent before the other spouse gifts or disposes of community personal property may have a claim during the divorce for reimbursement or breach of fiduciary duty.  The non-gifting spouse can seek to have the recipient of the gift return it to the community property (to avoid the gift).

Hypothetical Examples

Consider these divorce case examples.  What if the Wife gave the couple’s used television to her nephew, without the Husband’s written consent? After all, the television was several years old, and the couple had no need for it because they recently purchased a new television. Or what about the Husband who donated the couple’s used refrigerator, which was just sitting in the garage, to the Salvation Army without the Wife’s written consent? Or, what if the Wife held a garage sale with the Husband’s knowledge, but didn’t obtain his written consent before each item was sold to various buyers? Take a more troubling example: for her sister’s birthday the Wife gave money (community property) or purchased a gift with community funds without the Husband’s written consent and knowledge (meaning this was not a mutual gift).

In such hypothetical examples the actions of the gifting spouse appear to be seemingly innocuous. However, the spouse who has not provided written consent for the gifting or disposal of the community personal property may have a potential reimbursement claim against the other spouse during the divorce.

The Takeaway

While the law about gifts or disposal of community property is broad and a bit puzzling, it is yet another tool that the divorce attorney can use to make their client financially “whole” during a divorce. The divorce attorney can also apply the law to seemingly innocent activity (for example, the garage sale example cited above) to raise questions or bring up issues that could be beneficial to a client’s case. Lastly, the law emphasizes the continuing obligation on spouses to properly manage and control all aspects of the community property, even if the items appear not to be of value.