California is in the minority of states that apply community property principles to allocate equal ownership rights between spouses. However, in a divorce, this doesn’t mean that you must always split everything with your spouse -- including the inheritances you receive during your marriage. Under California law, marital rights to property are also subject to separate property rules.
California Community Property
It is generally presumed that all property you acquire while legally married is community property. This means that if you ever file for divorce, California courts won’t take into consideration who actually earned the money to purchase the property -- you and your spouse each own one half. For example, suppose you have an agreement with your husband that you’ll go to work each day and financially support the family while he stays at home to raise the children. Even though you pay the mortgage with funds you earn at work, your husband is considered to own one-half of the home.
Inheritances As Separate Property
California also recognizes that each spouse may have separate property, which includes the money and assets you own before you married. This can also include certain gifts and inheritances that you receive during the marriage. If you get divorced, California courts will allow you to leave the marriage with 100 percent of your separate property, but only if you’re able to convince the court that it is separate, and not community property. Suppose your parents’ will designates you as the sole heir to their estate. If you receive the inheritance while married, you need to convince the court that it was intended only for your benefit and not your wife’s.
Most couples don’t usually plan on getting a divorce -- and depending on the length of the marriage -- most couples do not keep any inheritances received entirely separate from other joint assets. This is referred to as commingling. Commingling your inheritance with other marital property doesn’t necessarily mean that the inheritance has to be treated as community property after a divorce, but commingling makes it more difficult to overcome the presumption that it is, in fact, community property.
Tracing Separate Property
To prove that an inheritance you commingle with community property is separate will likely require you to trace evidence. You will need to provide the court with documents showing that certain property was acquired with your separate funds. For example, suppose you deposit money from your parent’s estate into a joint bank account. One week later you buy a valuable piece of artwork. In this case, a California judge could reasonably conclude that despite the brief commingling of funds, that the artwork was purchased with your inheritance. However, if you purchase the artwork five years after making the deposit, it’s nearly impossible to trace the source of the funds -- given all the deposits and withdrawals. Moreover, if you use the inheritance to purchase property titled in both your name and your spouse’s, it is deemed to be community property, regardless of how easily the financing can be traced back to your inheritance.